The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) allowed the interest expense claim of Rs. 8.3 crore of Axis bank citing both Income tax. The bench ruled in favor of Axis Bank Ltd. on the issue of interest disallowance under Section 14A of Income Tax Act, 1961 for A.Y. 2010-11, citing a previous ITAT decision and the fact that the bank’s own funds exceeded exempt investments. This decision was also applied to A.Y. 2011-12 due to similar issues.
Axis Bank Ltd.,the appellant-assessee,filed its return of income on 07.09.2010, for the Assessment Year (A.Y.) 2010-11, declaring a total income of Rs. 43,15,45,21,002. The assessment order under Section 143(3) of Income tax law was issued on 26.02.2013, which assessed the total income at Rs. 44,82,61,63,918, incorporating additions and disallowances amounting to Rs. 2,61,96,08,02 under Section 14A of the Act.
The assessee filed an appeal with the Commissioner of Income Tax (Appeals) [CIT(A)] following the assessment order under Section 143(3) dated 26.02.2013. The Income tax appellate commissioner partly allowed the appeal. The assessee filed an appeal before the tribunal dissatisfied with the CIT(A)’s decision confirming the disallowance made by the assessing officer(AO) under Section 14A of the Act.
The ITAT to make its decision for the A.Y. 2010-2011 included the relevant extracts from the ITAT’s observations in the assessee’s case for A.Y. 2008-09 per the order dated 24.06.2017.
The counsel for the assessee argued that the tribunal’s order in the assessee’s case for A.Y. 2010-11 had granted relief on this issue. Therefore, CIT(A) was in error, both in fact and in law, by ruling that this issue and disallowance did not stem from the assessment order. It was contended that the assessing officer had failed to adhere to the ITAT’s directions for A.Y. 2010-11, and consequently, the CIT(A) erred in not granting relief to the assessee on this matter.
The Tribunal considered the rival contentions and material on record and contended that on examining the order passed by the ITAT in the assesse’s case for A.Y. 2010-11,and observed that the tribunal had granted relief to the assessee on this issue noting that the assessee’s own funds significantly exceeded the investments in exempt income-generating assets. Therefore, based on its earlier decision for A.Y. 2008-09, the ITAT decided that no interest disallowance under Section 14A was needed for Assessment Year 2010-11.
The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Annapurna Gupta(Accountant Member) ruled that as the facts and issues are identical for the A.Y. 2011-12, the appeal regarding the disallowance of interest expenses under Section 14A of the Act was allowed.
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