Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI RAJESH KUMAR
आदेश/ ORDER PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income-Tax (Appeals)-5, Mumbai [In short ‘the (CIT(A)’] dated
2 ITA 950 Mum 2019-Meditab Specialities Pvt. Ltd.
27.08.2018 for the Assessment Year 2013-14. The solitary issue raised in the appeal by the assessee is against the disallowance under section 14A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) r.w. Rule 8D of Income Tax Rules.
The brief facts of the case as emanating from records are: The assessee is engaged in manufacturing of Pharmaceutical products. During the period relevant to the Assessment Year under appeal, the assessee made suo-moto disallowance under section 14A to the extent of Rs. 21,93,202/- as against the tax free dividend income earned by the assessee from mutual funds schemes of Rs. 10,77,635/-. The Assessing Officer in scrutiny assessment proceedings re- computed the disallowance under section 14A r.w.Rule 8D and enhanced the disallowance by Rs. 13,50,570/-. Thus, making the total disallowance of Rs. 35,43,772/- under section 14A of the Act.
Shri Vijay Jaiswal representing the department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. DR submitted that the CIT(A) has already granted relief to the assessee in deleting the disallowance made under section 14A of the Act by following the decision of Special Bench in the case of Vireet Investments Pvt. Ltd. Reported as 82 taxmann.com 415.
We find that in Ground No. 1(d), the assessee has raised an alternate plea that the disallowance be restricted to the exempt income earned during the year. The said ground is reproduced here-in-below:
“ Without prejudice to above, the Learned CIT(A) has erred in not considering that the disallowance under section 14A of the Act should not exceed the amount of exempt income earned during the year of Rs. 10,77,635/-. The learned CIT(A) ought to have considered the order of Honourable ITAT dated 18.08.2017 in 3 ITA 950 Mum 2019-Meditab Specialities Pvt. Ltd. appellant’s own case for AY 2012-13, while computing the disallowance under section 14A of the Act”
We find merit in ground 1(d) of the appeal by assessee. The Hon’ble Punjab & Haryana High Court in the case of Principle CIT vs. State Bank of Patila (393 ITR 476) has held that disallowance under section 14A should be restricted to the exempt income earned. The Hon’ble Supreme Court of India in the case of Principle CIT vs. State Bank of Patila reported as 99 taxmann.com 286 has dismissed the SLP of Revenue in the said case. Similar view has been taken by the Hon’ble Bombay High Court in the case of Principle CIT vs. Ballarpur Industries Ltd. (ITA No. 51/2016 decided on 13.10.2016). Thus, in view of the law settled by Hon’ble Apex Court and the Hon’ble jurisdictional High Court, we find merit in ground 1(d) of the appeal, hence, the same is allowed.
Since, we have accepted ground no. 1(d) of the appeal, the other grounds of appeal raised without prejudice on the same issue have become academic, hence, not deliberated upon.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in open Court on Tuesday the 27th day of October, 2020.