RSWM Ltd. Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, disposed of cross-appeals filed by the assessee and the Revenue for Assessment Years (AYs) 2014-15 and 2015-16. The appeals involved issues relating to disallowance under Section 14A read with Rule 8D, addition under Section 69 for alleged unexplained investment, deductibility of education cess, and the tax treatment of various subsidies received by the assessee.
For AY 2014-15, the assessee challenged the disallowance of ₹81,01,633 under Section 14A, the addition of ₹1,52,45,000 under Section 69 towards alleged unexplained investment in land, and the rejection of its claim for deduction of education cess. The Revenue, on the other hand, challenged the relief granted by the Commissioner of Income Tax (Appeals) [CIT(A)] in respect of disallowance under Section 14A and deletion of additions relating to subsidies received under FPS/FMS, TUFS, and RIPS.
On the issue of Section 14A disallowance, the Tribunal noted that the assessee’s own interest-free funds, including share capital and reserves, were substantially higher than the investments made. Relying on earlier decisions in the assessee’s own cases for previous years, the Tribunal held that no disallowance under Rule 8D(2)(ii) relating to interest expenditure was warranted. However, it directed the Assessing Officer (AO) to recompute the disallowance under Rule 8D(2)(iii) by considering only those investments from which exempt income had actually been earned.
