Sunrays Propeties & Investment Ltd.,, ... vs Department Of Income Tax
- CitationITA No. 3785/Del/2013 : Asstt. Year : 2006-07
Ratio decidendi
The rule this decision rests on
Where the Assessing Officer computes disallowance under section 14A for an assessment year before AY 2008-09, the statutory machinery of Rule 8D is not applicable to that year, and the disallowance must instead be computed by the formula laid down by the Kerala High Court in CIT v. Catholic Syrian Bank Ltd., namely interest expenditure attributable to the tax-free income in proportion to total interest liability, or alternatively the ratio of exempt income to total business income. Where the Tribunal has already adjudicated an identical issue on identical facts in the assessee's own case for another assessment year, the same methodology applied there governs the present year, and the Tribunal will follow that earlier decision and decline to interfere with the Commissioner (Appeals)'s computation based on it.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
DCIT Vs Sunrays Propeties & Investment Ltd., Circle 9 (1), 414/1, 4th Floor, DDA Commercial Complex Nederland Distt. Centre, Janakpuri New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACS3655C Appellant by : Sh. Vijay Chaddha, Sr. DR Respondent by : Sh. Manu K. Gire, Adv.
Date of Hearing : 24.06.2015 Date of Pronouncement : 24.06.2015
ORDER
PER N.K. SAINI, A.M.
This appeal by the Department is directed against the order dated 18.03.2013 of ld. CIT(A)- XII, New Delhi.
2. Only effective ground raised in this appeal reads as under :-
"1. The ld. CIT(A) erred in law and on facts in restricting the amount of disallowance to Rs. 88,65,605/- instead of Rs. 1,71,90,424/-."
3. Facts of the case in brief are that the assessee filed the return of income declaring the loss of Rs. 9,57,318/- on 10.10.2008. The AO made disallowance of Rs. 1,71,90,424/- u/s 14A of the IT Act, 1961 2 ITA No.3785/Del/2013
(hereinafter referred to as the Act). The said disallowance was confirmed by the ld. CIT(A). However, the assessee preferred an appeal in ITA No. 3035/Del/2009 to the ITAT wherein vide order dated 25.10.2010. The matter was restored to the file of the AO for a fresh decision. The AO again made the same disallowance of Rs. 1,71,90,424/-.
4. Being aggrieved the assessee carried the matter to the Ld. CIT(A) who restricted the disallowance to Rs. 88,65,605/- by observing in impugned order as under :-
"The Assessing Officer vide order u/s 254/143(3) of the Income Tax Act dated 29.12.2011, has once again made the addition u/s 14A r.w.r.8D. The provisions of Rule 8D are applicable w.e.f. Assessment Year 2008-09 as laid down by the Bombay High Court in the case Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010) 328 ITR 81. Since the provisons of Rule 8D are not applicable for the AY 2007-08. The Hon'ble Kerala High Court in the case of CIT, Trichur Vs. Catholic Syrian Bank ltd. Trichur, vide its judgment has suggested a formula for computing disallowance u/s 14A in cases prior to AY 2008-09 where the provisions of Rule 8D of IT Rules are not applicable. The formula suggested by the Hon'ble High Court is as under :
Total Interest Liability
--------------------------X Tax Free Income earned by the assessee Total Income Accordingly the disallowance u/s 14A as per this ratio works out to Rs. 88,65,605/- as detailed hereunder.
1,96,35,273
------------------ X 1,24,59550 = 88,65,605/- 2,75,95,034 Keeping in view of the above facts, I am of the view that the disallowances made by the Assessing Officer u/s 14A Read with Rule 8D are not applicable in this year. Hence, the addition is restricted only to Rs. 88,65,605/- instead of Rs. 1,71,90,424/-."
3 ITA No.3785/Del/2013 5. Being aggrieved the department is in appeal. The ld DR strongly supported the order of the AO and reiterated the observations made in the assessment order dated 27.12.2011. In his rival submission, the ld. Counsel for the assessee submitted that this issue is squarely covered in favour of the assessee vide order dated 15.05.2015 of this bench of the Tribunal in ITA No. 2970 & 2971/Del.2013 for the assessment year 2004-05 & 2007-08 respectively in assessee's own case. He furnished the copy of the said order.
6. We have considered the submissions of both the parties and carefully gone through the material available on record. It is noticed that an identical issue having similar facts had been adjudicated by this bench of the tribunal in assessee's own case vide order dated 15.05.2015 in ITA No. 2970 & 2971/Del/2013 for the assessment year 2004-05 & 2007-08 respectively wherein relevant finds have been given at para 6 to 6.2 and read as under :-
"6. Apropos ground no. 4, we find that AO had made disallowance of Rs. 1,64,38,217/- u/s 14A by applying Rule 8D. However, ld. CIT(A) did not apply Rule 8D by observing that the said Rule was applicable w.e.f. assessment year 2008-09, as laid down by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT 328 ITR 81. She relied on the decision of Hon'ble Kerala High Court in the case of CIT Trichur vs. Catholic Syrian Bank Ltd., Trichur by observing as under :
"The Hon'ble Kerala High Court in the case of CIT Trichur vs. Catholic Syrian Bank ltd., Trichur, vide its judgment has suggested a formula for computing disalalowance u/s 14A in cases prior to AY 2008-09 where the provisions of Rule 8D of IT Rules are not applicable. The formula suggested by the Hon'ble High Court is as under :
4 ITA No.3785/Del/2013 Total Interest Liability / 7,62,03,737 X 1,26,61,025 = Rs. 33,16,436/- Keeping in view of the above facts, I am of the view that the disallowances made by the Assessing Officer u/s 14A read with Rule 8D are not applicable in this year. Hence the addition is restricted only to Rs. 33,16,436/- instead of Rs. 1,64,38,217/-. 6.1. The assessee had given following mode for computing the disallowance :
Dividend income = Rs. 1,26,61,025/- Business income = Rs. 7,62,03,737/-
Ratio of dividend income to business income : 1,26,61,025 / 7,62,03,737 X 100 = 16.61% Disallowance u/s 14A : 12661025* 16.61%= 21,02,996/-."
6.2 Having heard both the parties, we find that since the disallowance has been computed by ld. CIT(A) by applying the methodology laid down by Hon'ble Kerala High Court, therefore, no interference is called for in the same. We, accordingly, confirm 1. CIT(A)'s finding on the issue in question."
7. So respectfully following the aforesaid referred to order dated 15.05.2015 in assessee's own case. We do not see any valid ground to interfere with the findings of the ld. CIT(A) on this issue.
In the result, appeal of the department is dismissed. (Order Pronounced in the Court on 24/06/2015).
Sd/- Sd/- (George George K) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24 /06/2015 *B.Rukhaiyar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR 5 ITA No.3785/Del/2013
Date Initial 1. Draft dictated on 24/06/2015 PS 2. Draft placed before author 24/06/2015 PS 3. Draft proposed & placed before the JM/AM second member 4. Draft discussed/approved by Second JM/AM Member. 5. Approved Draft comes to the Sr.PS/PS PS/PS 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk PS 8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free