2014 (5) TMI 922 - AT - Income Tax

Tribunal dismisses appeal on interest & expenses, upholds disallowance under section 43B

The Tribunal dismissed the appellant's appeal for both assessment years. For the disallowance of interest under section 14A for AY 2008-09, the Tribunal ... Disallowance of interest u/s 14A r.w. Rule 8D of the Act – Held that:- Following Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] - no disallowance can be made u/s 14A of the Act, if no expenditure is incurred in relation to the exempt income - the assessee has not used loan funds for making investments - there is no interest expenditure that can be said to have been incurred by the assessee for the purpose of making investments, administrative and other expenditure if any incurred has to be quantified and disallowed in accordance with law - the assessee has not given any convincing explanation as to why in its case for earning exempt income, there is no administrative or other expenses and as it has also not come out with any alternate calculations, there was no reason to interfere with the calculation of the Revenue authorities – thus, the order of the FAA is upheld – Decided against Assessee. Deduction u/s 43B(F) of the Act – Held that:- CIT(A) has referred to the Hon’ble Supreme Court decision in the SLP and upheld the order of the Assessing Officer - AO has already disallowed the amount and the CIT(A) has confirmed the same – thus, there is no purpose for setting aside the matter to the file of the AO –Decided against Assessee. Issues:- Disallowance of interest under section 14A r.w.Rule 8D of the I.T. Rules, 1962 for AY 2008-09.- Disallowance under section 43B for AY 2009-10.Analysis:Issue 1: Disallowance of interest under section 14A r.w.Rule 8D for AY 2008-09:- The appellant contested the disallowance of interest under section 14A r.w.Rule 8D, arguing that the Assessing Officer must first question the correctness of the claim before applying Rule 8D, citing relevant case laws.- The appellant emphasized that if no actual expenditure is incurred for earning exempt income, no disallowance can be made under section 14A, supported by case laws.- It was argued that the investments were made from internal accruals and not from loan funds, thus no interest expenditure was incurred for making the investments.- The appellant presented a detailed analysis of the funds and investments to support their contention that no disallowance should be made under section 14A.- The Departmental Representative contended that disallowance under section 14A can be made even if there is no exempt income, citing relevant case law.- The Tribunal analyzed the facts, case laws, and contentions of both parties. It held that no disallowance can be made under section 14A if no expenditure is incurred in relation to the exempt income.- The Tribunal upheld the appellant's contentions regarding the source of funds for investments and dismissed the argument that the Assessing Officer must first question the correctness of the claim before applying Rule 8D.- However, the Tribunal noted that administrative and other expenses, if any, should be quantified and disallowed, as the appellant failed to provide a convincing explanation for the absence of such expenses.- Ultimately, the Tribunal upheld the findings of the First Appellate Authority and dismissed the appellant's ground for AY 2008-09.Issue 2: Disallowance under section 43B for AY 2009-10:- The appellant raised a ground related to section 43B, arguing that it was unconstitutional based on a decision of the Hon'ble Calcutta High Court and the admission of SLP by the Supreme Court.- The Tribunal noted that the Assessing Officer had already disallowed the amount under section 43B, which was upheld by the First Appellate Authority.- The appellant requested the matter to be set aside to the Assessing Officer with the direction to follow the Supreme Court's decision once it is adjudicated.- The Tribunal rejected the appellant's ground, stating that there was no need to set aside the matter as the Assessing Officer's decision was based on the order of the Hon'ble Supreme Court.- The Tribunal suggested that the appellant could move appropriate applications before the Tribunal once the Supreme Court adjudicates the matter.- Consequently, the Tribunal dismissed the appellant's ground related to section 43B for AY 2009-10.In conclusion, the Tribunal dismissed the appeals of the assessee for both AYs based on the detailed analysis and findings for each issue presented before it.