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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR.DIPAK P.RIPOTE, AM:
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income-tax(Appeals), Pune-5’s, order dated 29.01.2020 for the Assessment Year 2013-14, involving proceedings under section 143(3) of the Income Tax Act, 1961. The Assessee has raised the following grounds of appeal: “The Appellant would like to object to the impugned order of the Hon Commissioner of Income Tax Appeal - 5, Pune on the following grounds of Appeal, which are raised without prejudice to each other on the facts and in law.
1. The learned Commissioner of Income Tax Appeal - 5, Pune erred in confirming an addition of Rs 3,94,598/- made by the AO u/s. 14A on the ground that the appellant made the investment for A.Y.2013-14 Ankush Vijaykumar Mehta vs. DCIT, Circle-7, Pune earning exempted dividend income and also share of profit from partnership firm which required incurring of expenditure.
The learned Commissioner of Income Tax Appeal - 5, Pune while confirming an addition u/s 14A made by the AO erred in not appreciating following points: a. Section 14A is intended to apply in such circumstances, where income does not form chargeable income in context of whole Act. b. It is not intended to apply to income which form part of chargeable income. c. An income can be considered as exempt only if tax is not collected on it in any manner and once the income tax is levied in any manner under the Act, it cannot be said that said income does not form part of total income under the Act.
3. The Appellant prays for admission of Additional grounds /Additional evidence if any required to support the case.
4. The appellant craves to leave or add, amend or alter any of the grounds for appeal. In view of all these and other grounds which may be produced during the hearing of appeal the appeal, may be allowed and justice rendered.”
2. Brief facts of the case are that the Assessee has derived exempt income on account of share of profit from partnership firms. However, the assessee had not made any disallowance u/s14A. After giving opportunity to the assessee, the Assessing Officer made disallowance u/s14A as per Rule 8D of Rs.3,94,598/-. The assessee filed appeal before the Commissioner of Income Tax (A) against the impugned disallowance u/s14A. The CIT(A) confirmed the impugned disallowance. The assessee has filed appeal before this Tribunal against the impugned disallowance u/s14A.
A.Y.2013-14 Ankush Vijaykumar Mehta vs. DCIT, Circle-7, Pune
3. The Ld.AR submitted that the assessee has more than sufficient funds hence there shall not be any 14A disallowance. The AR relied on various case laws. The ld.Authorised Representative of the assessee filed written submission, relevant part of the same is reproduced here as under: Quote “3] We are enclosing the statement showing Investment in Partnership Firm and exempt income received by way of share of profit from these firm. From this statement it is evident that the appellant had earned exempt income only from investment in capital account from firm M/S.Shubhamangal constructions of Rs.3596745.96. There is no exempt income received from any of the partnership firm. The investment in the partnership concern and in the shares are amounting to Rs.76604606/- as on 31.03.2013, on this investments, no exempt income has been received and entire investment is made in the earlier years out of own capital and no expenditure is required for the same. In the circumstances without prejudice to our contention that no addition is required U/s.14A, we submit that the amount f investments of which no exempt income is received should be ignored, while computing disallowance U/s.14A read with Rule 8D.
Name of the Firm 31/03/2012 31/03/2013 Addition Exempt During the Income Year Capital with 86,77,566.50 86,77,566.50 - - Panchratna Properties Capital with 7,43,97,138.40 6,53,73,570.00 - Reiverfront Realty Capital with (93,40,524.59) 35,96,745.76 89,28,668.00 26,68,295.00 Shubhmangal Constructions Capital with Space 15,79,887.50 15,79,887.50 - - Providers Capital with 15,00,000.00 1,50,000.00 - - Thadani & Mariwala Investment in Shares Total 7,76,37,649.81 8,02,01,351.76 89,28,668.00 29,68,295.00
A.Y.2013-14 Ankush Vijaykumar Mehta vs. DCIT, Circle-7, Pune
4. Ld DR relied on the order of the lower authorities.
We have heard both the parties and perused the records.
The assessee has demonstrated that during the year the assessee had received the exempt income only from the partnership firm “Shubhmangal Constrctuion”. The DR had not objected to the said fact. Ld.Coordinate bench of ITAT Pune in the case of Kunal Shelters Pvt Ltd ,ITA No 1271/PUN/2017 vide order dated 24/09/2020 has held as under :
“5. As regards the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) on account of other common expenses by applying Rule 8D(2)(iii), ld. Counsel for the assessee has raised a limited contention that the same should be worked out by taking into consideration only those investments which had actually fetched exempt income during the year under consideration and not the entire investments as considered by the Assessing Officer. Since this contention raised by the ld. Counsel for the assessee is duly supported inter alia by the decision of the Mumbai Bench of this Tribunal in the case of Fineotex Chemical Ltd. vs. ACIT (ITA No.5412/Mum/2016 dated 27.02.2018), we direct the Assessing Officer to re-compute the disallowance to be made u/s 14A of the Act by applying Rule 8D(2)(iii) of the Rules on account of other common expenses by taking into consideration only those investments on which exempt income was actually earned by the assessee during the year under consideration. Ground no.1 and 2 of the assessee’s appeal are thus partly allowed.”
A.Y.2013-14 Ankush Vijaykumar Mehta vs. DCIT, Circle-7, Pune
Respectfully following the decision of Learned Co-Ordinate Bench (supra), we direct the AO to recalculate the 14A disallowance read with rule 8D(2)(iii) on account of other common expenses by taking into consideration only that investment on which exempt income was actually earned during the year. Accordingly the grounds raised by the assessee are allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 1st Aug, 2022.
Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 1st Aug, 2022/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2.
The CIT(A), concerned.
The Pr. CIT, concerned. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.
A.Y.2013-14 Ankush Vijaykumar Mehta vs. DCIT, Circle-7, Pune
S.No Details Date Initials Designation 1 Draft dictated on 28.07.2022 Sr. PS/PS 2 Final Draft placed before 01.08.2022 Sr. PS/PS author 3 Draft proposed & placed JM/AM before the Second Member 4 Draft discussed/approved by AM/AM Second Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order