Is disallowance u/s section 14A of the IT Act allowed when own capital is higher than investment in shares?

IN THE INCOME TAX APPELLATE TRIBUNAL
 “B” BENCH, AHMEDABAD
(Conducted through Virtual Court)

BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT
AND
SHRI AMARJIT SINH, ACCOUNTANT MEMBER

ITA No.1124 and 1125/Ahd/2018
Asstt.Year : 2010-2011

DCIT, Cent.Cir.2(3)
Ahmedabad. 

Vs.

M/s.Raj Jay Investment P.Ltd.
4th Floor, Pariseema Complex
Opp: Swagat Building
Opp: Bodyline
C.G.Road, Ahmedabad.
PAN : AAACR 7471 D

ITA No.1435 and 1436/Ahd/2018
Asstt.Year : 2009-2010

M/s.Raj Jay Investment P.Ltd.
4th Floor, Pariseema Complex
Opp: Swagat Building
Opp: Bodyline
C.G.Road, Ahmedabad.
(Applicant) 

Vs.

DCIT, Cent.Cir.2(3)
Ahmedabad.
(Responent)

Revenue by : Shri R.R. Makwana, Sr.DR
Assessee by : Written submissions

Date of Hearing : 20/05/2021
Date of Pronouncement: 04/06/2021

O R D E R

PER RAJPAL YADAV, VICE-PRESIDENT:

The above four appeals are cross-appeals by the Revenue and the assessee directed against orders of the ld.CIT(A)-7, Ahmedabad of even dated i.e. 12.02.2018 for the above two assessment years. All these four appeals are disposed of by this common order for the sake of convenience.

2. Before dealing with the issues on merit, it is pertinent to mention here that these are recalled matters. The appeals of the Revenue were dismissed on account of low tax effect. The Revenue had filed Misc. Applications for recall of the order of the Tribunal in ITA Nos.156/Ahd/2018 and 125 others dated 31.7.2018 qua the above assessee, because case of the Revenue falls within exception provided in clause 10(c) of the CBDT Circular No.3 of 2018. After hearing the MA, the Tribunal recalled the order dated 31.7.2018 qua the above assessee, and directed to list the appeals for adjudication on merit. Accordingly, the above appeals came up for hearing before us for adjudication on merit.

3. Sole issue raised in both appeals of the Revenue is that the ld.CIT(A) has erred in restricting disallowance under section 14A of Rs.24,03,566/- to Rs.2,37,810/- in the Asstt.Year 2009-10, and Rs.16,33,651/- to Rs.4,43,802/- in the Asstt.Year 2010-11. While in the cross appeals, assessee has challenged disallowance of administrative expenses at the rate of 0.5% of the average value of investment under Rule 8D(2)(iii) of the Income Tax Rules. Since issue and the facts are identical except variation in quantum in both the years, we take the facts given in the Asstt.Year 2009-10 for the convenience of adjudication.  

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