2021 (6) TMI 610 - AT - Income Tax

Disallowance u/s 14A - assessee made suo-motu disallowance under Rule 8D(2)(i) and 8D(2)(ii) - contention of assessee is that the assessee is having sufficient own interest free funds to cover the investments - HELD THAT - The presumption is that the investments are made from interest free funds available with the assessee. We find that similar plea was raised by the assessee in assessment year 2010-11. The Co-ordinate Bench 2020 (3) TMI 942 - ITAT MUMBAI restored the issue back to the file of Assessing Officer to examine the availability of assessee s own interest free funds viz-a-viz investments made. Since, the issues raised in present appeal are identical, additional ground No.1 2 are allowed for statistical purposes in similar terms. The Assessing Officer is directed to re-examine disallowance under section 14A r.w.r.8D in line with above directions of the Tribunal. Disallowance of provision made for leave salary under section 43B(f) - HELD THAT - As decided in own case 2020 (3) TMI 942 - ITAT MUMBAI Tribunal allowed relief to the assessee by following the decision of the Hon ble Apex Court in the case of Bharat Earth Movers vs. CIT 2000 (8) TMI 4 - SUPREME COURT Dehors the issue of constitutional validity of clause(f) to section 43B of the Act, the Co-ordinate Bench after considering the issue on merits has deleted the addition. Taking into consideration, entirety of facts we respectfully follow the decision of Tribunal in assessee s own case for assessment year 2008-09 and confirm the findings of CIT(A) in deleting the disallowance.

Summary

Issues:
1. Disallowance of interest under section 14A r.w.r 8D(2)
2. Disallowance made under section 43B(f) of the Act

Analysis:
1. The appeal was filed against the order of Commissioner of Income Tax (Appeals) for the assessment year 2009-10. The Co-ordinate Bench of the Tribunal allowed the Miscellaneous Application of the assessee to adjudicate additional grounds related to disallowance of interest under section 14A and disallowance under section 43B(f) of the Act. The grounds for adjudication were clearly outlined in the appeal.

2. The assessee received dividend income during the relevant period and made suo-motu disallowance under Rule 8D(2)(i) and 8D(2)(ii) of the Income Tax Rules. The Assessing Officer accepted the disallowance made under these rules but made additional disallowance under Rule 8D(2)(iii). The assessee argued that own interest-free funds were more than the investments made, citing legal precedents to support this claim.

3. The Tribunal examined the issue of disallowance of interest expenditure under Rule 8D(2)(ii) and held that no disallowance was warranted if the assessee had sufficient own interest-free funds to cover the investments made. The issue was restored back to the Assessing Officer for verification. Similarly, the Tribunal directed the Assessing Officer to recompute the disallowance under Rule 8D(2)(iii) based on investments that yielded exempt income.

4. In regard to the disallowance made under section 43B(f) of the Act, the Tribunal referred to previous decisions in the assessee's case for assessment years 2008-09 and 2010-11. The Co-ordinate Bench confirmed the findings of the CIT(A) in deleting the disallowance, based on the decision of the Hon'ble Apex Court. The Tribunal allowed the ground raised in the appeal for parity of reasons.

5. The Tribunal concluded that with the adjudication of the grounds and additional grounds, there would be no change in the final result of the appeal. Therefore, the appeal was partly allowed for statistical purposes. The judgment was pronounced on June 15, 2021.