MUKTA ARTS LIMITED,MUMBAI vs. ACIT 16(1), MUMBAI

Assessee by Dr.K.Shivaram Revenue by Shri Manoj Kumar Singh Date of Hearing 16/05/2023 Date of 19/05/2023 Pronouncement आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the order dated 20/02/2023, passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) for the A.Y.2017-18.

M/s. Mukta Arts Ltd. 2. In the grounds of appeal

, assessee has raised the following grounds:- “1. The Ld. CIT (A) has erred in law and facts in confirming, the action of the Ld. AO passing the assessment order w/s. 143(3) of the Act dated 24/12/2019 which is bad arid invalid in the eyes of law.

2. The Ld. CIT(A) has erred in law and in facts in confirming the addition made by the Ld.AO in disallowing a sum of Rs 44,07,791/- u/s 14A rws 8D of the Act, even though there is no exempted income during the year.

3. The Ld. CIT(A) has erred in law and in facts in confirming the addition made by the Ld AO to the Book Profit u/s 115JB of the Act at Rs 44,07,791% on account of disallowance w/s 14A rw. Rule 8D of the Act.

4. The appellant craves leave to add to, alter, amend and/or delete in all foregoing grounds of appeal.

3. Thus, in short the issue involved is whether addition u/s.14A r.w.r. 8D can be made when there is no exempt income; and can adjustment be made while computing the book profit u/s.115JB. The facts in brief are that ld. AO noted from the perusal of the balance sheet that assessee has made substantial investments in the form of equity, preference shares in mutual funds which can give raise to exempt income in the form of dividend and other tax exempt income. However, there is no exempt income during the year. The ld. AO asked the assessee to provide calculation of 14A disallowance in accordance with Rule 8D. The assessee first of all submitted that it has not incurred any expenditure for earning exempt income because the investments have been made in the associate / group companies; secondly, assessee has not M/s. Mukta Arts Ltd. received any exempt income during the year, therefore, no disallowance can be made and in support of which assessee has also relied upon various decisions. However, without prejudice and as required by the ld. AO, assessee worked out the disallowance of Rs.44,06,791/-. The ld. AO computed the disallowance under 14A of Rs.44,06,791/- in the normal computation. However, due to set off of brought forward losses, the normal computation was made at ‘Nil. However, while computing the book profit, he has added the disallowance u/s.14A of Rs.44,06,791/-.

M/s. Mukta Arts Ltd.  Pr. CIT v. Atria Power Corpn. Ltd. [2022] 142 taxmann.com 412 (Karn.)( HC) [SLP dismissed Pr. CIT v. Atria Power Corpn. Ltd. [2022] 142 taxmann.com 413 (SC)/[2022] 289 Taxman 111 (SC)[26-08-2022] 7. Accordingly, both the grounds raised by the assessee are allowed.