The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has recently held that interest expenditure could not be consider for making disallowance under Section 14A of the Income Tax Act, 1961 and the bench confirmed the relief granted to Adani Wilmar Ltd.
Section 14A of Income Tax Act states that for computing the total income of assesee no deduction shall be allowed in respect of expenditure incurred by the assesee for relation to income which does not form part of the total income.
Biren Shah, Counsel appeared for the assesee and Sudhendu Das appeard for the revenue.
The assessee Adani Wilmar Ltd had earned exempt income of Rs. 15 crores from investment made in KOG KTV Food Products for Rs. 16.12 crores. The Assessing Officer made proportionate disallowance under Rule 8D(2)(iii) of Rs. 8.25 crores. The Assessing Officer also made disallowance under Rule 8D(2)(iii) for Rs. 75.62 lakhs and the aggregate disallowance worked out at Rs. 9.01 crores.
Aggrieved assesee filed appel before CIT(A).
The CIT (A) observed that “interest expenditure of Rs. 253.50 crores cannot be considered for making disallowance under Section 14A of the Income Tax Act.” hence the CIT(A) allowed relief to assesee.
Against the relief granted by the CIT(A) ,revenue filed the present appeal before the Tribunal.
Counsel for the assese submitted that “Assessee was having substantial interest free funds at its disposal amounting to Rs. 1034.52 crores as against total investment of Rs.47.45 crores made by the assessee during the year under consideration”
Counsel for the revenue supported the assessment order of the assessing officer.
The tribunal thereafter observed that, out of total expenditure of Rs. 314 crores, a sum of Rs. 253.50 crores was incurred for specified purpose and the same had to be excluded for the purpose of disallowance of interest expenditure under Section 14A of the Income Tax Act.
Accordingly, the order with respect to the relief provided under section 14A Income Tax Act and the order of the CIT(A) confirmed the two member bench of Waseem Ahmed, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) also allowed the appeal of the assesee.
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