Indraprastha Gas Limited Vs JCIT (OSD) (ITAT Delhi)
Assessee, a leading distributor of CNG & PNG, filed its return declaring income of ₹914.49 crore. AO completed assessment u/s 143(3) determining total income at ₹927.94 crore after making two adjustments- disallowance of additional depreciation u/s 32(1)(iia) & disallowance u/s 14A read with Rule 8D amounting to ₹3.65 crore. CIT(A) deleted the disallowance of additional depreciation but upheld the disallowance u/s 14A.
Before Tribunal, Assessee contended that it had already made a suo motu disallowance of ₹25.84 lakh u/s 14A while computing income, following Maxopp Investment Ltd. (203 Taxman 364). It was argued that no fresh investments were made during the year, the dividend income arose from long-standing investments in associates (Maharashtra Natural Gas Ltd. & Central UP Gas Ltd.), & mutual fund gains were due to mark-to-market appreciation without any expenditure incurred. Assessee maintained that investments were made from own surplus funds, with no interest-bearing borrowings.
AO, however, rejected the working & applied Rule 8D mechanically, computing additional disallowance of ₹3.65 crore. CIT(A) affirmed the AO’s view.
Tribunal held that Rule 8D applies only when AO records a valid dissatisfaction about correctness of assessee’s claim. In this case, the AO’s satisfaction was general & unsubstantiated, without identifying any specific expenditure incurred for earning exempt income. Since there were no new investments & the assessee had sufficient own funds, no further disallowance of interest or indirect expenditure was warranted.
