THE DCIT, CIRCLE-4(1)(2),, AHMEDABAD vs. M/S. TORRENT PVT. LTD.,, AHMEDABAD

The revenue has raised following grounds of appeal:- “1). Whether the Ld. Commissioner of Income-Tax (Appeals) erred in law and on facts in deleting disallowance of Rs. 9,01,212/- out of total disallowance of Rs. 1,88,45,888/-despite the fact that the disallowance is worked out as per the formula of Rule 8D particularly the administrative expenditure under Rule 8D(iii) was based on investment, where no expenditure comes into formula. 2). Whether the Ld. Commissioner of Income-Tax (Appeals) is right in law and on facts in directing to exclude the addition/adjustment of Rs. 1,88,45,888/- made on account of disallowance u/s 14A, while computing the book profit computed u/s 115JB of the Act, when the expenditure disallowed u/s 14A relates to income exempt u/s 10(34) as laid down in Cl. (f) of Explanation 1 of Section 115JB.”

The assessee has raised following grounds of appeal:- “1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 1 of the appellant's appeal challenging the very validity of the assessment order impugned before him, after observing that the Ground was general in nature and the appellant had not filed any submission thereon. The learned CIT(A) ought to have appreciated, inter alia, that the appellant's reason for the challenge was contained in the Ground itself and adjudicated upon it on merits. 2.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the disallowance of Rs.1,79,44,676 made u/s. 14A read with Rule 8D [Subject to his favourable directions on computation of the quantum of the disallowance as prayed for in Grounds No. 3(b) and 3(c)]. He ought to have appreciated, inter alia, the appellant's elaborate narration of facts and submissions contained in the Statement of Facts accompanying the appellant's appeal and ordered for the deletion of the disallowance in its entirety. 2.2 Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in omitting to consider and deal with the Ground No..3(a) of the appellant's appeal before him challenging disallowance of Rs. 134,35,686 on account of depreciation u/s. 14A. He ought to have appreciated, inter alia, that depreciation was an allowance and not expenditure which alone could be considered for disallowance under A S. 14A and accordingly, ordered for the deletion of the impugned disallowance. 3.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dealing with Grounds No. 7 and 8 of the appellant's appeal simultaneously by observing that levy of interest both u/s. 234B and 234C was mandatory and consequential in nature. He ought to have appreciated that insofar as levy of interest u/s. 234C was concerned, vide Ground of Appeal No. 7, the appellant had raised a different but very vital issue which deserved to be specifically dealt with by him. 3.2 The learned CIT(A) ought to have appreciated that Ground No. 8 of the appellant's appeal too similarly deserved to be dealt with separately. 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing Ground No. 9 of the appellant's appeal before him challenging the

The fact in brief is that assessee has filed return of income declaring total income at nil on 29th Sep, 2012. The return of income filed was subject to scrutiny and assessment u/s. 143(3) was finalized on 16th Jan, 2015. The further facts of the case are discussed while adjudicating the grounds of appeals as under:-

The assessing officer noticed that assessee has earned exempt income to the amount of Rs. 2,73,56,63,248/-. However, it has made disallowance u/s. 14A to the amount of Rs. 15,15,867/- only. Therefore, the assessee was show caused to explain why not the disallowance u/s. 14A should be made as per provision of rule 8D of IT Rule, 1962. The assessee explained that no borrowed funds were utilized for making investment, therefore, no interest expenditure was attributable towards earning of any exempt income. The assessee also explained that investment to the extent of Rs. 84.45% was made in the subsidiary companies of the assessee as a strategic investment which did not require any monitoring or constant administration. The assessing officer has not accepted the explanation of the assessee and computed the disallowance u/s. 14A r.w. Rule 8D to the amount of Rs. 1,88,45,888/- and added to the total income of the assessee.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.

During the course of the appellate proceedings before us, it was brought to our notice that identical issue on similar facts has been adjudicated in favour of the assessee by the Co-ordinate Bench of the ITAT vide ITA No. 2594/Ahd/2014 dated 1st Feb, 2019 wherein the addition was deleted after following the decision of Co-ordinate Bench of the ITAT in the case of the assessee itself adjudicated by ITA No. 1777 and 2028/Ahd/2019. Relevant part of the decision of the Co-ordinate Bench of the ITAT is reproduced as under:- “12. As we can see, assessee has raised the issue regarding confirming the disallowance u/s. 14A of Rs. 1,89,32,077/- made by A.O. by following Rule 8D. Ld. C1T(A) has followed the preceding assessment year of order of his predecessor for assessment year 2010-11 and ITAT in similar circumstances, in assessee’s own case granted relief to the assessee in ITA No. 1777 & 2028/Ahd/2009 and deleted the addition made by the lower authorities. Therefore, in parity with the bench orders, we allow this ground of appeal by the assessee and directed to delete the addition of Rs. 1,89,32,077/-.”

During the course of assessment while computing the book profit u/s. 115JB, the assessing officer had added the amount of disallowance made u/s. 14A of Rs. 1,88,45,888/- as per clause (f) of explanation (1) of section 115JB. The ld. CIT(A) had deleted the same after following the decision of

During the course of appellate proceedings before us, the ld. counsel has brought to our notice that Co-ordinate Bench of the ITAT vide ITA No. 2587/Ahd/2014 for assessment year 2011-12 in the case of the assessee itself has decided the similar issue on similar facts in the case of the assessee. With the assistance of ld. representatives, we have gone through the above cited decision of the Co-ordinate Bench of the ITAT and noticed that the issue was decided in favour of the assessee by the Co-ordinate Bench after following the decision of the Special Bench of the ITAT, Delhi in the case of Vineet Investment reported in 165 ITD 27. Relevant part of the decision of the Co-ordinate Bench is reproduced as under:- “8. Ld. CIT(A) has deleted the addition vide para 5.4 on pages 43 and 44 of his order. At the time of hearing, ld. A.R. pointed out that over and above decision relied upon by ld. CIT(A) the issue is now well settled by the Special Bench decision in the case of Vineet Investment repotted in 165 ITD 27. And in similar circumstances, Co-ordinate Bench granted relief in assessee’s own case for the assessment year 2010-11 in 1TA No. 1718 & 1648/Ahd/2014. Therefore, having parity with the said order, we dismiss this ground of appeal of the Revenue.” Respectfully following the decision of the Co-ordinate Bench of the ITAT as cited above on similar facts and similar issue, this ground of appeal is allowed.

Ground no. 1 of assessee is of general nature which does not require any adjudication, therefore, the same is dismissed.

Ground No. 3 of the assessee is pertained to charging of interest u/s. 234B & 234C of the act. Since the charging of interest u/s. 234B and 234C

Ground no. 4 of the assessee regarding initiation of penalty u/s. 271(1)(c) of the act is premature at this stage, therefore, the same is also dismissed.

In the result, the appeal of the revenue is dismissed and appeal of the assessee is partly allowed.