A.C.I.T (ODS) - 1(3)(1), MUMBAI vs. RELIANCE VALUE SERVICES PVT. LTD. (FORMERLY KNOWN AS PAYONE ENTERPRISES LTD.), MUMBAI

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’).

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 jurisdictional 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”. 4. 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. Ltd vs. CIT, 59 taxmann.com 295 (Delhi), there is no infirmity in the order passed by the Ld. CIT(A) to interfere with the same. 5. 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 Investments Pvt. Ltd vs. CIT, 59 taxmann.com 295 (Delhi).

We have perused the material on record including the judgment relied upon by the Ld CIT(A) in the light of the rival submissions of the parties. As pointed out by the Ld. counsel, the issue raised by the revenue is covered in favour of the assessee and the Ld. CIT(A) has decided this ground of appeal in favour of the assessee holding as under. “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.”