DCIT Vs SIL Investment Ltd. (ITAT Delhi)
In the present case As assessee had established nexus of interest expenses with its main activity of financing and there was not a single amount of interest bearing borrowings which could be related with investment which yielded tax-free dividend income, no disallowance under rule 8D(2)(ii) was called for. AO was directed to compute disallowance under rule 8D(2)(iii) at the rate of 0.5% of investments which actually have resulted in the exempt dividend income.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
The present appeal by Revenue and Cross Objection filed by assessee has been filed against order dated 24/07/14 passed by Ld. CIT (A)-11, New Delhi for assessment year 2011-12 on the following grounds of appeal:
“That the Ld.CIT(A) has erred in deleting disallowance made by AO amounting to Rs.4,87,35,014/- under Rule 8D(2)(ii) of I.j, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.”
CO No. 142/del/2015
1. That the CIT(A) erred on facts and in law in confirming disallowance out of administrative expenses amounting to Rs.61,73,967/- u/s 14A of the Income Tax Act, 1961 (the Act) as computed by applying formulae given in Rule 8D(2)(iii) of the Income tax Rules, 1962 (the Rules).
1.1. That the CIT(A) erred on facts and in law in not restricting the disallowance u/s 14A to the amount of Rs.55,76,775/-, suo motu disallowed by the appellant in the return of income.
1.2. That the CIT(A) failed to appreciate that in the absence of ‘satisfaction’ being recorded by the AO u/s 14A(2) of the Act, Rule 8D of the Rules had no application.
1.3. That the CIT(A) erred on facts and in holding that ‘satisfaction’ in terms of 14A(2) of the Act could also be recorded by the CIT(A).
1.4. That the CIT(A) erred on facts and in holding that the basis/formula adopted by the appellant for making disallowance out of administrative expenses was not reasonable/scientific.
2. That the CIT(A) erred on facts and in law in confirming levy of interest u/s 234B and 234D of the Act.
The respondent craves leave to add, amend, alter or vary from the above grounds at or before the time of hearing.”
