In the Income Tax Appellate Tribunal, Delhi Bench ‘H’, presided by Vice-President Shaktijit Dey and Accountant Member Girish Agrawal, the case of RSWM Ltd versus DCIT Central Circle-31, New Delhi was adjudicated. The case, bearing ITA Nos. 142, 143 & 144/Del/2021, pertained to the assessment years 2011-12, 2012-13, and 2013-14, with the hearings and pronouncements made on July 3, 2023.
The appellant, RSWM Ltd, represented by Sh. S.S. Naagar, C.A., challenged the orders of the Commissioner of Income-tax (Appeals)-30, New Delhi, particularly concerning the assessment year 2012-13. The primary issue at stake was the disallowance of expenditure under Section 14A of the Income-tax Act, 1961, read with Rule 8D, which pertains to expenses related to earning exempt income. The case was notably delayed by 101 days due to the COVID-19 pandemic, with the tribunal eventually condoning the delay and admitting the appeals for adjudication.
Detailed discussions were held regarding the disallowances made by the Assessing Officer during the course of assessment proceedings. The officer had noted that the assessee had earned significant exempt incomes during the years under consideration and had not made requisite disallowances for expenditures linked to these incomes. This led to the initial disallowance of expenditures amounting to Rs.3,21,91,000 for the assessment year 2011-12 and Rs.3,85,60,000 for 2012-13. However, upon appeal, the first appellate authority restricted these disallowances to the quantum of exempt incomes earned during the relevant years.
The tribunal reviewed submissions from both the assessee and the revenue side, represented by Sh. Ramdhan Meena, Sr. DR. After thorough examination, the tribunal ruled that there were no current investments requiring such high disallowances and noted that the assessee had sufficient interest-free funds, such as share capital and reserves, to cover the investments yielding exempt income. This led to a significant reduction in the assessed disallowances under Rule 8D(2)(ii), fully eliminating them for the years in question. Additionally, for administrative expenditures under Rule 8D(2)(iii), only those investments yielding income during the relevant assessment years were considered for computation.
Ultimately, the tribunal partly allowed the appeals for ITA Nos. 142 and 143, dismissing the grounds not pressed by the assessee and deeming other general nature grounds as not requiring specific adjudication. ITA No. 144/Del/2021, pertaining to the assessment year 2013-14, was dismissed as not pressed. The final order, articulated with detailed legal references and analyses, underscores the nuanced application of tax laws and the critical role of judicial discretion in tax tribunals.
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