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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आदेश / O R D E R भहावीय ससिंह, उऩाध्मऺ के द्वाया / PER MAHAVIR SINGH, VP: These cross appeals are arising out of the orders of the Commissioner of Income Tax (Appeals)]-54, Mumbai, [in short CIT(A)], in appeal Nos. CIT(A)-54/IT-139/DC CC (4)/2016-17, CIT(A)-54/IT- 138/DC CC 6(4)/2016-17, CIT(A)-54/IT-37/DC CC 6(4)/2016-17, CIT(A)- 54/IT-10193/DC. CC.6(4)/2018-19, CIT(A)-54/IT-142/DC CC 6(4)/2016- 17, CIT(A)-54/IT-143/DC CC 6(4)/2016-17 dated 13.09.2019, 15.09.2019. The assessments were framed by the Dy. Commissioner Tax Officer, Circle 6(4) (in short DCIT/ Assessing Officer) for the A.Ys. 2009- 10, 2010-11, 2011-12, 2014-15, 2015-16, 2016-17 vide order dated 26.12.2016, 28.12.2018, 26.12.2018, under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). In
2. The only common issue in these three appeals of Revenue is as regards to the order of CIT(A) deleting the disallowance under section 14A read with Rule 8D of the Income-tax Rules, 1962 (hereinafter “1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the disallowance u/s.14A read with Rule 8D, relying upon a decision of the Hon'ble Bombay High Court in the case of Continental Warehousing (NhavaSheva) Ltd despite the fact that the Hon’ble Supreme Court has admitted department's SLP vide order dated 12.10.2015 in Civil Appeal No.18506/2015 reported in 64 taxmann.com 34 (SC).
On the facts and in the circumstances of the case and in Law, the (earned CIT(A) has erred in holding that in unabated cases, addition(s) on any issue can be made only on the basis of incriminating material found during the search action."
We noted that a search under section 132 of the Act was carried out in the case of Arshiya Limited and its group companies including assessee on 13.06.2014. The Assessing Officer issued notice under “5.3 In this case, the addition made is only on account of disallowance u/s. 14A which has got no relation to the search. In fact, in the assessment order, the AO clearly writes "On perusal of the financial statements of the assessee for the year under consideration, it is observed that the assessee has earned dividend from shares amounting to Rs,2,46,99,090/- which has been claimed exempt u/s 10 of the IT Act. However, it is noticed that the assessee has not disallowed any expenditure attributable for earning of dividend income in his computation of income. It is evident that the basis for the additions the financial statements of the assessee which are a part of record and not any incriminating material found during the search.
We find, even now before us, the learned Sr. DR could not point out any incriminating material found during the course of search on the basis of which this disallowance of expenses relatable to exempt income was made under section 14A read with Rule 8D (ii) & (iii) of the Rules. Even the grounds raised
by Revenue states that the Revenue has filed SLP before Hon’ble Supreme Court against the decision of Hon’ble High Court of Bombay in the case of Continental Warehousing (NhavaSheva) Ltd and despite the fact that the Hon’ble Supreme Court has admitted department's SLP vide order dated 12.10.2015 in Civil Appeal No.18506/2015 reported in 64 taxmann.com
34. (SC) the CIT has deleted the disallowance. It means that Revenue admits that the issue is covered. Hence, we are of the view that the CIT(A) has righty deleted the addition and we confirm the same. These appeals of Revenue are dismissed.
In & 7361/Mum/2019 of Revenue’s appeal and Cross appeal by assessee in ITA Nos. 7773 & 7774/Mum/2019 5. The only issue in these cross appeals is as regards to the order of CIT(A) restricting the disallowance of the expenses relatable to exempt income at ₹6,83,269/- as against the disallowance made by the Assessing Officer at ₹1,04,82,71,485/- in Assessment Year 2014-15. For this, assessee has raised the various grounds which need not to be
We have heard the rival contentions and gone through the facts and circumstances of the case. Brief facts are that the assessee has earned exempt income on account of dividend at ₹42,11,663/- and exempt long term capital gain of ₹308,98,67,962/-. The Assessing Officer during the course of assessment proceedings invoked the provisions of section 14A read with Rule 8D of the Rules and made disallowance of interest expenses at ₹1,04,17,984/- under Rule 8D(2)(i) and administrative expenses being half percent of average value of investment at ₹75,53,501/- under Rule 8D(2)(iii) of the Rules. Thereby, the Assessing Officer made disallowance of ₹4,82,71,485/-. Aggrieved, assessee preferred the appeal before Commissioner of Income Tax (Appeals). The CIT(A) after hearing both the parties directed that in view of the decision of Special Bench of this ITAT in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017] 58 ITR (AT) 313 (Delhi - Trib.) (SB), wherein it is held that the disallowance should be restricted to the extent of investment which gives exempt income and also directed that disallowance under 14A read with Rule 8D of the Rules cannot exceed the exempt income. The CIT(A) observed in Paras 5.2 and 5.3 as under:-
“5.2 However, the special Bench of ITAT, Delhi in the case of ACIT vs. Vireet Investments Pvt. Ltd. 82 Taxman.com 415 held that "only those investments which have yielded exempt income 5.3 Further, the Hon'ble ITAT in the case of Daga Global Chemical Pvt. Ltd. vs. ACIT [ITA No. 5592/Mum/2012] has held that the disallowance should be restricted to and should not exceed the exempt income. Further, the jurisdictional ITAT in the case of Sandeep Bharat Singh Kothari vs. ACIT [ITA No. 8706/Mum/2011] followed the coordinate Bench in the case of Daga Global Chemical Pvt. Ltd. and held that the disallowance u/s. 14A read with rule 8D cannot exceed the exempt income. The Hon'ble Bombay High Court has, in the case of Nirved Traders Pvt. Ltd. vs. DCIT No. 149 of 2017, in its order dated 23.04.2019, held that disallowance u/s 14A cannot be in excess of exempt income earned by the assessee during the assessment year in question.”
Aggrieved, Revenue as well as assessee came in appeal before us.
At the time of hearing we pointed out that what is the difficulty in the direction of Commissioner of Income Tax (Appeals). Neither the learned Counsel for the assessee nor Revenue point out any difficulty as the CIT(A) following the decision of Vireet Investments (P.) Ltd. (supra) has directed the Assessing Officer to disallow the expenses relatable to the investment giving rise to exempt income. Hence, there is no infirmity in the order of CIT(A) and we confirm the same. Both, the appeals of Revenue as well as assessee are dismissed. Similar are the facts and circumstances in & 7774/Mum/2019 for Assessment Year 2015-16 and hence, both the appeals of Revenue as well as assessee are dismissed.
The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the disallowance of expenses relatable to exempt income made by Assessing Officer under section 14A read with Rule 8D of the Rules. For this, Revenue has raised the following ground:-
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting disallowance made u/s. 14A r.w. Rule 8D by the AO?