MEGHMANI ORGANICS LIMITED,AHMEDABAD vs. THE DY.CIT (OSD)-1, CIRCLE-4, AHMEDABAD

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ITA 1589/AHD/2015Status: DisposedITAT Ahmedabad27 March 2019AY 2010-113 pages
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What did the Tribunal hold?

The tribunal held that the disallowance under Section 14A should be restricted to the extent of exempt income. It also directed the deletion of additions to book profit made on account of Section 14A disallowance. However, other grounds were dismissed.

What were the facts?

The assessee filed an appeal against the CIT(A)'s order concerning the assessment year 2010-11. The appeal involved grounds related to disallowance under Section 14A, deduction under Section 10B, and additions to book profit.

What were the issues?

Whether the disallowance under Section 14A can exceed the exempt income and whether additions to book profit on account of Section 14A disallowance are valid.

Which sections of the Income-tax Act were involved?

Section 14A,Section 10B,Section 115JB

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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA

For Appellant: DR यथ क ओर से /

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the assessee against the order of the CIT(A)-2, Ahmedabad (‘CIT(A)’ in short), dated 27.02.2015 arising in the assessment order dated 28.02.2014 passed by the Assessing Officer (AO) under s. 143(3) r.w.s 144C of the Income Tax Act, 1961 (the Act) concerning A.Y. 2010-11.

ITA No.1589/Ahd/2015 [Meghmani Organics Ltd. vs. DCIT] A.Y. 2010-11 - 2 - 2. Ground No. 1 to 9 concerns disallowance u/s. 14A read with

Rule 8D of the Income Tax Rules. The Ld. AR for the assessee

submitted that the exempt income is pagged at Rs. 3,14,117/- only and

therefore the disallowance under 14A cannot exceed the aforesaid

amount. We find merit in the plea of the assessee in view of the

decision of the Hon’ble Gujarat High Court in the case of CIT vs.

Energy Corrtech Pvt. Ltd. 372 ITR 97 and DCIT vs. TGB Banquets

Hotels Ltd. in Tax Appeal No. 470 of 2012 dated 21.06.2016

(Gujarat). Therefore the AO has directed to restrict the disallowance

u/s. 14A to the extent of exempt income. In the result, ground no. 1 to

9 is partly allowed and disposed in terms of above.

3.

Ground No. 10 concerns disallowance in respect of deduction

under 10B of the Act. At the time of hearing, the Ld. AR for the

assessee fairly submitted that she does not seek to press the aforesaid

ground. Consequently Ground No. 10 is dismissed as not pressed.

4.

Ground No. 11 concerns disallowance of Rs. 6,17,972/- in

respect of LTCG. With the assistance of the Ld. AR of the assessee,

we have perused of the order of the CIT(A) and we do not find any

infirmity therein. Therefore, without repeating the findings of the

CIT(A), we decline to interfere. Ground No. 11 is therefore

dismissed.

5.

Ground No. 12 towards addition of upward adjustment is

dismissed as not pressed.

ITA No.1589/Ahd/2015 [Meghmani Organics Ltd. vs. DCIT] A.Y. 2010-11 - 3 -

6.

Ground No. 13 concerns additions in the book profit computed

u/s. 115JB of the Act on account of disallowance u/s. 14A of the Act.

In view of the long line of judicial precedents including the decision

of the Special Bench in ACIT vs. Vireet Investments Ltd. 165 ITD 27

(SB), we find merit in the plea of the assessee. The AO is accordingly

directed to delete the addition to the book profit on this score.

Ground No. 13 is accordingly allowed.

7.

In the result, appeal of the assessee is partly allowed.

This Order pronounced in Open Court on 27/03/2019

Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 27/03/2019 Tanmay True Copy 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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