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2023 (9) TMI 669 - AT - Income TaxDisallowance made u/s. 14A r.w.r. 8D - assessee had made suo-moto disallowance of expenses as expenses incurred for the purpose of earning exempt income - HELD THAT - We find that assessee is having sufficient interest free funds in its kitty, which would meet the investments that yield exempt income. Hence the presumption of availability of own funds theory would certainly come to the rescue of the assessee. This view of ours is further fortified by the recent decision of Hon ble Supreme Court in the case of South Indian Bank Ltd 2021 (9) TMI 566 - SUPREME COURT Hence there cannot be any disallowance of interest in terms of Rule 8D2(ii) of the Rules. - AO is directed to delete the same. Mandation of recording satisfaction - In the instant case, the ld. CIT(A) had even categorically stated that the ld. AO had not recorded any satisfaction before implementing the computation mechanism provided in Rule 8D(2) of the Rules. CIT(A) however goes to record his satisfaction, which is also ignoring the books of accounts of the assessee. First of all, the statute mandates the ld. AO to record his satisfaction in terms of section 14A(2) of the Act read with Rule 8D(1) of the Rules and the same cannot be supplemented by the action of the ld. CIT(A) in recording satisfaction on behalf of the ld. AO. Against the aforesaid finding of ld. CIT(A), the revenue is not in appeal before us. Hence it could be safely concluded that in the instant case, there is a clear violation of provisions of section 14A(2) of the Act read with Rule 8D(1) of the Rules. Hence we have no hesitation in deleting the entire disallowance made by the Ld. AO u/s. 14A of the Act, in the facts and circumstances of the instant case. Limitation period for considering any fresh claim of an assessee - Action of the lower authorities in not considering the revised computation of income filed during the course of assessment proceedings - HELD THAT - We find that in the recent Supreme Court decision rendered in the case of Wipro Finance Ltd. 2022 (4) TMI 694 - SUPREME COURT after considering the decision rendered in the case of Goetze (India) Ltd. had reiterated that the decision in Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT make it very clear that limitation period for considering any fresh claim of an assessee would apply only to the assessing authority and does not impinge upon the preliminary powers of the Tribunal bestowed u/s. 254 of the Act. We deem it fit and appropriate, in the interest of justice and fair play, to restore this issue raised in ground no. 3 and 3.1 to the file of Ld. CIT(A) for denovo adjudication on merits, in accordance with law.
Issues Involved:
- Challenge to disallowance made under section 14A of the Income Tax Act, 1961. - Consideration of revised computation of income filed during assessment proceedings. - Chargeability of interest under section 234B of the Act. Challenge to Disallowance under Section 14A: - The appeals arose from the order of the Commissioner of Income Tax (Appeals) against the assessment order passed by the Deputy Commissioner of Income Tax. - The issue involved challenging the disallowance made under section 14A of the Act. - The assessee, a company engaged in manufacturing, had earned dividend and tax-free interest income, claiming it as exempt under sections 10(34) and 10(35) of the Act. - The Assessing Officer did not provide objective reasons for rejecting the assessee's suo-moto disallowance and directly applied Rule 8D(2) for disallowance computation. - The Commissioner upheld the disallowance of interest under Rule 8D(2)(ii) but failed to establish proper satisfaction regarding direct and indirect expenses linked to investment activity. - The Tribunal found the assessee had sufficient interest-free funds to meet investments, citing the Supreme Court's decision in a similar case. - Consequently, the Tribunal directed the Assessing Officer to delete the disallowance of interest under Rule 8D(2)(ii) and the entire disallowance under section 14A of the Act. Consideration of Revised Computation of Income: - The assessee filed a revised computation of income within the prescribed time, which the Assessing Officer did not consider while framing the assessment. - The lower authorities rejected fresh claims based on a previous Supreme Court decision. - Citing a recent Supreme Court decision, the Tribunal noted that the limitation for considering fresh claims applies to the assessing authority and not the Tribunal. - In the interest of justice, the Tribunal remanded the issue for fresh adjudication by the Commissioner. Chargeability of Interest under Section 234B: - The assessee challenged the chargeability of interest under section 234B of the Act, which was noted as consequential in nature. - The Tribunal allowed the appeal for statistical purposes, finding in favor of the assessee for the assessment year in question.
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