Srivaru Agro Pvt. Ltd Vs ACIT (ITAT Kolkata)
ITAT Kolkata: 14A Disallowance Remanded – Own Funds vs Borrowed Funds to be Verified as per South Indian Bank Ruling
Kolkata ITAT dealt with disallowance u/s 14A r.w. Rule 8D of ₹25.71 lakh made by AO. Assessee contended that its own interest-free funds of ₹13.48 crore far exceeded the total investments of ₹11.81 crore & hence no disallowance of interest was warranted as per the Supreme Court ruling in South Indian Bank Ltd. v. CIT (2021) 10 SCC 153. It was further argued that only one investment had yielded dividend income & total administrative expenses were only ₹57,979/-.
Tribunal observed that CIT(A) had not examined the fund-flow position or verified whether borrowed funds were actually used for investments. Relying on the principles laid down in South Indian Bank Ltd. & REI Agro (Kolkata HC), the Bench held that section 14A disallowance cannot be applied mechanically & must be restricted to actual expenditure incurred. The matter was therefore remanded to the CIT(A) for de-novo adjudication, directing verification of own-fund availability & reasonableness of administrative expenses. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)- 27, Kolkata [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 14.11.2024, which has been passed against the assessment order u/s 143(3) of the Act, dated 28.12.2018.
