Income Tax Appeal: RSWM Ltd, Bhilwara vs DCIT Central Circle-31, New Delhi
Case Overview
The case ITA Nos. 142, 143 & 144/Del/2021 involves RSWM Ltd, based in Bhilwara, Rajasthan, challenging the disallowances made by the Assessing Officer under Section 14A of the Income Tax Act, 1961, read with Rule 8D, pertaining to the assessment years 2011-12, 2012-13, and 2013-14. The core issue revolves around the disallowance of expenditure related to earnings of exempt income.
Background
RSWM Ltd, a prominent yarn manufacturing company, faced scrutiny from the Income Tax Department regarding the handling of its finances related to investments yielding exempt income. During the assessment for the years mentioned, the Assessing Officer noticed discrepancies in the disallowance calculations linked to exempt income, leading to an appeal by RSWM Ltd.
Proceedings and Arguments
The hearings for these appeals took place on July 3, 2023, presided over by Vice-President Shri Saktijit Dey and Accountant Member Shri Girish Agrawal. The appellant, represented by CA S.S. Naagar, contested the rigid disallowance approach applied by the Assessing Officer, while the department’s standpoint, presented by Sr. DR Shri Ramdhan Meena, supported the initial findings.
The tribunal examined the delay in filing the appeals, attributed to COVID-19 restrictions, and accepted the condonation of delay. Substantial discussion in the tribunal centered on the applicability of Rule 8D(2)(ii) and 8D(2)(iii) concerning the assessee’s investments and the related exempt income.
Judgment and Implications
The final judgment delivered on July 3, 2023, partly allowed the appeals for the assessment years 2011-12 and 2012-13, while the appeal for the assessment year 2013-14 was dismissed as not pressed. The tribunal’s decision highlighted the need for a more nuanced approach to calculating disallowances under Section 14A, taking into account the actual investments yielding exempt income during the relevant years.