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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE & SHRI GAGAN GOYAL
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-49 Mumbai passed u/s 143(3) and 250 of the Act. The assessee has filed the following grounds of appeal:
1. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) has erred in restricting the action of Ld. AO in making an disallowance of Rs. 3,68,281/- u/s M/s Wellknown Technologies P Ltd., Mumbai. - 2 -
14A of the Act, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal.
At the time of hearing, the Ld.AR of the assessee submitted that there is a delay in filing the appeal before the Hon’ble Tribunal. The assessee has filed an application for condonation of delay and we find the facts mentioned are reasonable and accepted.The Ld.DR has no specific objections. Accordingly, we condone the delay and admit the appeal.
The brief facts of the case that the assessee company is engaged in the business of education in marketing, management, fiancé, publication, curse were and establishing, constructing, leasing, providing, maintaining & conducting schools, colleges, sport complexes, stadiums and other institutions for imparting training, education and other institutions in the fields of education and creative arts, science, commerce & management. The assessee has filed the return of income electronically for the A.Y 2017-18 on 30.10.2017 disclosing a total income of Rs. 26,25,980/- and the return of income was processed
M/s Wellknown Technologies P Ltd., Mumbai. - 3 - u/s 143(1) of the Act. Subsequently the case was selected for limited scrutiny under the CASS reason being “expenses incurred for earning exempt income” Further the notice u/s 143(2) and 142(1) of the Act were served on the assessee. The A.O on perusal of the financial statements found that the assessee has investments. But the assessee has not made any disallowance in respect of the expenses incurred for carrying the activity of investment decisions and issued a show cause notice. The A.O observed that the explanations of the assessee that no expenditure incurred cannot be accepted and relied on the decision of the Hon’ble Jurisdictional High Court of Bombay and worked out the disallowance u/s 14A of the Act r.w.r 8D(2) of I T Rules and restricted to Rs.3,68,281/- and assessed the total income of the assessee of Rs. 29,94,260/- and passed the u/s 143(3) of the Act dated 13.11.2019.
Aggrieved by the order the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the A.O and has confirmed the action of the A.O and dismissed the appeal. Aggrieved
M/s Wellknown Technologies P Ltd., Mumbai. - 4 - by the order of the CIT(A) the assessee has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, the Ld. AR of the assessee submitted that the CIT(A) erred in confirming the action of the A.O without considering the facts that the assessee has not incurred any expenditure for investments decisions and the dividend income earned is claimed exempt. The Ld. AR supported the submissions with the financial statements in paper book and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A).
We heard the rival submissions and perused the material on record. Prima-facie the sole grievance of the assessee that the CIT(A) has erred in confirming the action of the A.O in making disallowance u/s 14A irrespective of the fact that no expenditure has been incurred. We find on perusal of page1 of paper book audited balance sheet the investments of the assessee as at 31.03.2016 is Rs.1,44,13,10,758/- and as at 31.03.2017 is 1,76,60,54,651/- and there is increase in investments in financial year 2016-17. Further at M/s Wellknown Technologies P Ltd., Mumbai. - 5 - Note 5 of notes forming part of the financial statements referred at page 13 of the paper book were the non current investments are in partially convertible compoundable redeemable debentures, equity shares and preference shares are disclosed. The assessee has disclosed the dividend income under note 19 of other income and claimed exempted. The contentions of the Ld.AR are that the disallowance u/sec14A r.w.r 8D(2) is excessive.
We find that there are no observations of the A.O with respect to dividend yielding investments considered for the purpose of calculation of average investment value. Accordingly, we restore the disputed issue to the file of the A.O. for limited purpose to recomputed the disallowance u/sec14A r.w.r 8D(2) IT Rules considering only those investments which yield exempted income and ratio of special bench ITAT decision of ACIT vs Vireet Investments(165 ITD 27)(SB Delhi). Further the assessee should be provided adequate opportunity of hearing and shall cooperate
M/s Wellknown Technologies P Ltd., Mumbai. - 6 - in submitting the information and allow the grounds of appeal of the assessee for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.