Delhi High Court non-taxable income

Last updated: 16 April 2015

Court :
Delhi High Court

Brief :
The question of law urged by the assessee is whether the decision of the ITAT as to the disallowance under Section 14A of the Income Tax Act, is in error of law. Assessee mainly engaged in the business of coal preparation had reported a tax exempt income to the tune of `18,26,360/- amongst other heads of income. The AO added back `19,96,242/- under Section 14A. The AO applied Rule 8D by taking into consideration the total quantum of interest other than that invested, under Section 14A in terms of Rule 8D, and arrived at the said figure after multiplying it with the result of the average value of investments and over average value of assets derived by him. He thus determined the disallowance of `19,96,242/-. The CIT(Appeals) went into the record and found that the amount of investment attributable to dividend as on 31.3.2008 was `3,53,26,800/-, which constituted less than 1% of the total scheduled funds. He however accepted the basis of calculation applied by the AO and directed a disallowance of .05% of the amount determined to be average investment. The ITAT – to which the revenue appealed, restored the AO’s determination holding it to be a true calculation in terms of Rule 8D.

Citation :
ACB India Limited – Appellant – Versus – Assistant CIT – Respondent