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Income Tax Appellate Tribunal, BANGALORE BENCHES “ C ” BENCH: BANGALORE
Before: SHRI JASON P BOAZ & SHRI PAVAN KUMAR GADALE
O R D E R PER SHRI PAVAN KUMAR GADALE, JM :
The revenue has filed an appeal against the order of Commissioner of Income Tax (Appeals)-6, Bangalore passed u/s. 143(3) and u/s 250 of the Income Tax Act, 1961.
The revenue has raised the following grounds of appeal :
The brief facts of the case are that the assessee is engaged in the business of development of land and filed the Return of Income for Assessment Year 2013-14 on 13.09.2013. Subsequently the case was selected for scrutiny and notices were issued under Sections 143(2) & 142(1) of the Act and the learned Authorised Representative appeared Assessing Officer found that the assessee has received dividend income and claimed as exempt and is of the opinion that assessee has incurred expenditure on earning dividend income and applied the provisions of Section 14A of the Act read with Rule 8D of the IT Rules and calculated the disallowance of Rs.1,13,79,360 and Determined the total income of Rs.2,47,33,160 under Section 143(3) of the Act Dt.30.3.2016. Aggrieved by the order of Assessing Officer, the assessee preferred an appeal before the CIT (Appeals). The CIT (Appeals) considering the grounds of appeal, the written submissions filed by the assessee on the disputed issue and findings of the Assessing Officer dealt on the details of investments at para 4, page 6 of the order and observed at para 6(e) that assessee has received dividend income of Rs.470 and directed the Assessing Officer to limit the disallowance to the extent of exempted income and further directed remaining balance to be deleted and partly allowed the appeal. Aggrieved by the order of CIT (Appeals), the revenue has filed an appeal before the Tribunal.
The learned Departmental Representative submitted that the CIT (Appeals) has erred in deleting the addition irrespective of the fact that there was no disclosure in the financial statements. The contention of the learned Departmental Representative that the Assessing Officer was correct in making disallowance and prayed for allowing the revenue’s appeal. Contra, the learned Authorised Representative of the assessee supported the order of CIT (Appeals) and filed the financial statements disclosing Rs.470 as dividend income which is claimed as exempted and relied on the judicial decisions.
We have heard the rival submissions and perused the material on record. The learned Departmental Representative’s contention that the CIT (Appeals) has erred in deleting the addition irrespective that the assessee has dividend income of Rs.470, whereas the learned Authorised Representative supported his stand referring to the financial statements at Schedule 16 of the other income disclosing dividend income. We are of the opinion that the provisions of Section 14A r.w. Rule 8D of the IT Rules are mandatory applicable in the case on hand. But the disallowance should be restricted to exempted income. We also Tribunal in Dt.6.7.2018 in the case of Vinod Kumar Agarwal Vs. DCIT at page 4, para 5 which is read as under :
5. We have heard the rival submissions and perused and considered the material on record including the judicial precedents cited. In the case on hand the assessee earned exempt dividend income amounting to Rs.2,572 in the year under consideration whereas the Assessing Officer had disallowed an amount of Rs.8,26,018 under Section 14A r.w. Rule 8D(ii) & (iii), the Hon’ble Delhi High Court in the case of Joint Investments (P) Ltd. v. CIT, 372 ITR 694 has taken the view that disallowance u/s. 14A of the Act cannot exceed the exempt income. Similar view was expressed by the Hon’ble Delhi High Court in the case of CIT v. Holcim India Pvt. Ltd., 272 CTR 282 (Del). These decisions were considered by the Mumbai Bench of the Tribunal in the case of Future Corporate Resources Ltd v. ACIT, dated 26.07.2017 relating to AY 2011-12 and it was held by the Tribunal Mumbai Bench that disallowance u/s. 14A of the Act cannot exceed the exempt income. In this regard, the Hon'ble Karnataka High Court in its order in the case of Sri Pragati Krishna Grameena Bank in ITA No.100001 & 100002/2018 dt.28.5.2018 has taken a similar view. Following the aforesaid decisions, we hold that disallowance u/s. 14A of the Act r.w. Rule 8D(2)(ii) & (iii) of the Rules in the case on hand should be restricted to the exempt income earned by the assessee. We hold and direct accordingly. Consequently, Ground NO.8 of assessee's appeal is allowed and the others being rendered academic in nature do not call for adjudication.
Further the revenue could not controvert the findings of the CIT (Appeals) with any information or cogent evidence. Accordingly, we rely on the decision of the co-ordinate bench and are not inclined to interfere with the order of CIT (Appeals) and upheld the same and dismissed the grounds of appeal of revenue.