Case Number: ITA 437/DEL/2019
Appellant: HOLTEC CONSULTING PVT. LTD., NEW DELHI
Respondent: ADDL. CIT, SPECIAL RANGE – 4, NEW DELHI
Assessment Year: 2009-10
Case Filed On: 2019-01-21
Order Type: Final Tribunal Order
Date of Order: 2022-05-30
Pronounced On: 2022-05-30
Holtec Consulting Pvt. Ltd., a resident company based in New Delhi, filed an appeal against the order dated 28th October 2018 of the learned Commissioner of Income Tax (Appeals)-35, New Delhi, for the assessment year 2009-10. The case was heard by the Delhi ‘C’ Bench of the Income Tax Appellate Tribunal (ITAT) through video conferencing, with Shri Saktijit Dey, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, presiding. The appellant was represented by Sh. Atul Ninawat, Advocate, while the respondent was represented by Ms. Anupama Singla, Senior DR.
The main issue in the appeal was the disallowance of Rs. 25,48,011/- under Section 14A of the Income-tax Act, 1961, read with Rule 8D of the Income-tax Rules, 1962. The appellant had filed its return of income on 29th September 2009, declaring a total income of Rs. 34,61,22,857/-. During the assessment proceedings, the Assessing Officer noted that the appellant had earned exempt income amounting to Rs. 30,47,986/-. Consequently, the Assessing Officer computed the disallowance under Rule 8D, which was later upheld by the learned Commissioner (Appeals).
The tribunal observed that the appellant’s main contention was that the disallowance under Rule 8D(2)(iii) should be computed by considering only those investments which yielded exempt income during the year. The appellant furnished a working to demonstrate the quantum of investment that yielded exempt income during the year:
Particulars | Details | Balance as on 31/03/2009 | Balance as on 31/03/2008 | Average |
---|---|---|---|---|
Total Value of Investment (A) | 75,71,17,329 | 46,20,77,229 | 60,95,97,279 | |
Investment yielding taxable / no income (B) | 69,84,64,668 | 42,07,42,255 | 55,96,03,462 | |
Investment yielding exempt income (C)=(B)-(A) | 5,86,52,661 | 4,13,34,974 | 4,99,93,818 | |
Disallowance under rule 8D(iii) (D)=(C)*0.5% | 2,49,969 |
The tribunal referred to the decision of the Hon’ble Delhi High Court in the case of Pr. CIT Vs. Caraf Builders & Constructions (P.) Ltd. [2019] 101 taxmann.com 167 (Delhi), which supports the appellant’s contention. According to this decision, only the average value of investments that yielded exempt income should be considered for computing disallowance under Rule 8D(2)(iii).
In conclusion, the tribunal directed the Assessing Officer to factually verify the appellant’s claim with reference to the working of the investments that yielded taxable income or did not yield any income and compute the disallowance by considering only those investments which yielded exempt income during the year. Consequently, the appeal was partly allowed.
The appeal by Holtec Consulting Pvt. Ltd. against the order of the learned Commissioner of Income Tax (Appeals)-35, New Delhi, was partly allowed. The tribunal directed the Assessing Officer to recompute the disallowance under Section 14A read with Rule 8D by considering only those investments that yielded exempt income during the year. This decision was pronounced on 30th May 2022 in the presence of both parties during the virtual hearing.
The decision in the case of Holtec Consulting Pvt. Ltd. vs. Addl. CIT, Special Range-4, New Delhi, sets a precedent for the computation of disallowance under Section 14A read with Rule 8D. It emphasizes that only the investments that have yielded exempt income during the year should be considered for disallowance purposes. This ruling aligns with the judicial precedents set by higher courts, ensuring a fair and accurate computation of disallowance.
The ruling in this case provides clarity on the application of Section 14A read with Rule 8D, particularly regarding the consideration of investments yielding exempt income. It serves as a guide for taxpayers and tax authorities in computing disallowance accurately and fairly. The decision is expected to reduce disputes and litigation related to the computation of disallowance under Section 14A.
The case of Holtec Consulting Pvt. Ltd. vs. Addl. CIT, Special Range-4, New Delhi, underscores the importance of adhering to judicial precedents and ensuring fair computation of disallowance under Section 14A. The tribunal’s decision provides a clear framework for taxpayers and tax authorities to follow, promoting consistency and accuracy in tax assessments.
Holtec Consulting vs Addl. CIT: Disallowance under Section 14A – ITA 437/DEL/2019
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