DCIT CIRCLE-6(3), MUMBAI vs. SKIL INFRASTRUCTURE LTD., MUMBAI

PDF · subscribers
ITA 1915/MUM/2019Status: DisposedITAT Mumbai28 October 2020AY 2015-164 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A read with Rule 8D cannot exceed the amount of exempt income earned. Following the jurisdictional High Court's decision, the CIT(A)'s order was upheld.

What were the facts?

The assessee company, engaged in infrastructure development, reported a loss for AY 2015-16. The AO made a disallowance under Section 14A of Rs. 132.51 crore, which was restricted by the CIT(A) to the exempt income of Rs. 1,42,400.

What were the issues?

Whether the disallowance under Section 14A of the Income Tax Act can exceed the exempt income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI JUSTICE P P BHATT & SHRI M.BALAGANESH, AM

For Appellant: Shri Mihir Naniwadekar
For Respondent: Shri Anand Mohan, CIT DR, Shri Mihir Naniwadekar
Hearing: 14/09/2020Pronounced: 28/10/2020

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-54, Mumbai in appeal No.CIT(A)-54/IT-10494/DC.CC/6(3)/2017-18 dated 25/01/2018 (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)

1.

M/s. Skil Infrastructure Ltd., dated 28/12/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 6(3), Mumbai (hereinafter referred to as ld. AO).

2.

The only issue involved in this appeal is that whether the ld. CIT(A) was justified in restricting the disallowance made u/s.14A of the Act to Rs.1,42,400/- as against Rs.132,51,00,000/- made by the ld. AO in the facts and circumstances of the instant case.

3.

We have heard rival submissions and perused the materials available on record. We find that assessee is engaged in the business of infrastructure development, investment and project development apart from consultancy / logistic business. The return of income for A.Y.2015-16 has been filed by the assessee company on 27/11/2015 declaring loss of Rs.72,19,75,464/-. We find that the assessee had earned exempt income in the form of dividend to the tune of Rs.1,42,400/- against which no disallowance of expenses were made by the assessee u/s.14A of the Act. We find that the ld. AO had made disallowance u/s.14A of the Act by applying the computation mechanism provided under Rule 8D(2) of the rules as under:-

i) Under Rule 8D(2)(i) - Rs.145,00,00,000/- ii) Under Rule 8D(2)(ii) - Rs.10,82,11,657/- iii) Under Rule 8D(2)(iii) - Rs.25,00,05,000/- -------------------- Total Rs.180,82,16,657 =========== 3.1. We find that the ld. AO had observed that since the assessee has claimed total expenditure only to the extent of Rs.132,51,00,000/- in the M/s. Skil Infrastructure Ltd., computation of income, the disallowance u/s.14A of the Act r.w.r. 8D(2) of the Rules was restricted to Rs.132,51,00,000/- in the assessment. The ld. CIT(A) however, observed that the disallowance in any case u/s.14A of the Act could not exceed exempt income and accordingly, restricted the sum to the extent of Rs.1,42,400/- and granted relief for the balance sum of Rs.132,49,57,600/-.

4.

Aggrieved, the revenue is in appeal before us.

5.

We find that the ld. DR argued that the ld. CIT(A) had wrongly placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics Pvt. Ltd., reported in 95 Taxmann.com 250 which only says that if no exempt income was earned by the assessee then there can be no disallowance u/s.14A of the Act. Moreover, this decision of the Hon’ble Supreme Court is not dismissal of a civil appeal rather it was only a dismissal of Special Leave Petition of the revenue. In the instant case, the assessee had indeed derived exempt income of Rs.1,42,400/- and hence, this decision is not at all applicable to the facts of the assessee.

5.1. Per contra, the ld. AR placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Nirved Traders Pvt. Ltd., vs. DCIT reported in 421 ITR 142 wherein the impugned issue before us had been duly addressed in favour of the assessee. The Hon’ble Jurisdictional High Court in the said case had categorically held that disallowance u/s.14A of the Act r.w.r. 8D of the Rules cannot exceed exempt income at all. Respectfully following the decision of the Hon’ble Jurisdictional High Court, we do not find any infirmity in the order of the ld. CIT(A) and M/s. Skil Infrastructure Ltd., accordingly, we do not deem it fit to interfere in the same. Accordingly, the grounds raised by the revenue are dismissed.

6.

In the result, the appeal of the revenue is dismissed.

Order pronounced on 28/10/2020 by way of proper mentioning in the notice board.

More judgments on Section 14A

All 15,875 judgments and leading authorities on Section 14A →

Recent GST High Court judgments

Search GST case law →