BINAYAK TEX PROCESSORS LTD,MUMBAI vs. DCIT CEN CIR 6(3), MUMBAI

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ITA 1184/MUM/2017Status: DisposedITAT Mumbai05 February 2020AY 2012-134 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 since the assessee earned no exempt income during the year, no disallowance under Rule 8D(2)(iii) was justified. The expense disallowance of Rs. 3.68 Lacs was deleted.

What were the facts?

The assessee claimed no suo-moto disallowance under Section 14A, stating they earned only Rs. 2,000 in dividend income, which was offered to tax as it was not exempt. The Assessing Officer made a disallowance of Rs. 28.07 Lacs.

What were the issues?

Whether disallowance under Section 14A is applicable when no exempt income is earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A,Section 10(34)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Mr. Shankarlal Jain- Ld. AR
For Respondent: Ms. Kavita P. Kaushik-Ld.DR

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2012-13) Binayak Tex Processors Ltd. DCIT Central Circle – 6(3) बनाम/ AIR Bldg, 19th Floor C/o Shankarlal Jain & Associates LLP 12, Engineer Building, 265 Nariman Point Vs. Princess Street, Mumbai – 400 002 Mumbai – 400021. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACB-1554-D (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Mr. Shankarlal Jain- Ld. AR Revenue by : Ms. Kavita P. Kaushik-Ld.DR सुनवाई की तारीख/ : 30/01/2020 Date of Hearing घोषणा की तारीख / : 05/02/2020 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2012-13 contest the order of Ld. Commissioner of Income-Tax (Appeals)-54, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-54/DCCC-6(3)/IT-03/15-16 dated 19/12/2016 on following grounds of appeal: - 2 Binayak Tex Processors Ltd. Assessment Year :2012-13

1. Ld. CIT(A) erred in confirming disallowance of Rs. 3,68,550/- made u/s 14A r.w.r. 8D(2)(iii) of the Income Tax Act, without properly appreciating the facts of the case and law applicable thereto.

2. The Ld. CIT(A) should have appreciated that appellant received dividend of Rs.2,000/- on investment of Rs.10,000/- made in shares in Saraswat Co-Op. Bank Ltd. such dividend received not being exempt u/s 10(34) of the Income Tax Act, the appellant has not earned any exempt income, hence provision of section 14A are inapplicable.

3. Ld. CIT(A) erred in not considering the facts that out of the total investment of Rs.7,37,10,000/- investment of Rs. 7,37,00,000/- are strategic investments made in earlier assessment years, without any variance and no dividend being received on the same and being made for business purposes, no disallowance under Rule 8D(2)(iii) is applicable on the same.

As evident, the sole subject matter of appeal before us is disallowance u/s 14A. 2.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in textile manufacturing was assessed for year under consideration u/s 143(3) on 18/03/2015 wherein it was saddled with disallowance u/s 14A for Rs.28.07 Lacs. 2.2 During assessment proceedings, it transpired that the assessee had made share investments in group entities but did not offer any suo- moto disallowance u/s 14A while computing the total income. The assessee submitted that it received meagre dividend of Rs.2,000/- from a co-operative bank which was already offered to tax and since no expenditure was incurred to earn the dividend income, the provisions of Sec.14A were not applicable. However, rejecting the same, Ld. AO computed aggregate disallowance of Rs.28.07 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.24.38 Lacs and expense disallowance u/r 8D(2)(iii) for Rs.3.68 Lacs.

3.

Before Ld. CIT(A), the assessee reiterated the submissions that since no exempt income was earned during the year, no disallowance 3 Binayak Tex Processors Ltd. Assessment Year :2012-13 u/s 14A would be warranted. The Ld. CIT(A) relying upon its predecessor’s order for AY 2011-12 deleted interest disallowance but confirmed the expenses disallowance of Rs.3.68 Lacs. Aggrieved, the assessee is under further appeal before us.

4.

Upon due consideration of factual matrix as enumerated hereinabove, the undisputed position that emerges is the fact that the assessee has earned meagre dividend income of Rs.2,000/- only and that too has been offered to tax since the same was received from a co- operative bank and therefore, not an exempt income. In other words, the assessee did not earn any exempt income during the year. This being the case, no disallowance u/r 8D(2)(iii) would be justified. Therefore, by deleting the expense disallowance of Rs.3.68 Lacs as confirmed by Ld. CIT(A), we allow the appeal.

5.

The appeal stands allowed.

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