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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
आदेश / O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)]-52, Mumbai, [in short CIT(A)], in appeal No. CIT(A)-52/IT-198/DCIT-CC-4(2)/17-18 dated 26.03.2019. The assessment was framed by the Dy. Commissioner of Income Tax, Central Circle- 4(2), Mumbai (in short DCIT/ AO), for the A.Y. 2015-16 vide order dated 12.10.2017 under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance under section 14A of the IT Act to the extent of exempt income received by the assessee during the year under consideration without appreciating the Circular No.5 of 2014 dated 11.02.2014 of CBDT.
On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in restricting the disallowance under section 14A of the IT Act to the extent of exempt income received by the assessee during the year under relying upon the decision of the Hon‟ble P & H High Court whereas in the said decision it has been held that Rule 8D is not applicable to the stock-in-trade earning exempting income.
3. Whether, On the facts and circumstances of the case and in law, ld the CIT(A), was justified in directing the Assessing Officer to restrict the disallowance under section 14A of the IT Act to Rs.5,86,52,973 as disallowed by the assessee itself
4. On the facts and under the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance under section 14A of the Income Tax Act, 1961 thereby overlooking the computational procedure laid down in Rule 8D of the IT Rule, 1962 which has to be necessarily followed whenever a disallowance under section 14A was to be made?
On the facts and under the circumstances of the case, and in Law, the Ld. CIT(A) erred in restricting the disallowance under section 14A of the Income Tax Act, 1961 without noticing that the decision of the Hon‟ble Jurisdictional High Court relied upon was rendered in the context of the pre- amended provisions f section 14A relevant for Assessment Years 2001-02 to 2005-06?”
We have heard the learned Sr. DR and gone through the facts and circumstances of the case. During the course of assessment proceedings, the Assessing Officer noted that the assessee has made investment of
The CIT(A) after going through the facts of the case noted that the assessee’s interest free funds in the shape of share capital and reserve and surplus are more than the investment made during the year and hence, he deleted the disallowance of interest expenses. The CIT(A) noted the interest fee funds available and investment made in purchase of shares as under: -
Particulars AY 2014-15 AY 2015-16 Share capital 1,52,14,22,530 1,52,14,22,530 Reserves and Surplus 3,30,92,54,413 2,14,98,25,539 Less: Revaluation -70,12,32,620 -70,12,32,620 reserve Add: Depreciation 3,29,90,66,381 3,83,00,29,425 Reserves Advance from 27,79,29,490 21,29,66,868 customers Security Deposits 11,93,55,345 18,40,46,397 Income received in 9,05,35,14,005 8,30,53,27,973 advance (unearned revenue) Investments 4,57,74,10,057 3,99,52,45,059 5. We noted from the that fact and it is clear that the assessee has interest free funds available with it, which is much more than investment made hence, in view of the decision of Hon’ble Bombay High court in the
Coming to the next issue of disallowance of expenses i.e. administrative expenses under Rule 8D(2)(iii) of the Rules, we noted that the assessee has earned dividend income of Rs. 13,17,233/- only but CIT(A) restricted the disallowance at Rs. 5,86,52,973/- being suo moto disallowed by assessee by observing in Para 5.20 and 5.21 as under:-
“5.20 In view of the aforesaid discussion, the contention of the assessee that the disallowance under section 14A should be restricted to the quantum of exempt/ dividend income earned during the year, is accepted to be the correct position of law. However, the Assessing Officer should not only consider the amount of dividend income earned of Rs. 13,17,233/- but also any other exempt income, if any, including the exempt share of profit from partnership firm(s) while restricting the quantum of disallowance u/s 14A.
5.21 In view of the above discussion, the Assessing Officer is accordingly directed to re- compute the disallowance under section 14A as explained in para 5.9 to 5.20 above. However, since, the assessee itself had computed disallowance under section 14A of Rs. 5,86,52,973/- which it had added back in the
We find no infirmity in the order of the CIT(A) and hence, this issue of Revenue’s appeal is dismissed.
The next issue in this appeal of Revenue’s is against the order of CIT(A) in computing the disallowance of expenses under section 14A of the Act read with Rule 8D(2) of the Rules while computing the book profit under section 115JB of the Act. For this, Revenue has raised the following ground Nos. 6 and 7:-
“6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing to delete the addition of disallowance under section 14A of the IT Act to the book profit of the assessee without appreciating the clause(f) of explanation 1 to section 115JB (2) of the IT Act.
7. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in directing to delete the addition of disallowance under section 14A of the IT Act to the book profit of the assessee without appreciating the decision of the Hon‟ble ITAT Mumbai „F; Bench in the case of Deputy commissioner of Income-tax, Central Circle-18& 19, Mumbai v. Viraj Profiles Ltd. In ITA No. 4439/(Mum.) 2013 for AY 2008-09.”