2019 (4) TMI 214 - AT - Income Tax

Disallowance u/s.14A r.w.r. 8D - HELD THAT - Assessee paid interest to Corporation Bank as well as Kotak Mahindra Bank to the tune of ₹ 1,39,445/- and ₹ 10,61,618/- respectively, thereby leaving other expenses at ₹ 8,11,107/-. The assessee submitted a chart before the CIT(A) contending that out of such remaining expenses, a sum of ₹ 7,72,505/- was exclusively incurred towards expenses in respect of taxable income thereby leaving common expenses, incurred both for taxable and non-taxable income, at ₹ 38,602/-. CIT(A) himself incorporated the submission of the assessee in the impugned order but misconstrued the same and ordered to make enhancement by the sum of ₹ 38,602/- which is not justifiable. We, therefore, order to delete the enhancement made by the CIT(A) to this extent. Exclusion of expenses exclusively towards taxable income u/s 14A - HELD THAT - Three items of expenses, viz., professional charges for project at Parvati amounting to ₹ 5,51,500/- ; stamp duty, stamp paper and miscellaneous expenses of ₹ 86,893/-; and expenses relating to property rented out by the assessee at ₹ 50,872/-, have no connection with the exempt income and hence cannot be considered for disallowance u/s 14A. The remaining item of expense in this list is a sum of ₹ 83,240/-, which is payment of professional fees, that relates to income-tax filing return common both to the taxable and exempt income. The same is therefore, liable to be considered as common expense and not exclusively for taxable income. At this stage, it is pertinent to note that even under rule 8D, the disallowance u/s.14A cannot exceed the total amount of expenses incurred by the assessee either exclusively for exempt income or jointly for exempt and taxable income. In this backdrop of the facts, we order to restrict the disallowance to ₹ 1,21,842/- (Rs.38,602 ₹ 83,240). The issue is, therefore, partly allowed. Computation of interest u/s.234A and 234B - date-wise payments of self-assessment tax made by the assessee, both before and after the due date u/s 139(1) - HELD THAT - Once the amount of self assessment tax was paid, the Revenue could not be considered as deprived of the amount of tax due to it. As interest u/s 234A is compensatory, following the rationale, we hold that the consequence will be no different if the amount of self-assessment tax is also paid after the due date but before the filing of return of income. In such a scenario, the Revenue will stand compensated to the extent of payment of self-assessment tax made after the due date and accordingly the amount of interest u/s 234A for the period during which such an amount stood paid, needs to be computed on the proportionately reduced amount of tax accordingly. We set-aside the impugned order and remit the matter to the file of the AO for calculating the amount of interest u/s.234A afresh after considering date-wise payments of self-assessment tax made by the assessee, both before and after the due date u/s 139(1).

Summary

Issues Involved:
- Disallowance under section 14A of the Income-tax Act, 1961
- Computation of interest under sections 234A and 234B of the Act

Issue 1: Disallowance under section 14A:

*ITA No.710/PUN/2017 - A.Y. 2010-11:*
- The appeal challenged the disallowance under section 14A of the Act related to exempt income from investments.
- The Assessing Officer determined the disallowance, but the CIT(A) confirmed and enhanced a part of it.
- The tribunal found errors in the CIT(A)'s decision, especially regarding exclusive expenses for taxable income.
- The tribunal restricted the disallowance to common expenses, partly allowing the appeal.

*ITA No.711/PUN/2017 - A.Y. 2013-14:*
- Similar issue as A.Y. 2010-11 regarding disallowance under section 14A.
- The CIT(A) confirmed and enhanced the disallowance, which the tribunal partly allowed.
- The tribunal directed to delete the enhancement and restrict the disallowance to common expenses incurred by the assessee.

Issue 2: Computation of interest under sections 234A and 234B:

*ITA No.711/PUN/2017 - A.Y. 2013-14:*
- The appeal raised concerns about the calculation of interest under sections 234A and 234B.
- The tribunal analyzed the legal position regarding the payment of self-assessment tax and its impact on interest calculation.
- Following legal precedents and circulars, the tribunal directed the AO to recalculate the interest considering payments made before and after the due date of filing the return.
- The tribunal provided detailed reasoning for reducing the interest amount based on the timing of self-assessment tax payments.

*ITA No.712/PUN/2017 - A.Y. 2013-14:*
- Similar issue as A.Y. 2013-14 regarding the computation of interest under sections 234A and 234B.
- The tribunal aligned its decision with the earlier case, directing the AO to compute interest under section 234A accordingly.
- The tribunal also addressed the consequential aspect of charging interest under section 234B.

In conclusion, the tribunal partly allowed the appeals by addressing the issues of disallowance under section 14A and the computation of interest under sections 234A and 234B, ensuring compliance with legal provisions and precedents. The detailed analysis provided insights into the tribunal's reasoning and application of relevant laws and circulars to reach the final decisions.