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Income Tax Appellate Tribunal, ‘C‘ BENCH
Before: SHRI M.BALAGANESH, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-17,Mumbai in appeal No.CIT(A)-17/IT-169/16-17 dated 17/06/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) by the ld. Asst.
M/s. Orix Auto Infrastructure Services Limited Commissioner of Income Tax-14(2)(2), Mumbai (hereinafter referred to as ld. AO).
The only issue involved in this appeal of the assessee is as to whether the ld. CIT(A) was justified in confirming the disallowance made u/s.14A of the Act r.w.Rule 8D(2)(iii) of the Rules amounting to Rs.33,62,493/- in the facts and circumstances of the instant case.
We have heard rival submissions and perused the materials available on record. We find that assessee is a public limited company engaged in the business of leasing, hire purchase, rent a car, transport solution services, granting loans and providing other services. The original return of income was filed by the assessee on 29/11/2012 declaring total loss of Rs.7,72,66,388/- which was later revised on 28/03/2014 to Rs.8,95,03,227/-. We find that the ld. AO had observed that assessee had made investment in exempt income yielding assets amounting to Rs.82,24,98,670/-. It is not in dispute that assessee had earned exempt income during the year under consideration. But at the same time we find that assessee had made voluntary disallowance of administrative expenses under third limb of Rule 8D(2) of the Rules amounting to Rs.33,62,493/- in the return of income. The assessee pleaded before the lower authorities that in the absence of any exempt income even the voluntary disallowance made by the assessee amounting to Rs.33,62,493/- should be reduced from the taxable income as the provisions of Section 14A of the Act would not come into operation at all. This request was rejected by the ld. AO and the ld. AO proceeded to compute the disallowance by applying computation mechanism provided under Rule 8D(2) of the Rules as under:-
M/s. Orix Auto Infrastructure Services Limited Under Rule 8D(2)(ii) - Rs.5,48,61,727/- Under Rule 8D2(iii) - Rs. 3,36,243/- ---------------------- Total Rs.582,24,220/- Less disallowance made by the assessee In the return Rs. 33,62,493 =========== Net disallowance u/s.14A Rs.5,48,61,727/- =========== 3.1. We find that the ld. CIT(A) duly appreciated the fact that since there was no exempt income derived by the assessee, no disallowance u/s.14A of the Act would come into operation. Accordingly, he deleted the disallowance u/s.14A of the Act made by the ld. AO in the assessment, but however, sustained the suomoto disallowance made by the assessee in the sum of Rs.33,62,493/- as the same was voluntarily made by the assessee in the return of income. We find that the ld. CIT(A) had also given a categorical finding that assessee is having sufficient interest free funds in its kitty and hence, no disallowance of interest under Rule 8D(2)(ii) of the Rules could be made in the facts of the instant case in view of the decision of the Hon’ble Jurisdictional High Court in the case of HDFC Bank Ltd., reported in 366 ITR 505. This factual finding was not controverted by the revenue before us.
3.2. We find that assessee had made suomoto disallowance under Rule 8D(2)(iii) of Rs.33,62,493/- and had indeed pleaded before the lower authorities that the same should be reduced while determining taxable income as there was no exempt income derived by the assessee. We find that this request was rejected by the lower authorities.
M/s. Orix Auto Infrastructure Services Limited 3.2.1. We find that assessee is entitled to make a claim before the ld. AO or before the ld. CIT(A) even though it had made certain erroneous disallowance in the return of income. Reliance in this regard is placed on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt Ltd., reported in 349 ITR 336 (Bom). Respectfully following the said decision of the Hon’ble Jurisdictional High Court, we hold that the lower authorities ought to have entertained the claim of the assessee. We also find that the ld. CIT(A) in para 4.14 had categorically agreed to the legal proposition that no disallowance u/s.14A of the Act could be made when there is no exempt income. Having said so, he ought to have entertained the plea of the assessee and directed the ld. AO to reduce even the suomoto disallowance of Rs.33,62,493/- made by the assessee. To this extent, we are inclined to modify the order of the ld. CIT(A) and direct the ld. AO to delete Rs.33,62,493/- being the suomoto disallowance made by the assessee.
3.3. We are conscious of the fact that this deletion of suomoto disallowance would result in assessed income going below the returned income. In this regard, we find that the Hon’ble Gujarat High Court in the case of Gujarat Gas Company Ltd., vs. JCIT reported in 245 ITR 84 and also in later decision in the case of Milton Laminates Ltd., vs CIT reported in 37 Taxmann.com 249 had categorically held that the assessed income could go below the returned income if assessee had disclosed certain income which is not supposed to be disclosed as per law. Respectfully following the said decision, we direct the ld. AO to delete the voluntary disallowance of Rs.33,62,493/- made by the assessee u/s.14A of the Act even if ultimately the assessed income goes below the returned income.
M/s. Orix Auto Infrastructure Services Limited
In the result, the appeal of the assessee is allowed.
Order pronounced on 08/03/2021 by way of proper mentioning in the notice board.