SLK Software Pvt. Ltd. Vs ACIT (ITAT Bangalore)
Section 14A Can’t Be Mechanical: Bangalore ITAT Pulls Up AO for Rule 8D Invocation- Speaking Order Mandatory: ITAT Sets Aside CIT(A)’s Non-Reasoned TDS Order
Bangalore ITAT “C” Bench, in M/s SLK Software Pvt. Ltd. Vs ACIT (ITA Nos. 932 & 933/Bang/2023, AYs 2017-18 & 2018-19; order dated 31.01.2025), partly allowed Assessee’s appeals, granting full relief on disallowance u/s 14A while setting aside TDS disallowance on overseas payments for fresh adjudication due to a non-speaking order by CIT(A).
For AY 2017-18, Assessee earned exempt dividend income of ₹1.15 crore & had made a suo-motu disallowance of ₹8.05 lakh u/s 14A. AO, without recording any dissatisfaction as required u/s 14A(2), mechanically invoked Rule 8D & made further disallowance. Tribunal held that recording dissatisfaction is a sine qua non before invoking Rule 8D & mere increase in investments or absence of separate investment books is insufficient. Relying on PCIT Vs Reliance Capital Asset Management Ltd (Bom HC), ITAT deleted the entire 14A addition, holding Rule 8D invocation invalid in law.
On the issue of disallowance u/s 40(a)(i) for alleged non-deduction of TDS on payments to overseas group entities/service providers, Tribunal found that CIT(A) passed a cryptic, non-reasoned order, in violation of section 250(6), without dealing with Assessee’s detailed arguments on DTAA, section 9 & section 195. Holding that appellate orders must be speaking orders, ITAT set aside the matter to CIT(A) for fresh adjudication after proper consideration & opportunity of hearing.
For AY 2018-19, issues being identical, Tribunal followed its findings for AY 2017-18, deleting 14A disallowance & remanding overseas TDS issues to CIT(A). Consequently, both appeals were partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals filed by the assessee are against the order passed by the NFAC, Delhi dated 30/09/2023 and 06/10/2023 respectively for the assessment years 2017-18 and 2018-19.
