PTC India Limited Vs DCIT (ITAT Delhi)
14A Satisfaction Upheld but 8D Must Apply Only to Dividend-Yielding Investments—Disallowance Recomputed; Unrealised Surcharge Not Taxable—
Assessee earned ₹81.56 crore exempt dividend and suo-moto disallowed ₹49,51,789, based on a CA certificate allocating direct expenses of ₹15.41 lakh and 18% of indirect expenses of ₹1.87 crore.
AO held the disallowance insufficient, recorded satisfaction citing lack of monthly investment details and high finance cost, and invoked Rule 8D, computing additional disallowance of ₹17,09,49,711. CIT(A) confirmed.
Before Tribunal, the Assessee argued absence of proper satisfaction, reliance on past years’ ITAT orders, and incorrect application of Rule 8D. Revenue argued that post-2016 amended Rule 8D mandates 1% of monthly average investments.
Tribunal held:
- AO did record valid dissatisfaction with assessee’s working—thus invocation of 14A(2) sustained.
- But AO wrongly applied Rule 8D(2)(ii) on all investments, instead of only those that yielded exempt income, contrary to Crago Motors (Del HC, 453 ITR 554) & Vireet Special Bench (82 taxmann.com 415).
- Disallowance must therefore be recomputed restricting 1% to dividend-yielding investments only.
Assessee’s appeal partly allowed.
Revenue’s Appeal
The issue concerned addition of ₹1,94,37,33,111 as “surcharge on delayed payments”. AO treated the surcharge as accrued income under mercantile system. CIT(A) deleted the addition following earlier years and the ITAT’s order in assessee’s own case.
