THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), AHMEDABAD vs. M/S. MAS FINANCIAL SERVICES LTD., AHMEDABAD

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ITA 585/AHD/2017Status: DisposedITAT Ahmedabad29 March 2019AY 2013-143 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the exempt income earned. Since the exempt income was only Rs. 10,188, no further disallowance was warranted beyond what the assessee had already offered.

What were the facts?

The Assessing Officer disallowed Rs. 76,44,797 under Section 14A, in addition to the Rs. 13,05,319 already suo motu disallowed by the assessee. The assessee had reported only Rs. 10,188 as tax-free dividend income.

What were the issues?

Whether the disallowance of expenditure under Section 14A can exceed the amount of exempt income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD

For Appellant: Shri Vinod Tanwani, Sr. DR

आदेश/O R D E R

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad (‘CIT(A)’ in short), dated 23.12.2016 arising in the assessment order dated 21.03.2016 passed by the Assessing

ITA No. 585/Ahd/17 [ACIT vs. M/s. MAS Financial Services Ltd.] A.Y. 2013-14 - 2 -

Officer (AO) under S. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2013-14.

2.

As per the captioned appeal, the Revenue has challenged the action of the CIT(A) in relating disallowance made under s.14A of the Act to the extent of Rs.76,44,797/- made by the AO.

3.

None appeared for the assessee despite several notices. Accordingly, the matter is proceeded ex parte and in the absence of the assessee.

4.

With the assistance of the learned DR for the Revenue, we find that the AO has computed disallowance of Rs.89,50,116/- as per formula prescribed under Rule 8D of the Income Tax Rules r.w.s. 14A of the Act. It was further observed by the AO that the assessee has suo motto made disallowance of Rs.13,05,319/- while filing return of income. The AO accordingly computed additional disallowance of Rs.76,44,797/- and over and above what was disallowed by the assessee and added the same to the total income of the assessee. The CIT(A) in first appeal, however deleted the additional disallowance of Rs.76,44,797/-. The Revenue is in appeal against the aforesaid action of the CIT(A).

5.

We straightway notice that the assessee has reported tax free income by way of dividend to the extent of Rs.10,188/- only. In view of the decision of Hon’ble Gujarat High Court in the case of CIT vs. Corrtech Energy Pvt. Ltd. 372 ITR 97; DCIT vs. TGB Banquets Hotels Ltd. in Tax Appeal No. 470 of 2012 dated 21.06.2016 (Gujarat) and Joint Investment Pvt. Ltd. vs. CIT (2015) 372 ITR 694 (Delhi) the disallowance cannot exceed the exempt income. We also note that Hon’ble Gujarat High Court in the case of CIT vs. Vision Finstock

ITA No. 585/Ahd/17 [ACIT vs. M/s. MAS Financial Services Ltd.] A.Y. 2013-14 - 3 -

Ltd. Tax Appeal No. 486 of 2017 judgment dated 31.07.2017 has once again expressed the similar view and held that disallowance of expenditure in terms of Section 14A r.w. Rule 8D cannot exceed the exempt income itself. It is noticed that SLP(Civil) [Diary No. 13152/2018] filed by the Revenue against the judgment of the Hon’ble Gujarat High Court in Vision Finstock Ltd. (supra) has been dismissed on merits by the Hon’ble Supreme Court vide order dated 07.05.2018. The assessee himself has computed expenditure attributable to exempt income more than the exempt income itself. Therefore, no further disallowance is called for. The CIT(A), in our view, has rightly concluded the issue. We thus decline to interfere.

6.

In the result, appeal of the Revenue is dismissed.

This Order pronounced in Open Court on 29/03/2019

Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 29/03/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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