ACIT, Circle-7(1), New Delhi vs DLF Homes Developers Ltd: Delay in TDS Disallowance for AY 2014-15

ACIT, Circle-7(1), New Delhi vs DLF Homes Developers Ltd: Delay in TDS Disallowance for AY 2014-15

Case Number: ITA 5704/DEL/2019

Appellant: ACIT, Circle-7(1), New Delhi

Respondent: DLF Homes Developers Ltd., New Delhi

Assessment Year: 2014-15

Case Filed On: 2019-06-28

Order Type: Final Tribunal Order

Date of Order: 2023-03-07

Pronounced On: 2023-03-07

Background

The case involves the ACIT, Circle-7(1), New Delhi, as the appellant, and DLF Homes Developers Ltd., New Delhi, as the respondent. The issue revolves around the disallowance under Section 14A r.w. Rule 8D of the Income Tax Act, 1961, for the assessment year 2014-15. The respondent challenged the disallowance made by the Assessing Officer (AO) under Section 14A.

Reason for Filing the Case

The appellant, ACIT, Circle-7(1), New Delhi, filed the case challenging the reversal of the disallowance made by the AO under Section 14A. The respondent, DLF Homes Developers Ltd., argued that the AO did not record the necessary satisfaction before invoking the provisions of Section 14A and Rule 8D, and that they had sufficient interest-free funds to cover the investments giving rise to exempt income.

Tribunal Proceedings

On 7th March 2023, the tribunal, comprising SHRI CHANDRA MOHAN GARG, Judicial Member, and SHRI PRADIP KUMAR KEDIA, Accountant Member, heard the case.

The appellant’s representatives, Shri R.S. Singhvi, CA, and Shri Satyajeet Goel, CA, presented their arguments. The respondent was represented by Shri T. James Singson, CIT-DR.

Arguments Presented

The appellant contended that the CIT(A) erred in deleting the disallowance made by the AO under Section 14A r.w. Rule 8D of the Act, amounting to Rs.1,53,04,36,680/- for the assessment year 2014-15. The disallowance was based on the statutory formula prescribed under Rule 8D of the Income Tax Rules, 1962.

The respondent argued that:

• They had made a suo-motu disallowance of Rs.4,49,320/- and the AO did not reject this computation.
• The AO did not record satisfaction before invoking the provisions of Section 14A and Rule 8D.
• They had sufficient interest-free funds available for making the investments, and these investments were not made from interest-bearing funds.
• Similar cases in previous years had been decided in their favor, including decisions by the CIT(A) and the ITAT.

Tribunal’s Decision

The tribunal considered the rival submissions and the material placed on record. The tribunal noted that the AO did not record any satisfaction about the incorrectness of the disallowance made by the respondent. It was observed that the respondent had sufficient interest-free funds to cover the investments, and the AO had not demonstrated any defects in the respondent’s computation.

The tribunal referenced several judicial precedents, including decisions by the Hon’ble Delhi High Court and the ITAT, which supported the respondent’s position. The tribunal highlighted that the AO must record satisfaction about the incorrectness of the disallowance before invoking Section 14A and Rule 8D, which was not done in this case.

Conclusion

The tribunal upheld the CIT(A)’s decision to delete the disallowance made by the AO under Section 14A r.w. Rule 8D for the assessment year 2014-15. The tribunal emphasized the importance of the AO recording satisfaction about the incorrectness of the disallowance before applying the statutory formula.

The final result was a significant step towards ensuring that disallowances under Section 14A are made with due diligence and adherence to procedural requirements.

Order pronounced on: 07/03/2023

Signatories:

SHRI CHANDRA MOHAN GARG, Judicial Member

SHRI PRADIP KUMAR KEDIA, Accountant Member

Dated: 07/03/2023

Copy forwarded to:

• Appellant
• Respondent
• CIT
• CIT(Appeals)
• DR: ITAT

ASSISTANT REGISTRAR

ITAT NEW DELHI

ACIT, Circle-7(1), New Delhi vs DLF Homes Developers Ltd: Delay in TDS Disallowance for AY 2014-15