ACIT - CIRCLE- 6 (2)(1), MUMBAI vs. ESJAY INTERNATIONAL PVT. LTD., MUMBAI

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ITA 5776/MUM/2018Status: DisposedITAT Mumbai06 November 2019AY 2014-153 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 upheld the CIT(A)'s deletion of disallowance of interest, relying on the finding of sufficient own funds. It also upheld the deletion of indirect expenses disallowance, as the suo moto disallowance exceeded the amount calculated based on investments yielding dividend income.

What were the facts?

The assessee earned dividend income and made a suo moto disallowance under Section 14A. The Assessing Officer made a higher disallowance. The CIT(A) deleted the disallowance of interest, finding the assessee had sufficient own funds for investments.

What were the issues?

Whether the disallowance under Section 14A, particularly concerning interest and indirect expenses, was correctly deleted by the CIT(A).

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(3)Show list

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Income Tax Appellate Tribunal, “E”, BENCH

Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM

For Appellant: Shri Amit Pratap Singh
For Respondent: Shri Hiten Chande
Hearing: 05/11/2019Pronounced: 06/11/2019

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-12, Mumbai in appeal No.CIT(A)-12/DCIT-6(2)(2)/C-144/17-18 dated 03/07/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 25/12/2017 by the ld. Asst.CIT – 6(2)(2), Mumbai (hereinafter referred to as ld. AO).

M/s. Esjay International P. Ltd.,

2.

The only issue raised by the revenue in this appeal is with regard to deletion of disallowance made by the ld. CIT(A) u/s.14A of the Act.

3.

We have heard rival submissions. We find that assessee had earned dividend income of Rs.64,34,281/- and claimed the same as exempt in the return of income. We find that the assessee had made suomoto disallowance of Rs.13,38,207/- u/s.14A of the Act r.w.rule 8D or the Rules in the return of income by considering only those investments which had yielded dividend income in terms of Rule 8D(2)(iii) of the Rules. The ld. AO however proceeded to disallow u/s.14A of the Act by applying the second and third limbs of Rule 8D(2) of the rules in the sums of Rs.1,40,49,002/- and Rs.28,47,647/- respectively. We find that the ld. CIT(A) had categorically observed that assessee is having sufficient own funds for making investments which had yielded exempt income and by placing reliance on the decisions of the Hon’ble High Courts in the case of Reliance Utilities and Power Ltd., reported in 313 ITR 340 and HDFC Bank Ltd. reported in 366 ITR 505, had directed the ld. AO to delete the disallowance of interest under second limb of Rule 8D(2) of the Rules. This factual finding of the ld. CIT(A) of availability of own funds with the assessee for making investments had not been controverted by the revenue before us. Hence, we do not deem it fit to interfere in the order of the ld. CIT(A) in this regard.

1.

3.1. With regard to disallowance of indirect expenses under third limb of Rule 8D(2) of the rules, we find that the ld. CIT(A) had considered the decision of Special Bench of Delhi Tribunal in the case of Vireet Investment (P) Ltd reported in 165 ITD 27 wherein it was held that only those investments which had yielded dividend income should be considered for the purpose of disallowance under Rule 8D. The ld. CIT(A)

M/s. Esjay International P. Ltd., observed that if such ratio is applied, the disallowance would work out only to Rs.7,83,598/- whereas the assessee itself had made suomoto disallowance of Rs.13,38,207/-. Accordingly, the ld. CIT(A) had held that no further disallowance is warranted as per Rule 8D(2)(iii) of the Rules. We do not find any infirmity in the said order of the ld. CIT(A) as the same has been passed in accordance with binding judicial precedents stated supra. Accordingly, the grounds raised by the revenue are dismissed.

4.

In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on this 06/11/2019

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