M/S HYDROLINE PRODUCTS PRIVATE LIMITED,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3(1)(2), BANGALORE

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ITA 2217/BANG/2018Status: DisposedITAT Bangalore30 January 2020AY 2015-162 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's submission regarding the method of calculating disallowance under Section 14A, referencing a Special Bench decision. The matter was restored to the AO for re-examination of facts.

What were the facts?

The assessee claimed a deduction for expenses related to earning dividend income. The Assessing Officer (AO) disallowed a portion of these expenses under Section 14A. The CIT(A) upheld the disallowance.

What were the issues?

The primary issue was the correct method for calculating disallowance of expenses under Section 14A, specifically concerning which investments should be considered for the calculation of average value of investments.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE

Before: SHRI ARUN KUMAR GARODIA, AM & SHRI PAVAN KUMAR GADALE, JM

For Appellant: Shri A. S. Narayan Moorthy, C. A
For Respondent: Shri Sunil Kumar Agarwal, Addl. CIT DR
Hearing: 02.12.2019Pronounced: 30.01.2020

BEFORE SHRI ARUN KUMAR GARODIA, AM AND SHRI PAVAN KUMAR GADALE, JM Assessment Year : 2015 – 16 M/s Hydroline Products Pvt. Ltd., No. 3/1, Varsova Layout, ACIT Circle – 3 (1) (2), C. V. Raman Nagar, vs. Bangalore Bangalore – 560093. PAN: AAACH9129E APPELLANT RESPONDENT Assessee by : Shri A. S. Narayan Moorthy, C. A. Revenue by : Shri Sunil Kumar Agarwal, Addl. CIT DR Date of Hearing : 02.12.2019 Date of Pronouncement : 30.01.2020 O R D E R PER SHRI A.K. GARODIA, AM:

This appeal is filed by the assessee and it is directed against the order of CIT(A) – 3 Bengaluru dated 01.06.2018 for A. Y. 2015 – 16.

2.

Although several grounds are raised by the assessee but the only effective grievance is about disallowance of Rs. 272,444/- u/s 14A of I T Act.

3.

In course of hearing, it was submitted by the learned AR of the assessee that on page 3 of the paper book no. 2 is the detail of all investments including the investments on which dividend income was earned and as per the same, on investment of Rs. 101,79,087/- only in three Mutual Funds, dividend of Rs. 869,173/- was earned in the present year. He submitted that as per the order of the special bench of the tribunal rendered in the case of ACIT vs. Vireet Investment Pvt. Ltd., 165 ITD 27, only those investments should be considered for computing average value of investments which yielded exempt dividend income in the year under consideration. He submitted that therefore, 0.5% of only Rs. 101,79,087/- should be disallowed and it works out to Rs. 50,895/- (B)/2018 Page 2 of 2 out of which, Rs. 17,383/- is already disallowed by the assessee itself. Learned DR of the revenue supported the order of CIT (A).

4. We have considered the rival submissions. We find force in the submissions of the learned AR of the assessee that disallowance u/s 14A should be made in the light of this order of the special bench of the tribunal cited by him as noted above but the facts are to be examined as to what is the amount of investments which yielded exempt dividend income in the year under consideration. Hence, we set aside the order of CIT (A) and restore this matter back to AO for fresh decision after examining the facts of the present case in the light of this order of the special bench of the tribunal rendered in the case of ACIT vs. Vireet Investment Pvt. Ltd. (Supra).

4.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.

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