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2018 (12) TMI 1315 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D - Held that - Disallowance u/s 14A r.w. Rule 8D to the amount of ₹ 20,58,424/- suo motu disallowed by the appellant. Addition on account of transactions listed in Annual Information Report (AIR) of the Department - Held that - We are of the considered view that the above matter be reexamined by the AO, because he was running short of time while making the assessment u/s 143(3) on 25.02.2013. Therefore, we set aside the order of the CIT(A) on the above issue and restore the matter to the file of the AO to make a fresh order, after giving (i) the relevant documents and (ii) reasonable opportunity of being heard to the appellant. We direct the appellant to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes. Credit of tax deducted at source to the appellant - Held that - As decided in CITICORP FINANCE (INDIA) LTD VERSUS ADDL COMMISSIONER OF INCOME TAX 2013 (10) TMI 1119 - ITAT MUMBAI the department is required to give credit for TDS once valid TDS certificate had been produced or even where the deductor had not issued TDS certificates on the basis of evidence produced by assessee regarding deduction of tax at source and on the basis of indemnity bond. We, therefore modify the order passed by CIT(A) on this point and direct the AO to proceed in the manner discussed above to give the credit of tax deducted at source to the assessee - Direct the AO to proceed in the manner discussed above to give credit of tax deducted at source to the appellant.
Issues:
1. Disallowance of interest attributed to earning exempt dividend income under Rule 8D(2)(ii). 2. Addition of a sum on account of transactions listed in the Annual Information Report (AIR). 3. Credit for TDS certificates amounting to a specific sum for the assessment year 2010-11. Issue 1: Disallowance of Interest under Rule 8D(2)(ii): The appellant, a Non-Banking Finance Company, appealed against the disallowance of interest amounting to &8377; 1,75,18,216 under Rule 8D(2)(ii) for earning exempt dividend income. The Assessing Officer (AO) disallowed this amount based on the appellant's dividend income and the lack of satisfaction with the expenditure claim. The Commissioner of Income Tax (Appeals) upheld this disallowance. However, the appellant argued that their own funds exceeded investments, indicating a nexus between non-interest bearing funds and tax-free investments. Citing legal precedents, the appellant contended that the disallowance was unjustified without establishing a direct link between the expenditure and exempt income. The Tribunal, considering the appellant's submissions and legal principles, deleted the disallowance under Rule 8D(2)(ii). Issue 2: Addition on Account of AIR Transactions: The AO added &8377; 5,83,777 based on transactions pending reconciliation from the Annual Information Return (AIR). The appellant requested a re-examination of this addition, citing time constraints during assessment. The Tribunal agreed, setting aside the CIT(A)'s order and directing the AO to reevaluate the matter with relevant documents and a fair hearing for the appellant. The second ground of appeal was allowed for statistical purposes. Issue 3: Credit for TDS Certificates: The appellant sought credit for TDS certificates amounting to &8377; 31,93,706 for the assessment year 2010-11. The Tribunal referenced a similar case where the credit for TDS was denied due to discrepancies in Form 26AS but was later granted based on evidence of tax deduction. Following this precedent, the Tribunal directed the AO to grant the appellant the credit for tax deducted at source. Consequently, the appeal was partly allowed. In conclusion, the Tribunal ruled in favor of the appellant by deleting the disallowance of interest under Rule 8D(2)(ii), directing a re-examination of the addition based on AIR transactions, and granting credit for TDS certificates. The judgment provided detailed legal reasoning and cited relevant precedents to support the decisions on each issue raised in the appeal.
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