ARYA OFFSHORE SERVICES P.LTD,MUMBAI vs. DCIT CEN CIR 6(4), MUMBAI

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ITA 5827/MUM/2018Status: DisposedITAT Mumbai08 January 2020AY 2015-165 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that expenses relatable to exempt dividend income are to be disallowed, even if the investment was strategic. The CIT(A) rightly restricted the disallowance to the amount of exempt income.

What were the facts?

The assessee company earned dividend income of ₹4,95,439/-. The Assessing Officer disallowed expenses under Section 14A read with Rule 8D, and the CIT(A) restricted the disallowance to the extent of the dividend income.

What were the issues?

Whether expenses relatable to exempt dividend income are disallowable under Section 14A, and if strategic investments are exempt from this disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

For Appellant: Shri Hitesh Trivedi, AR
Hearing: 12.12.2019Pronounced: 08.01.2020

आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री एम बालगणेश, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI M BALAGANESH, AM आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2015-16) Arya Offshore Services Pvt. The Dy. Commissioner of Ltd. Income Tax, Central Centre Unit No. 801, Godrej 6(4), Room No. 1925, 19th बनाम/ Coliseum, C-Wing, Off Floor, Air India Building, Vs. Somaiya Hospital Road, Nariman Point, Sion Mumbai-400 022 Mumbai-400 021 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AAACA1034D अपीलार्थी की ओर े / Appellant by : Shri Hitesh Trivedi, AR प्रत्यर्थी की ओर े / Respondent by : Shri S. Michael Jerald, DR ुिवाई की तारीख / Date of hearing: 12.12.2019 घोर्णा की तारीख / Date of pronouncement : 08.01.2020 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:

This appeal by assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-54, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-4/IT-10084/DCCC.6(4)/2017-18 vide dated 23.07.2018. The Assessment was framed by the Dy. Commissioner of Income Tax, Central Circle-6(4), Mumbai (in short DCIT/ AO) for the A.Y. 2015-16 vide order dated 17.05.2017 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2 | P a g e Arya Offshore Services Pvt. Ltd.

2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing expenses relatable to exempt income amounting to ₹4,95,439/- by invoking the provisions of section 14A read with rule 8D of the Rules. For this, assessee has raised the following five grounds: - “1. The Learned CIT (A) erred in confirming disallowance to the extent to Rs. 4,95,439/- out of Rs. 27,31,114/- disallowed by Assessing Officer under section 14A r.w.r. 8D.

2.

The Learned CIT (A) erred in not considering plea of the appellant all investments were made in Associated Companies and all Investments were made purely out of internal accruals and not out of borrowed fund and we have not spent any amount in earning dividend income as same is received from group company.

3.

The Learned CIT (A) erred in not considering plea of the appellant that strategic investments should not be considered for the purpose of computing amount of disallowance under section 14A r.w.r. 8D.

3 | P a g e Arya Offshore Services Pvt. Ltd. 4. The Learned CIT (A) erred in not considering several judgements quoted by appellant in submission dated 20.06.2018 ie J. M. Financial Ltd. vs. ACIT [ Mum / Tribunal], Garware Wall Ropes (ITA No. 5408/ Mum / 2012] etc.

5.

The learned CIT (A) erred in mentioning in para 6 that assessee's AR replied to assessing officer that there is no dividend income and hence no disallowance u/s. 14 A is warranted. However, no such observation was noted by the Assessing Officer in her order passed and in fact the assessee had earned meagre dividend of Rs. 4,95,439/- on which dividend distributed tax was paid by MIS. International Cargo Terminals and Infrastructure Pvt. Ltd. and which was mentioned by the assessee in its submission.”

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