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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI S.S. VISWANETHRA RAVI, JM
आदेश / ORDER PER ANIL CHATURVEDI, AM :
This appeal filed by the Revenue is emanating out of the order of 1. Commissioner of Income Tax (A) – 6, Pune dated 22.03.2017 for the assessment year 2007-08.
The relevant facts as culled out from the material on record are as under :-
Assessee is a company stated to be engaged in the business of manufacturing of two wheelers and Auto components. M/s. Jaihind Sciaky Limited was merged into the assessee with effect from 01.04.2005 pursuant to the approval of Hon’ble Bombay High Court.
Assessee consequent to the approval of the demerger and amalgamation
scheme filed revised return of income. Notice u/s 148 of the Act was
issued on 29.12.2010 and in response to which assessee submitted that
the return filed by it on 20.12.2010 may be considered as a return in
response to notice u/s 148 of the Act. The case was taken up for
scrutiny and thereafter the assessment was framed u/s 143(3) r.w.s.
147 of the Act vide order dt.27.12.2011 and the total income was
determined at Rs.28,90,03,680/-. Aggrieved by the order of AO,
assessee carried the matter before Ld.CIT(A), who vide order
dt.22.03.2017 (in appeal No.PN/CIT(A)-V/ACIT Cir-9/657/2011-12)
granted partial relief to the assessee. Aggrieved by the order of
Ld.CIT(A), Revenue is now in appeal before us and has raised the
following effective ground :
“Whether on the facts and circumstances of the case, the CIT(A) was justified in restricting the disallowance made u/s 14A to only 5% of the Dividend income, when the AO has rightly worked out the disallowance u/s 14A after clearly bringing on record that the assessee could not explain that the investment in shares was not out of the borrowed funds?”
During the course of re-assessment proceedings, AO noticed that
assessee had earned dividend income of Rs.90,40,988/- which was
claimed as exempt. He also noted that assessee had paid net interest of
Rs.17,11,81,282/- and had made suo moto disallowance of
Rs.4,52,050/- u/s 14A of the Act. The assessee was therefore asked as
to why the part of interest not be disallowed u/s 14A of the Act. AO
noted that no satisfactory explanation was given by the assessee. AO
thereafter worked out the disallowance of interest at Rs.3,04,45,474/-
and after giving credit of suo moto disallowance made by the assessee,
AO worked out the disallowance at Rs.2,99,93,424/- u/s 14A of the
Act. Aggrieved by the order of AO, assessee carried the matter before
Ld.CIT(A) who while deciding the issue in favour of assessee noted that
though the AO did not invoke Rule-8D specifically for disallowing
expenses u/s 14A of the Act but had made the disallowance of interest
on proportionate basis using the formula prescribed under Rule 8D of
the Act. Ld.CIT(A) also noted that Rule 8D was applicable from the
assessment year 2008-09 onwards and was not applicable to the year
under consideration. He further noted that Pune Tribunal in various
cases for the period prior to A.Y. 2008-09 had restricted disallowance
u/s 14A of the Act to 5% of the dividend income and following the same
basis he directed the AO to restrict the disallowance u/s 14A of the Act
to 5% of dividend income. Aggrieved by the order of Ld.CIT(A), Revenue
is now before us.
Before us, Ld. D.R. supported the order of AO however at the
same time he fairly submitted that in A.Y. 2006-07 the Tribunal in
assessee’s own case has held the disallowance of 5% to be just and
reasonable. Ld. A.R. on the other hand, reiterated the submissions
made before AO and Ld.CIT(A) and supported the order of Ld.CIT(A).
We have heard the rival submissions and perused the material on
record. The issue in the present ground is with respect to disallowance
u/s 14A of the Act made by following the formula prescribed under Rule
8D of Income Tax Rules. It is an undisputed fact that the year under
consideration is A.Y. 2007-08. We find that Hon’ble Bombay High Court
in the case of Godrej & Boyce Manufacturing Co. Ltd., Vs. DCIT reported
in (2017) 394 ITR 449 (SC) has held that provisions of Rule 8D are not
applicable prior to A.Y. 2008-09. In view of the aforesaid, we are of the
view that Ld.CIT(A) was fully justified in holding that no disallowance
u/s 14A of the Act can be made by following the formula prescribed
under Rule 8D of the Act. We further find that Ld.CIT(A) after relying on
the various decisions of Pune Tribunal directed the AO to restrict the disallowance u/s 14A of the Act to 5% of the dividend income. Before us, Revenue has not pointed out any fallacy in the findings of Ld.CIT(A). We therefore find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of the Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 16th day of September, 2019.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 16th September, 2019. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-1, Kolhapur. 4. Pr. CIT-1, Kolhapur. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER
// True Copy //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.