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04-11-2019, Oscar Investments, Section 263, 14A, 10(34), Tribunal Delhi

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6 months 2 weeks ago #11321 by amit
Section - 263, 14A, 10(34), 8D, 43B, 217(1A), 273(c)
Order Date - 04-10.2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Oscar Investments Ltd.
Respondent - PCIT
Citation - 1119Taxpundit58
Appeal No. - ITA No. 2823/Del/2016
Asstt. Year - 2011-12



This appeal is preferred by the assessee against order dated 7th March, 2016 passed by the Ld. Pr. Commissioner of Income Tax (PCIT), Delhi – 7 under section 263 of the Income tax Act, 1961 (hereinafter called ‘the Act’) and pertains to assessment year 2011-12.

2.0 Facts in brief are that for the year under consideration the return of income declaring total income of Rs.66,00,44,440/- was filed by the assessee.Thereafter, the case was selected for scrutiny and vide order dated 17thJune, 2013 passed u/s 143(3) of the Act, the Assessing Officer (AO) assessed the total income of the assessee at Rs.70,93,22,040/-. In the order of assessment passed u/s 143(3) of the Act, the AO noted that during the year under consideration, the assessee had received dividend income of Rs.1,10,58,833/- which was claimed as exempt not chargeable to tax and that in its computation of income, the assessee had, suo moto, made a disallowance of Rs.2.13 crores as expenditure incurred by it on account of administrative and personal expenditure u/s 14A of the Act. The AO, was however, unconvinced and by invoking provisions of Rule 8D (2)(iii) he recomputed the disallowance u/s 14A at Rs.4,05,51,458/-.

2.1 Being aggrieved, the assessee filed an appeal before Ld. CIT (A) which was allowed vide. The Ld CIT (A) deleted the additional disallowance made by AO and in this regard, vide order dated 30th April, 2014 in Appeal No.182/13-14, it, was held by the Ld. CIT (A) as under:-

“4.1.1 I have carefully considered the submissions of the A/R of the appellant company, the facts of the case as well as the findings of the AO Ground no.3 of appeal is general in nature. Therefore, no adjudication is called for. In Ground no.1 of appeal the plea of the appellant is that the AO has erred in enhancing disallowance under clause (iii) of sub-rule (2) of Rule 8D from Rs.2,12,73,863/- (as returned by the appellant) to Rs.4,05,51,458/- (being 0.5% of average of value of investments) without appreciating that the appellant had actually incurred and claimed total expenditure of Rs.2,12,73,863/- only during the year under reference.

4.1.2 The appellant, a listed company and also an NBFC is engaged in the business of investment in shares / securities as well as in the business of granting loans and advances. During the year under reference the assessee company has erred income not forming part of total income of Rs.1,10,58,833/- on shares of various companies and units of mutual fund in the nature of dividend exempt u/s 10(34)/10(35) of the Act. The appellant in its return of income had made a suo moto disallowance u/s 14A of Rs.2,19,52,010/- in the form of Rs.6,78,146/- out of interest and Rs.2,12,73,864/- in accordance with clause (iii) of subrule (2) of Rule 8D. The AO has computed the disallowance under rule 8D (2)(iii) at Rs.4,05,51,458/- and added the excess disallowance of Rs.1,92,77,595/-.

4.1.3 From the P&L account it is seen that the total amount debited was Rs.3,36,56,041/-. From the computation of income it is evident that out of the above the appellant has suo moto added back the amounts debited in the P&L account of rs.1,24,87,347/- (out of interest on late deposit of TDS (Rs.320/-), Contingent Provisions against Standard Assets (Rs.20,13,436/-), depreciation as per accounts (Rs.20,15,945/-), out of amount written off (Rs.76,75,079), out of misc. expenses – subscription (Rs.30,000/-), leave encashment u/s 43B (Rs.22,778/-) gratuity u/s 40A(7)(Rs.80,248), out of Deb. Issue exp. (Rs.5,54,858/-) and security transaction taxd (Rs.94,683/-) in the computation of income as inadmissible expenses. Besides the above, expenditures of Rs.2,19,52,010/- being related to exempt income was also disallowed and added back suo moto u/s 14A by the appellant in the computation of income. Thus, the entire amounts of Rs.3,36,56,041/- debited in the P&L account was suo moto added back by the appellant in the computation of income. The disallowance u/s 14A made by the AO by any stretch of imagination, cannot exceed the amount of total expenditure incurred by the appellant. AO has computed the disallowance of expenditure u/s 14A at Rs.4,05,51,458/- under Rule 8D(2)(iii) being 0.5% of average value of investments of Rs.811,02,91,535/- and disallowed the excess of Rs.1,92,77,595/- over and above the disallowance made suo moto by the appellant. The AO has grossly erred in making the additional disallowance of Rs.1,92,77,595/- as the entire expenditure debited in the P&L account have already been added back suo moto by the appellant in the computation of income. Disallowance by the AO cannot exceed the total expenditure debited in the P&L account. In view of the above, the additional disallowance of Rs. 1,92,77,595/- made by the AO being not justified, is deleted The appeal is allowed in this ground.”

2.2 The Revenue, however, was aggrieved by the relief granted by Ld. CIT (A) and it filed an appeal before this Tribunal in Appeal No.4088/Del/2014. The said appeal was dismissed vide order dated 9th February, 2017 by observing as under:-

“We have carefully considered the rival contentions and also produced the orders of the lower authorities. In the present case the assessee has earned exempt dividend income of Rs.11058833/- and assessee on its own has disallowed a

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