DCIT 8 (1)(2), MUMBAI vs. M/S SAMIDHA FOODS PVT LTD., MUMBAI

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ITA 6539/MUM/2019Status: DisposedITAT Mumbai29 July 2021AY 2010-114 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that disallowance under Section 14A cannot exceed the exempt income earned. The appeal was also not maintainable due to low tax effect.

What were the facts?

The assessee earned exempt income of Rs. 3,19,136. The Assessing Officer disallowed Rs. 9,97,929 under Section 14A read with Rule 8D. The CIT(A) restricted the disallowance to the exempt income.

What were the issues?

Whether disallowance under Section 14A can exceed exempt income and if the appeal is maintainable based on tax effect.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR

For Appellant: Shri Vijaykumar Menon (DR)

Date of hearing 29-06-2021 Date of pronouncement 29-07-2021 O R D E R Per: Saktijit Dey, JM: This is an appeal by the revenue against order dated 31-07-2019 of learned Commissioner of Income Tax (Appeals)-24, Mumbai for the assessment year 2010-11 2. The dispute in the present appeal is confined to partial deletion of disallowance made under section 14A of the Income Tax Act, 1961.

3.

Briefly the facts are, the assessee, a resident company, is stated to be engaged in the business of trading in commodities. For the assessment year under dispute, assessee had filed its return of income on 15-10-2010 declaring total

2 ITA 6539/Mum/2019 income of Rs.42,00,530/-. Assessment in case of the assessee was originally completed under section 143(3) of the Act vide order dated 26-03-2013 determining total income at Rs.2,07,47,870/-. Subsequently, being of the view that income chargeable to tax has escaped assessment, the assessing officer reopened the assessment under section 147 of the Act. In course of the re- assessment proceedings, the assessing officer called upon the assessee to explain why disallowance under section 14A r.w.r. 8D should not be computed in respect of the exempt income earned by way of dividend amounting to Rs.3,19,136/- Though, the assessee objected to the proposed disallowance, however, the assessing officer rejecting the explanation of the assessee proceeded to compute disallowance under rule 8D and worked out a disallowance of Rs.9,97,929/-. Assessee contested the aforesaid disallowance before learned Commissioner (Appeals). Partly accepting the submissions of the assessee, learned Commissioner (Appeals) directed the assessing officer to restrict the disallowance under section 14A r.w.r. 8D to Rs.3,19,136/-, being the exempt income earned by the assessee during the year.

4.

When the appeal was called for hearing, none appeared for the assessee. Considering the nature of dispute, we proceed to dispose of the appeal ex parte qua the assessee after hearing the learned departmental representative and based on materials on record.

5.

Undisputedly, during the year under consideration the assessee had earned exempt income amounting to Rs.3,19,136/-. Whereas, the assessing officer, applying Rule 8D, has disallowed an amount of Rs.9,97,929/-. In other words, the disallowance made by the assessing officer is far in excess of the exempt income earned during the year. Now, it is a fairly settled legal position that disallowance

3 ITA 6539/Mum/2019 of expenditure under section 14A r.w.r.8D cannot exceed the exempt income earned during the year. The judicial precedents relied upon by learned Commissioner (Appeals) clearly express such view. Therefore, the decision of learned Commissioner (Appeals) deserves to be upheld.

6.

Even otherwise also, as we find from record, tax effect on the amount disputed by the revenue in the present appeal is much below the monetary limit of Rs.50 lakhs stipulated for filing appeal by the department before the Tribunal as per circular No.17 of 2019 dated 08-08-2019 issued by the Central Board of Direct Taxes (CBDT). There is nothing on record to suggest that the present appeal is protected under any of the exceptions provided to the aforesaid circular. Therefore, on the ground of tax effect also, the present appeal of the revenue is not maintainable.

7.

That being the case, we do not find any infirmity in the decision of learned Commissioner (Appeals) on the issue in dispute. Grounds are dismissed.

8.

In the result, appeal is dismissed. Order pronounced on 29/07/2021. Sd/- sd/- RAJESH KUMAR SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dt : 29/07/2021 Pavanan

4 ITA 6539/Mum/2019

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