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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI RAJESH KUMAR (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM This appeal has been filed by the revenue against the order dated 26.12.2017 passed by the Commissioner of Income Tax (Appeals)-6 (for short ‘the CIT(A), Mumbai, for the assessment year 2012-13, whereby the Ld. CIT(A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short the ‘Act’).
Brief facts of the case are that the assessee company filed its return of income for the assessment year under consideration declaring the total income of Rs. 27,42,773/- . Since, the case was selected for scrutiny, the AO issued notice u/s 143 (2) and 142 (1). In response thereof the authorized representative of the assessee appeared before the AO and submitted the details called for. The AO completed the assessment u/s 143 (3) of the Act determining the total income at Rs. 1,50,32,140/- after making addition of Rs. Assessment Year: 2012-13
2,49,500/- being expenses incurred on account of increase in share capital and Rs. 76,82,000/- on account of provision for diminution in value of the investment and addition of Rs. 1,22,39,468/- on account of disallowance made under section 14A of the Act, r.w. Rule 8D of the Rules. The assessee challenged the assessment order before the Ld.CIT (A) inter alia on the ground that the AO has wrongly made disallowance of Rs. 1,22,43,772/- u/s 14A of the Act read with rule 8D of the Rules as against Rs. 4,304/- worked out by the assessee. The Ld. CIT (A) deleted the addition aforesaid. The revenue is in appeal against the said findings of the Ld. CIT (A).
The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- 1. “On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the A.O. u/s 14A r.w.r. 8D of the I.T. Rules by holding that the disallowance cannot exceed the exempt income, without appreciating the Fact that no such restriction is provided under the I.T. Act/Rule.
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the A.O. u/s 14A r.w.r. 8D of the I.T. Rules by relying on the decision in the case of Joint Investment P. Ltd. (59 Taxmann.com 295) (Del.), by ignoring the juri ictional High Court decision in the case of Godrej & Boyce Mfg. co. Ltd. (328 ITR 81) and CBDT Circular No. 5 of 2014 dtd. 11.02.2014”.
At the outset the Ld. counsel for the assessee submitted that since the issue raised by the revenue is covered in favour of the assessee by the judgment of the Hon’ble Delhi High Court in the case of Joint Investments Pvt.
On the other hand the Ld. Departmental Representative (DR) submitted that since the AO has made addition under section 14A read with rule 8D of Assessment Year: 2012-13
the Income Tax Rules, the Ld. CIT (A) has wrongly deleted the addition by following the decision of the Hon’ble Delhi High Court in the case of Joint “7.3 I have carefully considered the facts of the case, discussion of the AO in the assessment order, oral contentions and written submission of the appellant as well as material available on record. It is the fact of the case that the appellant has earned exempt income being share of profit from partnership firm of Rs. 38/- only during the year. It is the fact submitted by the assessee that apart from this exempt income, it has not earned any exempt income from investments during the year under consideration. In these facts and circumstances of the case and in view of the prevailing jurisprudence on the issue including the case of Joint Investments Pvt. Ltd. Vs. CIT (supra), the disallowance u/s 14A cannot exceed the exempt income earned by the appellant during the year under consideration. The appellant has already made a suo moto disallowance of Rs. 4,304/- which is higher than the exempt income earned during the year of Rs. 38/- by the appellant. In such facts and circumstances of the case, the additional disallowance computed by the AO of Rs. 1,22,39,468/- is not found to be justifiable and is accordingly directed to be deleted relying on the decision of Hon’ble High Court in the case of Joint Investments Pvt. Ltd. Vs. CIT (supra). The appellants, in their grounds of appeal and submissions, have raised various other contentions. However, the same are considered to be academic in nature in view of the directions given hereinabove. As the additional disallowance computed by the AO u/s 14A of Rs. 1,22,39,468/- is not found to be justifiable in the facts and circumstances of the case, the question of adding the same while working out the book profit would not arise. Accordingly, Assessment Year: 2012-13
the additional ground raised by the appellant is allowed. In the result, Ground Nos. 1 to 4 and additional ground raised by the appellant are treated as allowed.”
We notice that the Ld. CIT(A) has decided the issue in question in favour of the assessee by following the judgment of the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd vs. CIT (supra) in which the Hon’ble Court has held that section 14A and Rule 8D cannot be interpreted to mean that entire tax exempt income can be disallowed. Since, the findings of the Ld. CIT(A) are based on the ratio laid down by the Hon’ble Delhi High Court, we do not find any merit in the appeal of the revenue. We therefore, uphold the findings of the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue. In the result, appeal filed by the revenue for assessment year 2012-2013 is dismissed. Order pronounced in the open court on 7th Aug, 2019. (RAJESH KUMAR) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 07/08/2019
Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. Assessment Year: 2012-13
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.