2021 (3) TMI 624 - AT - Income Tax

Disallowance u/s. 14A r.w Rule 8D(2)(i) and 8D(2)(ii) - AO held that he was not satisfied with the explanation given by the assessee and was not satisfied with the correctness of the claim made by the assessee - HELD THAT - AO stated that direct expenditure relatable to earning of exempt income as per appendix 4(b) of the Tax Audit Report is ₹ 1,60,950/-. This quantum of disallowance was challenged by the assessee under Rule 8D(2)(i) of the I.T Rules. Smt. Priyanka Salapuria, Ld. Counsel for the assessee has submitted that the Ld. AO made this disallowance without any calculation and without any basis. On an examination of facts, we find that the Ld. AO made the disallowance, based on Tax Audit Report. Thus, we uphold the order of the Ld. CIT(A) on this issue and dismiss ground no. 2(a) of assessee s appeal. Net interest expenditure should be considered while calculating the disallowance made under Rule 8D(2)(ii) of the I.T Rules, 1962 - Assessee has not submitted any calculation or other information in support of this ground. The Ld. AO at page-3 held that interest on borrowing obtained for specific purposes is deleted from the total interest expenses of the assessee and only the balance is disallowed under Rule 8D(2)(ii). In the absence of any cogent material filed by the assessee, we uphold the order of the Ld. CIT(A) on this issue and dismiss ground no. 2(b) of assessee s appeal. Disallowance u/s 43B on Leave Encashment - HELD THAT - Ground of assessee s appeal has to be rejected as this issue has been adjudicated by the Hon ble Supreme Court against the assessee in the case of Exide Industries Ltd Vs. U.O.I 2020 (4) TMI 792 - SUPREME COURT . Respectfully following the same, we dismiss this ground (3a) of assessee s appeal.

Issues:
1. Delay in filing Revenue's appeal
2. Disallowance under Rule 14A r.w. Rule 8D(2)(i) and 8D(2)(ii)
3. Consideration of net interest expenses in disallowance under Rule 8D(2)(ii)
4. Disallowance under section 43B(f) of the Act

Issue 1: Delay in filing Revenue's appeal

The Appellate Tribunal ITAT Kolkata considered the delay of 7 days in filing the Revenue's appeal. After reviewing the petition for condonation of delay, the Tribunal found that the Revenue had sufficient cause for the delay and thus condoned the delay, admitting the appeal.

Issue 2: Disallowance under Rule 14A r.w. Rule 8D(2)(i) and 8D(2)(ii)

In the Revenue's appeal, the main contention was regarding the re-computation of disallowance under section 14A r.w. Rule 8D of the Income Tax Rules, 1962. The CIT(A) had directed the Assessing Officer to compute the disallowance based on a judicial pronouncement, which the Tribunal upheld, dismissing the Revenue's grounds of appeal.

Issue 3: Consideration of net interest expenses in disallowance under Rule 8D(2)(ii)

The assessee's appeal raised concerns about the calculation of disallowance under Rule 8D(2)(ii) without considering net interest expenses. The Tribunal noted that the assessee did not provide sufficient evidence or calculations to support this claim. The Tribunal upheld the CIT(A)'s order on this issue, dismissing the ground raised by the assessee.

Issue 4: Disallowance under section 43B(f) of the Act

The assessee contended that the disallowance under section 43B(f) of the Act related to Leave Encashment should not apply based on a High Court judgment. However, the Tribunal dismissed this ground, citing a Supreme Court judgment against the assessee on a similar issue.

In conclusion, the Appellate Tribunal ITAT Kolkata dismissed both the cross appeals of the Revenue and the assessee. The Tribunal upheld the orders of the CIT(A) on various issues related to disallowances under different sections of the Income Tax Act, 1961. The judgment was pronounced on 15th March 2021 by the Tribunal.

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