National Aluminium Company Ltd. Vs ACIT (ITAT Cuttack)
The issue under consideration is whether disallowance u/s 14A without following calculation method mentioned under rule 8D is justified in law?
ITAT states that, the assessee is earning income under different heads, as mentioned above. During the year, the assessee has received dividend and claimed such income as exempt income. The assessee has only made disallowance u/s.14A to earn the exempt income. The Assessing Officer has applied section 14A read with Rule 8D and disallowed the expenditure as per formula provided under rule 8D. The assessee is stated to have made no fresh investments out of borrowed funds. The Assessing Officer appears to have calculated the disallowance as per Rule 8D(2)(iii) observing that administrative expenses cannot be denied to earn exempt income. ITAT, however, find that the Assessing Officer has considered average total investment appearing on the first day and last day of the financial year, which in our opinion is not justified. These investments may also include such investments from which no exempt income would have been earned by the assessee. As is clear from the Rule itself, the average of only such investments have to be taken into account, which yielded the income not forming part of the total income. Therefore, the AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of Special Bench in the case of ACIT vs. Vireet Investment (P) Ltd. None of the parties before us, however, have laid any details to examine as to which of the investments have yielded such income which did not form part of the total income. ITAT, therefore, restore the matter back to the file of the Assessing Officer for calculating the disallowance u/s. 14A read with Rule 8D afresh, in the light of observations made in the body of this order above. Accordingly, appeal is allowed for statistical purposes.
FULL TEXT OF THE ITAT JUDGEMENT
These are the cross appeals filed by the assessee and Revenue
and cross objections by the assessee, against the separate orders of the CIT(A)-1, Bhubaneswar, dated 30.12.2017, 27.12.2018 & 24.10.2019 for the assessment years 2009-2010, 2015-2016 & 2016-2017, respectively.
2. Out of the six appeals, one appeal i.e. ITA No.65/CTK/2020, which has been filed by the Revenue for assessment year 2016-2017, is barred by limitation of 19 days. In this regard, the department has filed an application dated 30.01.2020 for condonation of delay stating therein the cause for delay in filing the present appeal, to which ld. AR did not object to it. After considering the application of the department, we find that the department has explained the sufficient cause for condonation of delay. Accordingly, we condone the delay of 19 days in filing the present appeal and the appeal is heard finally along with other connected appeals.
3. First of all, we would like to take on record the following paper books filed by the assessee in the appeals under consideration which have been perused and relevant part of the same have been considered for deciding the above appeals :-
