9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 620 - AT - Income TaxAddition u/s 14A - interest expenses addition - Sufficiency of own funds - HELD THAT - As in case of Gujarat Fluoro chemicals Ltd. 2020 (10) TMI 252 - GUJARAT HIGH COURT reiterated that where interest free funds available with assessee were far more than gross investment, it could safely be harboured that interest bearing funds was not invested by assessee and, thus, no disallowance under section 14A to be made. In view of the consistent position taken by the Gujarat High Court, as applied to the facts instant case, in our considered view, no disallowance is called for in respect of interest expenses under section 14A when the assessee is having sufficient interest-free funds at the disposal in excess of investment made in instruments yielding exempt income. Disallowance of administrative expenses - As quantification was not permissible under rule 8D for the impugned assessment year, the disallowance had to be made on the basis of reasonableness and fairness. The Mumbai ITAT in the case of Taj Sats Air Catering Ltd. 2012 (4) TMI 305 - ITAT MUMBAI held that where assessee had not allocated any expenditure for earning interest free dividend income, reasonable disallowance was justified. The Ahmedabad in the case of Sun Pharmaceutical Industries Ltd. 2017 (6) TMI 1323 - ITAT AHMEDABAD directed the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D We are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in confirming disallowance in respect of administrative expenditures and directing the A.O. to compute the disallowance for administrative expenditure made by the AO as per the formula given under Rule 8D.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act 2. Condonation of Delay in Filing the Appeal Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act Facts: - The assessee earned dividend income of ?64,30,214/- which is exempt from tax. - The Assessing Officer (AO) observed investments totaling ?14,88,93,893/- as of 31-03-2009 and disallowed ?10,43,772/- under Section 14A. - The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision but reduced the disallowance to ?9,26,753/-. Arguments by Assessee: - Investments were made from idle IPO proceeds, and no direct expenditure was incurred to earn the exempt income. - The assessee had sufficient interest-free funds (reserves and surplus) amounting to ?81,77,28,384/- against the investment of ?14,78,73,373/-. Judgment: - Interest Expenses: No disallowance under Section 14A is warranted for interest expenses since the assessee had sufficient interest-free funds exceeding the investments made for earning exempt income. This position aligns with several judgments by the Gujarat High Court, including cases like Hitachi Home and Life Solutions (I) Ltd., UTI Bank Ltd., and Gujarat Narmada Valley Fertilizers Co. Ltd. - Administrative Expenses: The disallowance of administrative expenses amounting to ?5,54,406/- was upheld. It was deemed unreasonable to claim that no administrative expenses were incurred for managing substantial investments. This decision is supported by various precedents, including the ITAT's rulings in cases like Amit P. Pandya, Axis Bank Ltd., and Zee Entertainment Enterprises Ltd. 2. Condonation of Delay in Filing the Appeal Facts: - The appeal was filed with a delay of 462 days. - The delay was attributed to the advice of the assessee's Chartered Accountant (CA) and subsequent legal proceedings. Judgment: - The delay was condoned based on the principles laid down by the Supreme Court in cases like Collector, Land Acquisition v. Mst. Katiji and N. Balakrishnan v. M. Krishnamurthy. The court emphasized that substantial justice should prevail over technicalities, and the delay was neither deliberate nor indicative of mala fide intent. Conclusion: - The appeal was partly allowed, with the disallowance under Section 14A for interest expenses being overturned due to sufficient interest-free funds. However, the disallowance for administrative expenses was upheld, and the delay in filing the appeal was condoned.
|
