2021 (12) TMI 539 - AT - Income Tax

Disallowance u/s 14A read with rule 8D - assessee company has made suo motu disallowance - HELD THAT - When we examine impugned order passed by the ld. CIT (A) it does not lead to any conclusive findings as per grounds raised by the assessee company that disallowance cannot be more than exempt dividend income earned by the assessee during the year under consideration. Rather ld. CIT (A) has confused the entire controversy sought to be decided by the assessee by partly following his own order passed in AY 2012-13 but has lost sight of all the facts brought on record by the assessee. Thus, the entire findings are cryptic and incomprehensible. In these circumstances, we are of the considered view that the issue has not been examined by ld. CIT(A) by thrashing the facts in the light of the law applicable thereto. Consequently, this issue is remitted back to the ld. CIT(A) to decide afresh in the light of the decisions rendered by Hon ble Delhi High Court in the cases of as Joint Investments (P.) Ltd. 2015 (3) TMI 155 - DELHI HIGH COURT AND MAXOPP INVESTMENT LTD., CHEMINVEST OTHERS 2011 (11) TMI 267 - DELHI HIGH COURT . Payment to its Associated Enterprise, M/s. Hero Global Design Ltd., for providing engineering services - HELD THAT - The issue is identical and services have been rendered by M/s. Hero Global Design Limited, and since then business model has not been changed, and whose engineers were constantly available within the factory of the assessee company and have been regularly being paid for their services. So, following the order passed by the coordinate Bench of the Tribunal in assessee s own case for AY 2012-13 2020 (4) TMI 51 - ITAT DELHI we find no infirmity or illegality in the impugned deletion made by the ld. CIT (A), hence grounds no.3 4 are determined against the Revenue.

Summary

Issues:
1. Disallowance of investment in Debt Oriental Mutual Funds and other companies under section 14A read with Rule 8D.
2. Addition of expenses paid to M/s. Hero Global Design Ltd. for AYs 2013-14 & 2014-15.

Analysis:

Issue 1: Disallowance of Investment
The Appellant, ACIT, sought to set aside the orders passed by the Commissioner of Income-tax (Appeals) regarding the disallowance of investments made by the assessee in Debt Oriental Mutual Funds and other companies for the Assessment Years 2013-14 & 2014-15. The Assessing Officer computed the disallowance under section 14A read with Rule 8D. The ld. CIT (A) partly allowed the appeals, leading to the Revenue's appeal before the Tribunal. The Tribunal found that the ld. CIT (A) did not conclusively address the issue of disallowance in line with the law and facts of the case. Therefore, the issue was remitted back to the ld. CIT (A) for fresh consideration in light of relevant legal precedents, providing an opportunity for the assessee to be heard. Grounds No.1 & 2 were determined in favor of the Revenue for statistical purposes.

Issue 2: Addition of Expenses to M/s. Hero Global Design Ltd.
The AO made additions on the grounds that the expenses paid to M/s. Hero Global Design Ltd. were not incurred wholly and exclusively for the purpose of business. However, the ld. CIT (A) deleted these additions based on his previous decision for AY 2012-13 in favor of the appellant. The Tribunal noted that the findings were confirmed by a coordinate Bench in a previous case of the assessee. The Tribunal examined the nature of services provided by M/s. Hero Global Design Ltd. and found no illegality in the deletion made by the ld. CIT (A). Consequently, grounds No. 3 & 4 were determined against the Revenue. The appeals for AYs 2013-14 & 2014-15 were partly allowed for statistical purposes.

In conclusion, the Tribunal addressed the issues of disallowance of investments and addition of expenses to M/s. Hero Global Design Ltd. The judgment highlighted the importance of examining facts and legal provisions thoroughly in such tax matters, ensuring a fair and just decision based on the merits of each case.