Airport Authority of India Vs DCIT (ITAT Delhi)
ITAT Delhi remanded the issue back to file of AO to re-compute disallowance under rule 8D(2)(ii) of the Income Tax Act by taking those investment which give rise to exempt income @1% of average value of investment.
Facts- The assessee in its return of income disclosed dividend income of Rs. 19,65,60,000/- and claimed as exempt. AO during the course of assessment proceedings asked the assessee to furnish details of expenditure debited to the profit and loss account in relation to exempt income and show caused as to why disallowance u/s 14A of the Act read with 8D of the Rule be not made. Assessee claimed before AO,that, since the investment have been made from own funds, no disallowance is called for u/s 14A of the Act read with Rule 8D(2)(ii) of the Rules. AO not agreeing with the submissions of the assessee, invoked the formula under 8D(2)(ii)of the rules and made disallowance @1% average value of investment of Rs. 17,15,47,000/-.
CIT(A) deleted the disallowance. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the entire premise of the CIT(A) was interest free fund available with the assessee but we are of the view that finding of the CIT(A) are recorded for the purpose of disallowance of old clause i.e. under Rule 8D(2)(ii) of the rules prior substitution of the above amendment i.e. prior to 02.06.2016. It means that the average value of investment under the substituted Rules is to be made @1% on average value of investment as held by Special Bench of this Tribunal in the case of ACIT vsVireet Investments P Ltd reported in 165 ITD 27 (Del) (SB) wherein, it has been held that for the purpose of computation of disallowance of average value of investment the AO has to take only the instrument which gives rise to exempt income and not the investment which does not give rise the investment. In terms of above, we set aside the order CIT(A) on this issue and remand the issue back to the file of the ld AO.
