Case Number: ITA 603/DEL/2019
Appellant: DCM Ltd., New Delhi
Respondent: Addl.CIT, Special Range-3, New Delhi
Assessment Year: 2013-14
Date of Order: 2021-12-31
Pronounced On: 2021-12-31
Case Filed On: 2019-01-29
Order Type: Final Tribunal Order
The case of DCM Ltd. vs Addl.CIT, Special Range-3, New Delhi, ITA No. 603/DEL/2019, pertains to the assessment year 2013-14. The case was filed on 29th January 2019 and involves a dispute over the disallowance of expenses under Section 14A of the Income Tax Act. The final order was pronounced on 31st December 2021.
DCM Ltd., a prominent company based in New Delhi, filed its income tax return for the assessment year 2013-14, declaring an income of Rs. 36,34,22,190. The Assessing Officer (AO) framed the original assessment under Section 143(3) of the Income Tax Act, 1961, at an income of Rs. 42,26,56,849, which included disallowances under Section 14A read with Rule 8D of the Income Tax Rules, 1962.
The AO disallowed Rs. 287.82 lakhs under Section 14A, which comprised Rs. 256.71 lakhs as interest expenditure and Rs. 35.11 lakhs as administrative expenses. Additionally, the AO disallowed Rs. 22.32 lakhs of interest pertaining to an outstanding balance of advances/loans to the DCM Employees Welfare Trust. Aggrieved by these disallowances, DCM Ltd. appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], who partly upheld the AO’s decision. Both the assessee and the revenue subsequently filed cross-appeals before the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘B’.
The appeal was heard by the ITAT, Delhi Bench ‘B’, comprising Shri G.S. Pannu, President, and Shri Ravish Sood, Judicial Member. The tribunal addressed the issues raised by both the assessee and the revenue in a consolidated order due to the interconnected nature of the disputes.
The primary issues revolved around the disallowance of interest and administrative expenses under Section 14A read with Rule 8D. The assessee contended that the interest expenditure was directly attributable to business loans and that sufficient self-owned funds were available to cover investments yielding exempt income. The assessee also argued that the disallowance of administrative expenses should be based on the average value of investments that actually yielded exempt income during the year, rather than all investments.
The ITAT made several key observations in its order:
In conclusion, the ITAT partly allowed the appeal filed by DCM Ltd. and dismissed the revenue’s appeal. The tribunal’s decision highlighted the importance of adhering to judicial precedents and the proper application of disallowance provisions under Section 14A read with Rule 8D.
The decision was pronounced in the open court on 31st December 2021.
Members:
G.S. Pannu, President
Ravish Sood, Judicial Member
Dated: 31st December 2021
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
DCM Ltd. vs Addl.CIT, Special Range-3, New Delhi – Case Filed Due to Disallowance of Expenses
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