Chatterjee Asset Holdings Pvt. Ltd. Vs ACIT (ITAT Kolkata)
The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi for Assessment Year 2017-18. The Tribunal dealt with two substantive issues: disallowance under Section 14A read with Rule 8D and disallowance of interest expenditure under Section 36(1)(iii).
Regarding the first issue, the Assessing Officer had disallowed Rs. 12,42,107 under Section 14A read with Rule 8D as expenditure allegedly related to earning exempt income. The assessee had already made a suo motu disallowance of Rs. 1,02,042. Subsequently, through a rectification order dated 13.02.2020, the net disallowance was revised and retained at Rs. 11,40,065. The CIT(A) confirmed the disallowance. The Tribunal noted that during the year the assessee earned total income of Rs. 1,04,57,460, including dividend income of Rs. 1,04,13,400. It further observed that the assessee had already disallowed interest expenditure of Rs. 1,19,31,562. Since the assessee had disallowed an amount exceeding the dividend income earned during the year, the Tribunal held that no further disallowance was warranted and directed deletion of Rs. 11,40,065.
The second issue concerned disallowance of Rs. 1,71,98,066 under Section 36(1)(iii). The Assessing Officer observed that the assessee had claimed total interest expenditure of Rs. 3,02,80,478. After excluding the amount considered under Section 14A, the Assessing Officer disallowed the balance interest expenditure on the ground that it was not incurred for business purposes. The CIT(A) upheld this disallowance.
