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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI S. RIFAUR RAHMAN
Since the present appeals pertain to the same assessee involving common issue, except variation in figures, which arose out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. However, in order to understand the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the appeal being ITA no.1131/Mum./2019, for assessment year 2013–14, the conclusive result of which would be applicable equally to other appeal being ITA no.1132/Mum./2019, for the A.Y. 2015–16. ./2019 Assessment Year – 2013–14
2. The assessee has filed the present appeal on the following grounds of appeal:– “1. The learned Commissioner of Income Tax (Appeals)–24, erred in law & on facts in dismissing the appeal and confirming the order of the A.O. The order may be quashed.
2. The learned Commissioner of Income Tax (Appeals)–24, erred in law & on facts in confirming the disallowance of ` 27,15,658, under section 14A r/w rule 8D of the Income Tax Act, 1961. 3. (i) The learned Commissioner of Income Tax (Appeals)–24, erred in law & on facts in confirming the disallowance of ` 27,15,658 under section 14A r/w rule 8D of the Income Tax Act, 1961. Alternatively –
3 M/s. PN NJ Industries Pvt. Ltd.
(ii) The same has to be restricted to ` 3,70,037, being exempt income earned during the year.
3. Facts in brief are, the assessee for the year under consideration filed its return of income on 30th September 2013, declaring total income at ` 25,44,606. The Assessing Officer completed the assessment under section 143(3) of the Income Tax Act, 1961 (for short "the Act") determining total income at ` 52,60,260, under the normal provisions by making disallowance under section 14A r/w rule 8D, amounting to ` 27,15,658. During the assessment proceedings, the Assessing Officer noticed that the assessee had earned exempt income during the year under consideration. The Assessing Officer, therefore, sought explanation from the assessee as to why disallowance under section 14A r/w rule 8D should not be made with reference to earning of exempt income. In response, the assessee submitted that during the year, the assessee received dividend of ` 3,70,037, which was claimed as exempt under section 10(34) of the Act. The assessee, though reiterated that no disallowance can be made under section 14A of the Act, however, the disallowance under section 14A of the Act was acceptable to the extent of dividend income earned. The Assessing Officer considered the submissions of the assessee, however, relying upon the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mgf. Co. Ltd., 234 CTR 001
4 M/s. PN NJ Industries Pvt. Ltd.
(Bom.) and other case law, the Assessing Officer made disallowance of ` 27,15,658, under section 14A r/w rule 8D. The assessee being unsuccessful filed appeal before the first appellate authority.
2. The learned CIT(A) also dismissed the assessee’s appeal by observing as under:–
“DECISION: I have given Imy careful consideration to the statement of facts and perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. At the outset, it has to be mentioned that the appeal has been posted. for hearing on several occasions/dates as per the notices issued and placed on record. Perusal of the record it is observed that several opportunities of hearing were afforded to the appellant and there has been no proper compliance which shows that the appellant has no interest to. pursue .or prosecute the appeal. It is the appellant who filed this appeal aggrieved by the assessment, order and the appellant is expected to not only pursue the appeal but effectively prosecute the appeal before the appellate authority if it is genuinely aggrieved by the assessment order. In view of the facts and circumstances narrated above, the appeal filed by the appellant does not deserve any merit consideration and has to be dismissed. Hence I have no other option but to dispose the appeal by dismissal. Reliance is placed on the decision of the Hon'ble Chandigarh. Tribunal in the case of Susham Singla (33 [FR 449)(2014). In this case it was held that where none was present on behalf of the appellant for hearing, neither any adjournment was sought, the appeals filed by the assessee was to be dismissed. Hon'ble Cochin Bench of the ITAT in its decision (43 Taxmann.com 176) observed that the assessee's appeal can be dismissed where the assessee had failed to show that there was a reasonable cause for nonappearance on the date of hearing of appeal. Also, the Hon’ble jurisdictional High Court in a recent judgment in the case of Bharat Petroleum Corporation Ltd (359 ITR 371) (2014) upheld the dismissal of the appeal by the Tribunal for not prosecuting the appeal filed before the Tribunal. Similarly, Hon'ble Bombay High Court in the case of Jayantital S. Shah (53 Taxman 229) upheld
5 M/s. PN NJ Industries Pvt. Ltd. the decision of the Tribunal in favour of the Revenue. In this case the assessee sought an adjournment in certain proceedings before the Tribunal Which was granted and on the date chose not to attend the proceedings.. The Tribunal's rejection of the assessee's petition without further opportunity of being heard was upheld by the Bombay High Court. Reliance is also placed on the decision of the Hon'ble Delhi court in the case of Multiplan India P ltd. 381 TD 320(1991 )(Delhi).”
Still aggrieved, the assessee is in further appeal before the Tribunal.
Before us, the learned A.R. reiterated the submissions made before the authorities below and submitted that the assessee during the year under consideration had earned dividend income of ` 3,70,034, which was claimed as exempt under section 10(34) of the Act. The learned A.R. though reiterated that no disallowance can be made under section 14A of the Act, yet he agreed for the disallowance under section 14A to the extent of dividend income of ` 3,70,034. In support of his contentions, he relied upon the following decisions:–
i) Godrej & Boyce Mfg. Co. Ltd. v/s DCIT & Anr., [2010] 234 CTR 001 (Bom.); ii) Cheminvest Ltd. v/s ITO, 317 ITR 86 (AT); iii) Sanchayita Mercantile Pvt. Ltd. v/s ACIT, 25 SOT 57 (Mum.).
The learned Departmental Representative relied upon the orders of the authorities below.
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Considered the rival submissions and perused the material on record. We find that the learned Authorised Representative fairly conceded for the disallowance made to the extent of dividend income earned. With regard to the disallowance made under rule 8D(2), the law is now well settled by the Special Bench decision of the Tribunal, Delhi Bench, in CIT v/s Vireet Investments Pvt. Ltd., [2017] 165 ITD 027 (Del.) (SB) that only those investments which had actually yielded exempt income to the assessee should be considered for the purpose of working out the disallowance under rule 8D. Accordingly, we direct the Assessing Officer to re–compute the disallowance under rule 8D(2) by considering only those investments which had yielded exempt income. Consequently, we set aside the impugned order passed by the learned CIT(A) by allowing the grounds of appeal raised by the assessee.
In the result, assessee’s appeal is allowed in terms indicated above. ./2019 Assessment Year – 2015–16
The related facts and circumstances of the issue raised by the assessee in this appeal is materially identical to the issue decided by us vide ground no.1 to 3, raised by the assessee in its appeal being ITA no.1131/Mum./2019, vide Para–6, wherein we have allowed
7 M/s. PN NJ Industries Pvt. Ltd. similar claim made by the assessee for the reason stated therein. Since the issue in the present appeal is identical to the issue decided by us as aforesaid, consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) and allow the grounds of appeal raised by the assessee for this assessment year also.