2021 (6) TMI 893 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - HELD THAT - As decided in own case 2018 (2) TMI 109 - ITAT HYDERABAD with regard to investment in APGPCL, the coordinate bench has remitted this issue back to the file of the AO to verify the contention of the assessee and, if, found correct, the investment should be excluded from the calculation under rule 8D(2)(iii). Therefore, we are also inclined to remit this issue back to the file of the AO to verify the contention of the assessee. Appeal of the assessee is allowed for statistical purposes

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Adjudication on investments made out of own funds.
3. Disallowance calculation on strategic and historic investments.
4. Disallowance computation on investments acquired under a scheme arrangement.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961:
The appeal was against the CIT(A)'s order involving proceedings under section 143(3) of the Income Tax Act, 1961. The Assessing Officer (AO) made a disallowance under section 14A due to the assessee's investments, resulting in exempt income. The AO referred to a CBDT Circular and past assessments to support the disallowance. The CIT(A) restricted the disallowance after considering the submissions. The Tribunal noted that a similar issue was decided in the assessee's own case for a previous assessment year. The Tribunal remitted the issue back to the AO for further consideration in line with the previous decision, allowing the appeal for statistical purposes.

Issue 2: Adjudication on investments made out of own funds:
The appellant argued that investments were made from accumulated profits and not borrowed funds. The Tribunal referred to a similar case where the investment nature was discussed, and the issue was remitted back to the AO for verification. The Tribunal decided to follow the same approach and directed the AO to decide the matter in accordance with the previous decision.

Issue 3: Disallowance calculation on strategic and historic investments:
The AO computed the disallowance under section 14A based on the investments held by the assessee. The Tribunal considered the arguments presented by both parties and referred to a previous decision involving a different investment case. The Tribunal remitted the issue back to the AO for verification, similar to the approach taken in the previous case.

Issue 4: Disallowance computation on investments acquired under a scheme arrangement:
The appellant contended that the disallowance calculation was erroneous in the context of investments acquired under a scheme arrangement. The Tribunal reviewed the submissions and past decisions, ultimately remitting the issue back to the AO for further examination. The appeal was allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed various issues related to the disallowance under section 14A of the Income Tax Act, 1961, emphasizing the need for consistency with past decisions in similar cases and directing the Assessing Officer to reevaluate the matters in line with previous rulings.