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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM This appeal has been filed by the revenue against the order dated 14.09.2017 passed by the Commissioner of Income Tax (Appeals)-2 (for short ‘the CIT(A), Panaji, pertaining to the assessment year 2013-14, whereby the Ld. CIT(A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short the ‘Act’).
Brief facts of the case are that the assessee engaged in the business of Hotels and Restaurants, filed its return of income for the assessment year under consideration declaring the total loss of Rs. 2,81,03,292/-, which consisted of business loss of Rs. 1,16,41,586/- and long term capital loss of Rs. 1,64,61,706/-. The assessment order was passed u/s 143 (3) of the Act after making disallowance of unpaid statutory liability u/s 43B amounting to Rs. 71,297/- and disallowance u/s 14A amounting to Rs. 38,21,533/- and Assessment Year: 2013-14
determined the total income at Rs. (-) 1,64,61,706/- under the normal provision of the Act and Rs. 4,14,85,100/- under section 115JB of the Act. The assessee challenged the addition made u/s 14A of the Act before the Ld. CIT (A). The Ld. CIT (A) partly allowed the appeal and deleted the amount of Rs. 35,64,420/- out of the total addition of Rs. 38,21,533/-made by the AO. The revenue is in appeal against the said action of the Ld. CIT (A).
The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:-
“The order of the Ld. CIT (A) is opposed to law and facts of the case.
The Ld. CIT (A) erred in deleting the addition made by the AO on account of disallowance of the claim of deduction u/s 14A r.w. rule 8D amounting to Rs. 35,64,420/-.
The Ld. CIT (A) erred in not considering the findings of the AO that the assessee has earned tax free income in the form of dividend amounting to Rs. 42,50,000/-. These income earned from mutual fund or shares where assessee has made investment in earlier year. The assessee has borrowed fund from bank which is utilized for business purpose as well as in purchase of mutual fund/shares. The expenditure in the form of interest incurred on fund utilized for purchase of above investment is non business related expenses, therefore, same needs to be disallowed as per provision of section 14A r.w.r. 8D. Hence, the provisions of section 14A attracts in this case.
The Ld. CIT (A) also erred in considering the fact that revenue has not accepted the order of the CIT (A), Panaji for A.Y. 2012-13 giving relief in respect of disallowance u/s 14A and has preferred appeal before the Hon’ble ITAT, Panaji. Hence, disallowance u/s 14A is rightly made by the AO.”
Before us, the Ld. Departmental Representative (DR) submitted that the Ld. CIT (A) has wrongly deleted Rs. 35,64,420/- out of the total addition of Rs. 38,21,533/- made by the AO. The assessee had borrowed funds from the Bank and utilized for business as well as for making investments in Mutual Assessment Year: 2013-14
Funds of the shares, therefore, the expenditure in the form of interest incurred on funds utilized for the purpose of investments needs to be disallowed as per provisions of section 14A read with Rule 8D of the Income Tax Rules. The Ld. DR further pointed out that the department has not accepted the identical order passed by the CIT (A) in the assessee’s own case for the assessment year 2012-13. Therefore, the order passed by the Ld. CIT (A) is liable to be set aside.
On the other hand, the Ld. counsel for the assessee submitted that ITAT has upheld the findings of the Ld. CIT (A) recorded in fvaour of the assessee in the assessee’s own case for the A.Y. 2012-13 and since the order passed by the CIT (A) in the present case is in accordance with the ITAT, Panaji, there is no merit in the appeal of the revenue.
We have perused the material on record in the light of the rival submissions of the parties. The only grievance of the revenue is that the Ld. CIT (A) has wrongly deleted the addition to the extent of Rs. 35,64,420/- out of the total addition made u/s 14A of the Act. We further notice that the CIT (A) has passed the identical order in the similar set of facts in the assessee’s own case and the department challenged the said order before the ITAT. The ITAT after hearing the assessee confirmed the CIT (A) order. In the present case, the CIT (A) has partly allowed the appeal of the assessee by following the decision of the ITAT rendered in the assessee’s own case for the A.Y. 2012-13. The relevant para of the Ld. CIT (A) reads as under:-
“3.2 I have gone through the submissions of the appellant and facts of appellant’s case. The appellant has earned divided income of Rs. 42,50,000/- which is exempt from tax. Against the said exempt income, appellant has claimed an expenditure of Rs. 21,636/- which is quite merge. Though, appellant has not incurred any expenditure on interest on borrowed funds, the administrative expenditure on maintaining the average investment portfolio of Rs. 5.57 crores needs to be incurred Assessment Year: 2013-14
which has not been properly reflected or allocated in the books of accounts maintained by the appellant. In A.Y. 2012-13 in appellant’s own case, the ITAT has upheld the disallowance of Rs. 2,00,000/- on the same set of facts and more or less identical amount of investment. The disallowance of 0.5% of average value of the investment in the appellant’s case comes to Rs. 2,78,749/- as worked by the AO. Out of the said amount, the appellant has already allocated an amount of Rs. 21,636/-. Thus, net disallowance of Rs. 2,57,113/- made by the AO is upheld and balance disallowance of Rs. 35,64,420/- is deleted. Ground no. 1 is partly allowed.”
We notice that the order passed by the Ld. CIT (A) in the present case is in accordance with the decision of the ITAT rendered in the assessee’’s own case for the A.Y. 2012-13. Hence, we do not find any reason to interfere with the findings of the Ld. CIT (A). We accordingly uphold the findings of the Ld.CIT (A) and dismiss the sole ground of appeal of the revenue and direct the AO to delete the disallowance to the extent of Rs. 35,64,420/- in terms of the order passed by the Ld. CIT (A). In the result, appeal filed by the revenue for assessment year 2013-2014 is dismissed. Order pronounced by listing the result on the notice board of the bench under rule 34(4) of the Appellate Tribunal Rules, 1963. (SHAMIM YAHYA) JUDICIAL MEMBER Panaji; दिन ांक Dated: 31/01/2019
Alindra, PS Assessment Year: 2013-14
आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, Panaji/ DR, ITAT, Panaji 6. ग र्ड फ ईल / Guard file.
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.