M/S GALIAKOTWALA ENGINEERING COMPANY PVT. LTD.,MUMBAI vs. ACIT CIRCLE-3(1)(2), MUMBAI

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ITA 2632/MUM/2019Status: DisposedITAT Mumbai01 February 2021AY 2013-143 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer failed to record the necessary satisfaction before invoking Section 14A and Rule 8D. Therefore, the disallowance confirmed by the CIT(A) was deleted.

What were the facts?

The assessee invested in equity shares and mutual funds, earning exempt income. The Assessing Officer invoked Section 14A and Rule 8D for disallowance, which was partly restricted by the CIT(A).

What were the issues?

Whether the Assessing Officer recorded the requisite satisfaction to invoke Section 14A and Rule 8D for disallowance of expenses related to exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI

Before: SHRI MAHAVIR SINGH & SHRI MANOJ KUMAR AGGARWAL

For Respondent: Shri T.S. Khalsa
Hearing: 01/02/2021Pronounced: 01/02/2021

This appeal by the assessee is arising out of the order of CIT(A)-9, Mumbai in Appeal no. CIT(A)-9/Cir.3/Tr.126/2016-17 dated 20.03.2019. The assessment was framed by the Asst. Commissioner of Income Tax, Circle- 3(1)(2), Mumbai under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2013-14 vide order dated 29.02.2016.

2.

Brief facts are that the Assessing Officer during the course of assessment proceedings noticed that assessee has invested in equity shares and mutual funds a sum of Rs.2,07,99,352/- and earned exempt income of Rs.6,18,304/-.

M/s. Galiakotwala Engineering Co. Pvt. Ltd. The Assessing Officer computed the disallowance by invoking provisions of Section 14A of the Act r.w.r 8D of the Income Tax Rules. He computed the disallowance under Rule 8D(2)(ii) and 8D(2)(iii) of the Income Tax Rules (hereinafter referred to as ‘the Rules’) totalling to Rs.3,02,169/-. Aggrieved, assessee preferred appeal before the CIT(A), who restricted the disallowance under Rule 8D(2)(iii) of the Rules at Rs.1,11,002/-. Aggrieved, assessee came in appeal before the Tribunal.

3.

We have heard the rival contentions and gone through the facts and circumstances of the case. At the outset, it is noted from the assessment order as well as order of CIT(A) that there is no satisfaction recorded by the Assessing Officer qua the claim of assessee that there is no expenditure incurred on account of earning of exempt income. Even the Assessing Officer has not gone through the accounts of the assessee and could not point out which expenses are relatable to exempt income. Hence, he has not recorded any satisfaction before rejecting the accounts of the assessee. We are of the view that recording of satisfaction is a primary condition for invoking the provisions of Section 14A of the Act r.w.r 8D of the Rules. Hence, we delete the disallowance confirmed by CIT(A) amounting to Rs.1,11,002/-.

4.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 1st February, 2021.

Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT Mumbai, Date : 1st February, 2021 *SSL*

M/s. Galiakotwala Engineering Co. Pvt. Ltd.

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