ARYADOOT TRANSPORT P. LTD,MUMBAI vs. DCIT CEN CIR 6(4), MUMBAI

Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2015-16 contest the order of Ld. Commissioner of Income-Tax (Appeals)-54, Mumbai [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-

The Learned CIT (A) erred in confirming disallowance of Rs. 7,15,298/- by Assessing Officer under section 14A r.w.r. 8D.

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

The Learned CIT (A) erred in not considering appellant's alternative request to restrict disallowance to 0.5 % of average investment in the shares of group companies Arya Omnitalk Wireless Solutions Pvt. Ltd. & Arya Omnitalk Radio Trunking Services Pvt. Ltd. (As on 31.03.2014 & 31.03.2015) by excluding capital balance in M/s. Malgham Brothers - firm in which appellant is a partner.

The Learned CIT (A) erred in not considering several judgements quoted by appellant in submission dated 17.07.2018 ie J. M. Financial Ltd. vs. AC1T ITA No. 4521/ Mum / Tribunal], Garware Wall Ropes [ ITA No. 5408/ Mum / 2012] etc.

We have carefully heard and considered the rival submissions and perused relevant material on record and also deliberated on judicial pronouncements as cited before us. Our adjudication to the issue would be as given in succeeding paragraphs.

Facts on record would reveal that the assessee being resident corporate assessee, stated to be engaged in the business of providing truck trailers, was assessed for year under consideration u/s. 143(3) on 11/05/2017 wherein the assessee was saddled with disallowance u/s 14A for Rs.7.15 Lacs in view of the fact that it earned exempt dividend income of Rs.43.21 Lacs and another exempt income of Rs.4.80 Lacs, being share of profit in partnership firm namely Mangham Brothers. The assessee had offered suo-moto disallowance of Rs.0.10 Lacs against the same in its computation of income. However, not satisfied, Ld.AO invoking the 3 Aryadoot Transport Private Ltd. Assessment Year-2015-16 provisions of Sec.14A r.w.r. 8D, computed aggregate disallowance of Rs.7.25 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.0.04 Lacs and expense disallowance u/r 8D(2)(iii) for Rs.7.21 Lacs. After adjusting the suo-moto disallowance as offered by the assessee, net disallowance thus worked out to be Rs.7.15 Lacs, which was added back to the income of the assessee. The stand of Ld. AO, upon confirmation by learned first appellate authority vide impugned order dated 23/07/2018, is under challenge before us.

The Ld. AR, drawing our attention to financial statements, pleaded for exclusion of those investments which did not yield any exempt dividend income during the year. Reliance was placed on the decision of Delhi [82 Taxmann.com 415] for the said submissions. In the similar manner, Ld. AR pleaded for exclusion of investments made in partnership firm in terms of decision of this Tribunal rendered in Hitesh D.Gajaria V/s ACIT (ITA No. 993/Mum/2007 order dated 14/11/2008) wherein the coordinate bench relying upon the decision of Tribunal in Sudhir Kapadia V/s ITO (ITA No.7888/Mum/2003 order dated 26/02/2007) held that the share of income from firm was not exempt in absolute sense. It was only to avoid double taxation, once in the hands of the firm and thereafter, in the hands of the partners and therefore, the disallowance u/s 14A would not apply to these investments. The revenue is unable to controvert the submissions with any contrary decisions.

Concurring with above submissions as made by Ld. AR, we direct Ld. AO to recompute disallowance u/s 14A after excluding those investments which have not yielded any exempt income during the year and also after excluding investment made by the assessee in the partnership firm.

The appeal stands partly allowed in terms of our above order.