ADVANCE INVESTMENT MEECHANICS INDIA PVT. LTD,MUMBAI vs. INCOME TAX OFFICER-WD 12(1) (1), MUMBAI

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ITA 798/MUM/2022Status: DisposedITAT Mumbai20 October 2022AY 2016-174 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the exempt income earned by the assessee, citing Supreme Court and Bombay High Court judgments. Therefore, the disallowance was restricted to the exempt income.

What were the facts?

The assessee's appeal concerned a disallowance of INR 32,78,849/- made under Section 14A read with Rule 8D. The assessee argued that the disallowance should be restricted to the exempt income earned, which was INR 4,635/-.

What were the issues?

Whether the disallowance 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, SMC BENCH, MUMBAI

order : 20.10.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 22.03.2022, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as „the CIT(A)‟] for the Assessment Year 2016-17, whereby the Ld. CIT(A) had dismissed the appeal filed by the Appellant against the Assessment Order, dated 26.10.2018 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟).

2.

When the matter was taken up for hearing, the Ld. Authorised Representative for the Appellant submitted all the grounds raised in the present appeal pertain to disallowance of INR Assessment Year: 2016-17 32,78,849/- made by the Assessing Officer by invoking the provisions of Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. Though various grounds of appeal have been raised in the appeal, the Ld. Authorised Representative for the Appellant pressed into service „Without Prejudice‟ contention raised as Ground II in the appeal which read as under:

1.

Ground II Without prejudice to the above, the Appellant prays that the disallowance should be restricted the extent of exempt income earned during the year of Rs. 4,635 only.

3. Learned Authorised Representative for the Appellant submitted that during the relevant assessment year, the Appellant had earned exempt income of INR 4,635/- only and therefore, in case the addition made under Section 14A of the Act are restricted to the aforesaid exempt income, the grievance of the Appellant shall stand redressed. In support of his contention, he relied upon the judgment of the Hon‟ble Supreme Court in the case of DCIT Vs. State Bank of Patiala: [2018] 259 Taxman 314 (SC)[08-10-2018].

4. We find merit in the contention advanced by the Learned Authorised Representative for Appellant. The Hon‟ble Supreme Court has, in the case of State Bank of Patiala (supra), held that disallowance under Section 14A of the Act cannot exceed the exempt income earned by the Appellant during the relevant previous year. To the same effect is the judgment of the Hon‟ble Bombay High Court in the case of Nirved Traders (P.) Ltd. vs. Dy. CIT [IT Appeal No. 149 of 2017, dated 23.4.2019. It is admitted position that the Appellant had earned exempt 2 Assessment Year: 2016-17 dividend income of INR 4,635/- only during the relevant previous year and therefore, the amount of disallowance under Section 14A of the Act cannot exceed the same in view of the judgment of the Hon‟ble Supreme Court and the Hon‟ble Bombay High Court.

5. In view of the above, Ground No. II raised by the Appellant is allowed whereas Ground No. I (1,2 and 3) are disposed off as not pressed in view of the submissions advanced by the Learned Authorised Representative for the Appellant recorded and our findings with regard to Ground No. II hereinabove.

6.

In the result, the present appeal is partly allowed.

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