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2024 (6) TMI 736 - AT - Income TaxDisallowance u/s 14A r/w rule 8D - HELD THAT - It is seen that the assessee made investments of Rs. 12,50,000/- in Kalupur Commercial Co-operative Bank Ltd. and the dividend received on such shares is taxable in nature and does not generate any exempt income. Further, the assessee had share capital, Reserve Surplus to the extent of Rs. 357 crores, whereas the investments in mutual funds is to the extent of Rs. 284 crores. Thus, the interest free funds are far in excess to the investments made by the assessee, which are generating exempt income not forming part of the total income. Thus we hold that, the AO having not recorded his dissatisfaction u/s 14A(2) of the Act before invoking Rule 8D, he could not have made any disallowance u/s 14A of the Act. Thus, the disallowance made by the Assessing Officer is not sustainable in law and the same is liable to be deleted. Deduction claimed u/s 37 for education cess and higher secondary education cess - Scope of amendment made to Sec.40(a)(ii) by the Finance Act, 2022 retrospectively - assessee, submitted that the assessee has been visited with additions on the ground that though the claim of the assessee was legitimate at the time of the filing of the return of income, however, because of the retrospective introduction of the Explanation (3) to the Act, the same becomes an inadmissible expenditure and the provisions of Section 155(18) which came to be introduced with effect from 01.04.2022 provided that where the assessee is desirous of withdrawing the claim, he can do so subject to the payment of taxes - HELD THAT - Where the application in Form No.69 has been made in the prescribed format and within the prescribed period, the claim would not be deemed to be under-reported income for the purpose of Section 270(A)(3) of the Act. Copy of the acknowledgement of receipt of the IT Form No.69 was furnished by the assessee before ld. CIT(A) so as to ascertain this fact as mentioned in the order of the ld. CIT(A); however, no orders have been passed by the AO regarding the application made by the assessee and the ld. CIT(A) has also not addressed this issue. Thus, the ground No.1 raised by the assessee is hereby allowed with the direction to the Assessing Officer to dispose of the application in Form No.69 made by the assessee and pass the order in accordance with law.
Issues Involved:
1. Disallowance u/s 14A read with Rule 8D of Income-tax Rules, 1962. 2. Deduction claimed u/s 37 for education cess and higher secondary education cess. Summary: Issue 1: Disallowance u/s 14A read with Rule 8D - Facts: The assessee, a company engaged in manufacturing and sale of chewing tobacco, filed returns for AY 2018-19 and 2020-21. The Assessing Officer (AO) made disallowances u/s 14A r.w.r. 8D for both years. - Assessee's Argument: The AO did not record dissatisfaction with the assessee's suo moto disallowance, which is a prerequisite for invoking Rule 8D. The assessee cited judgments from the Hon'ble Jurisdictional High Court in support. - Tribunal's Findings: The AO failed to record dissatisfaction as required u/s 14A(2). The Tribunal cited precedents from the Hon'ble Gujarat High Court, emphasizing that the AO must record dissatisfaction before applying Rule 8D. The Tribunal deleted the disallowance for both AY 2018-19 and 2020-21. Issue 2: Deduction claimed u/s 37 for education cess and higher secondary education cess - Facts: For AY 2020-21, the assessee claimed education cess as a deductible business expenditure. The AO disallowed this based on the amendment in Section 40 by the Finance Act, 2022. - Assessee's Argument: The assessee complied with the provisions of Section 155(18) and Rule 132 by filing Form No.69 before the due date, requesting recomputation without the deduction for cess. - Tribunal's Findings: The Tribunal directed the AO to dispose of the application in Form No.69 and pass an order in accordance with the law. The Tribunal allowed the ground for statistical purposes. Conclusion: - ITA No. 1006/Ahd/2023: Appeal allowed, disallowance u/s 14A deleted. - ITA No. 1007/Ahd/2023: Appeal allowed for statistical purposes, AO directed to address the application in Form No.69.
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