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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
PER MAHAVIR PRASAD, JUDICIAL MEMBER
1. 1186/Ahd/2018 are cross appeals by the Assessee and the Revenue preferred against the order of the Ld. CIT(A)-1, Ahmedabad dated 27.02.2018 pertaining to A.Y. 2013-14 and assessee has raised the following grounds:-
1. In law and in the facts and circumstance of the case of appellant, the Ld. CIT(A) has grossly erred in upholding disallowance of Rs. 57,72,000 being 1% of certain administrative expenditure incurred by Appellant under section 14A r. w. Rule 8D(2)(iii) of the Act, when no such disallowance is called for. 1.1 The Ld. CIT(A) ought to have appreciate that disallowance u/s.14A r. w. Rule 8D cannot exceed exempt income of Rs.50,000/-earned during the year.
2. The Assessing officer has erred on facts and in law charging interest u/s 234A, 234B, 234C and 234D when no such interest is leviable. The appellant denies its liability to pay interest.
Facts of the case are that on verification of the books of accounts of the assessee, it is noticed that assessee has made investment in shares and received dividend amounting to Rs. 50,000/- which is exempt from tax and not includible in the total income of the assessee for the year under consideration. Assessee submitted that its exempt income is not more than 50,000/- and same is also evident from his books of accounts. But ld. A.O. made addition of Rs. 17,02,77,850/- with the help of following Chart:
& 1186/Ahd/2018 3 . A.Y. 2013-14 (i) The amount of expenditure directly relating to Income which does not form part of total income; 0 (ii) In a case where the assesses has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, art amount computed in accordance with the following formula, namely - A X B/C - Where
(A) Amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; 0 0
(B) the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year;
P.Y. 31138510000 C.Y. Invest 36972630000 Total 68111140000 2 34055570000 Invest PY+CY (C) The average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; P.Y, Assets 53958710000 C.Y. 59509940000 Total 113468650000 2 56734325000 Assets PY+CY (A) (B) (C) AXB/C Interest. 0 Avg. 34055570000 Avg. Assets 56734325000 Total -AXB/C 0 Exp. JA) Invest. (C) (B) (iii) An amount equal to one-half percent of the average of the value of investment, income from which does riot or shall not form part of the total income, as appearing 17027 in the balance sheet of the assessee, on the first day of the previous year, .. 7850
Avq. investment 34055570000 I 0.5 100 | 170277850 | 170277850 AGGREATEOF(i)+(ii) (iil) 17027 7850
3. Against the said addition, assessee preferred first statutory appeal before the ld.
CIT(A) who confirmed the action of the ld. A.O.. Thereafter assessee preferred second statutory appeal before the Tribunal.
We have gone through the relevant record and impugned order. At the outset,
ld. A.R. Shri S.N. Soparkar stated that present case is clearly covered by order of Hon’ble Jurisdictional High Court in Tax Appeal No. 486 of 2017 in the matter of CIT-Vadodara-2 vs. Vision Finstock Ltd. wherein similar facts and circumstances appeal of the Revenue was dismissed with following observation:
The Revenue has challenged the judgement of the Income Tax Appellate Tribunal dated 07.07.2016 raising following questions for our consideration:
& 1186/Ahd/2018 4 . A.Y. 2013-14 "A. Whether on the facts and circumstances of the case and in law, the ITAT was justified in restricting the disallowance made of Rs. 1,02,82,049/- u/s. 14A to the extent of exempt income of Rs. 55,604/- only?
B. Whether on the facts and circumstances of the case and in law, the ITAT was justified in restricting the disallowance of Rs. 1,02,82,049/- made u/s. 14A of the Act to the extent of income earned of Rs. 55,604/- without appreciating that the assessee had paid interest of Rs. 1,45,52,632/- on borrowed funds?"
2. From the record it emerges that, during the period relevant to the assessment year 2008-09, the assessee had earned exempt income of Rs. 55,604/-. As against that, the Assessing Officer had worked out the disallowance of expenditure under section 14A of the Act read with Rule 8D to Rs. 1,02,82,049/-. The Tribunal, while restricting the disallowance to Rs. 55,604/-, relied on the decision of Delhi High Court in case of Joint Investments (P) Ltd vs. CIT reported in 372 ITR 694 holding that disallowance of expenditure in terms of section 14A read with Rule 8D cannot exceed the exempt income itself. Our High Court has also adopted the similar view in case of Commissioner of Income Tax vs. Corrtech Energy Pvt. Ltd. reported in 372 ITR 97.
Tax appeal is, therefore, dismissed.
As we can see, assessee total dividend income is Rs. 50,000/- so there cannot be disallowance of Rs. more than 50,000/-. Respectfully following the above quoted judgment, we allow the appeal of the assessee.
Now we come to the Revenue has taken following grounds of appeal:
(1) That the ld.CIT(A) erred in law and on facts in restricting the disallowance u/s 14A of Rs.l7,02,77,850/- to Rs.57,72,000/-. (2) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary.
& 1186/Ahd/2018 5 . A.Y. 2013-14 7. Since already we have given relief to the assessee in connected appeal wherein we have held that there cannot be disallowance of Rs. more than 50,000/-. Thus in parity with the above said order, we dismiss the appeal of the revenue and delete the addition made by the authorities.
In the result, appeal filed by the Assessee in Revenue in is dismissed.
Order pronounced in Open Court on 30- 01- 2020 Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 30 /01/2020 Rajesh Copy of the Order forwarded to:-