DCIT - CC- 6(4), MUMBAI vs. J.M.BAKSHI & CO., MUMBAI

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ITA 5068/MUM/2018Status: DisposedITAT Mumbai22 August 2019AY 2015-164 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 held that since an identical issue was decided in favor of the assessee in a previous assessment year, and the CIT(A) followed that decision, there was no reason to interfere with the CIT(A)'s order. The Revenue's ground of appeal was dismissed.

What were the facts?

The Assessing Officer (AO) disallowed payments made to port employees and other miscellaneous expenses, deeming them illegal and opposed to public policy. The assessee had routed these amounts through the balance sheet. The CIT(A) deleted this addition, relying on a co-ordinate bench's decision.

What were the issues?

Whether payments deemed illegal and opposed to public policy are allowable expenses. Whether disallowance under Section 14A is warranted when there is no exempt income.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI

Before: Shri Rajesh Kumar & Shri Ram Lal Negi

For Appellant: Shri Rajeev Gubgotra
For Respondent: Shri Y P Trivedi & Shri Nitant Garodia
Hearing: 07.08.2019Pronounced: 22.08.2019

Per Rajesh Kumar, Accountant Member

1.

The captioned appeal filed by the Revenue pertaining to A.Y. 2015-16 is directed against the order passed by the CIT(A)-54, Mumbai, dated 12.06.2018 which in turn arises out of an order passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 (hereinafter "the Act").

2.

The issue raised in Ground of Appeal No.1 is against the deletion of the addition of ` 77,73,133/- by the CIT(A) as made by the AO towards payments made to the port employees and other miscellaneous payments not sanctioned as per the law of land. The facts in brief are that during the course of assessment proceedings the AO found that assessee collects service charge and fees from its clients and a portion of the same was spent for making payment to port employees and other miscellaneous payments, which are illegal expenses and opposed to public policy and not sanctioned as per law of the land. According to the AO these expenses like paying speed money for getting speedier disposal of assignments were opposed to public policy and are illegal.

These amounts are neither credited nor debited to the Profit and Loss Account, but routed through the balance sheet. He further observed that though the assessee, in the return of income filed on 25.11.2015, suo motu disallowed a sum of ` 25,91,044/- being 25% of ` 1,03,64,177/- on account of sundry expenses, added the same to the income filed u/s. 139(1) of the Act. The AO by holding that there is no provision under the Act to partially allow any expenditure, which are incurred in connection with activities prohibited under the law. Accordingly, he disallowed and added ` 77,73,133/- to the income of the assessee.

3.

At the outset, the learned AR submitted that the issue is covered in favour of the assessee by the order of the co-ordinate Bench in assessee’s own case for A.Y. 2007-08, which has been followed by the CIT(A) for the year under consideration while allowing the appeal of the assessee on this issue. The learned AR prayed before the Bench that since the issue has been decided in favour of the assessee the ground raised by the Revenue be dismissed. The learned DR fairly agreed that the issue is covered in favour of the assessee by the order of the Tribunal for A.Y. 2007-08.

4.

After hearing both the parties, we observe that identical issue has been decided in favour of the assessee in its own case for A.Y. 2007-08.

Respectfully, following the said decision of the co-ordinate Bench, we do not find any reason to interfere with the order of the CIT(A). It is accordingly upheld and the ground raised by the Revenue is dismissed.

5.

Ground no.2 is against the deletion of disallowance of Rs 1,25,625/- u/s. 14A, ignoring the provisions of section 14A read with Rule 8D of the Income tax Act. The learned AR submitted that during the year there is no exempt income as is apparent from 5.1 of the assessment order, wherein the AO has given a finding that investments by the assessee did not fetch any income during the year. The learned AR submitted that in view of the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Ballarpur Industries Limited, wherein no disallowance has been made u/s. 14A Rule 8D, where there is no exempt income. The learned DR, on the other hand, relied on assessment order and the ground raised in the Memorandum of appeals.

6. After hearing both the parties, we observe that during the year the assessee has not earned any exempt income and, therefore, there is no question of disallowance u/s. 14A Rule 8D. We do not find any reason to interfere with the finding of the learned CIT(A), who has followed the judgment of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. Income Tax Officer 378 ITR 33. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Ballarpur Industries Ltd. (supra), has also held that no disallowance u/s. 14A Rule 8D has to be made when there is no exempt income. Accordingly, we uphold the order of the learned CIT(A) and dismiss the ground raised by the Revenue.

6.

In the result, the Revenue’s appeal is dismissed.

Order pronounced in the open court on this day of 22nd August, 2019.

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