ACIT CIRCLE -7 (3)(1), MUMBAI vs. PANCARD CLUBS LTD., MUMBAI

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ITA 2774/MUM/2018Status: DisposedITAT Mumbai29 April 2022AY 2015-164 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, stating that disallowance under Section 14A should only be made in respect of investments that have actually earned exempt income during the year. This aligns with established legal principles and a Special Bench decision.

What were the facts?

The Revenue appealed the CIT(A)'s order which directed the Assessing Officer to disallow expenses under Section 14A only for investments yielding exempt income. The Revenue argued that disallowance should apply to all investments, citing a CBDT circular.

What were the issues?

Whether disallowance under Section 14A of the Income Tax Act should be made on all investments or only on those yielding exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT

For Respondent: Shri Jasdeep Singh, D.R

O R D E R

Per : Kuldip Singh, Judicial Member:

1.

Aforesaid appeals earlier decided vide order dated 08.01.2020 by the Tribunal were recalled for limited purpose to decide ground No.3, which remained undecided vide earlier order (supra).

2.

The appellant, Asstt. Commissioner of Income Tax, Mumbai (hereinafter referred to as ‘the Revenue’) by filing the present appeals, sought to set aside the impugned order dated 31.01.2018

2 & 2774/M/2018 M/s. Pancard Clubs Ltd. passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment year 2011-11 on identically worded ground No.3 in both the appeals except the difference in amounts inter alia are that :-

A.Y. 2010-11 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the disallowance u/s 14A of the Act shall be made only in respect of those investments from which exempt income has been earned during the year whereas CBDT vide circular No. 5/2014 dated 11.2.2014 had clarified that disallowance u/s 14A has to be made even if no exempt income was earned during the year from the investments."

3.

Despite issuance of the notice to the assessee company none appeared on behalf of it, so the Bench decided to decide these appeals on the basis of material available on record with the assistance of the Ld. D.R. for the Revenue.

4.

We have heard the Ld. Departmental Representative for the Revenue, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon.

5.

Assessing Officer (AO) by invoking the provisions contained under section 14A of the Income Tax Act, 1961 (for short ‘the Act’) made disallowance of Rs.58,03,500/- and Rs.91,28,060/- in A.Y. 2010-11 and in A.Y. 2015-16 respectively, which were challenged before the Ld. CIT(A) on the ground that the AO while making disallowance under section 14A of the Act considered all

6.

At the same time, the Ld. CIT(A) while deciding this issue directed the AO to consider investments which have yielded exempt income only by returning following findings:

“4.5 So far as eight and ninth grounds of appeal are concerned, in view of the decision of ITAT, New Delhi, Special Bench in the case of ACIT Vs Vireet Investment (P.) Ltd [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB)/[2017]

58. ITR(T) 313 (Delhi- Trib.) (SB)/[2017] 165 ITD

27. (Delhi - Trib.) (SB)/[2017] 188 TTJ

1. (Delhi –Trib.) (SB), the AO is directed to make disallowance u/s 14A only in respect of those investments from which exempt income has been earned during the year.”

7. We have perused the findings returned by the Ld. CIT(A) on the ground in question which is decided in accordance with the settled principle of law that only “exempt income yielding investments are to be taken for the purpose of making disallowance under section 14A of the Act and not all the investments made by the assessee” during the year under assessment. This issue has already been decided by the Special Bench of the Tribunal in case of ACIT vs. Vireet Investments (supra) referred by the Ld. CIT(A). So in these circumstances, we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A) on the issue in question. So ground No.3 of & 2774/M/2018 for A.Y. 2010-11 & 2015-16 respectively is decided against the Revenue.

8.

Resultantly, both the appeals filed by the Revenue are dismissed.

Order pronounced in the open court on 29.04.2022.

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