DCIT 1(3)(1), MUMBAI vs. PAYONE ENTERPRISES (P) LTD., MUMBAI

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ITA 3616/MUM/2018Status: DisposedITAT Mumbai21 August 2019AY 2013-144 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 the disallowance under Section 14A should be restricted to the extent of exempt income, following the decisions of the Bombay High Court and Delhi High Court.

What were the facts?

The assessee received dividend income of ₹ 926/- which was claimed as exempt. The AO disallowed expenses under Section 14A read with Rule 8D(2)(iii). The CIT(A) restricted the disallowance to the extent of the exempt income.

What were the issues?

Whether disallowance under Section 14A can exceed the exempt income. The applicability of Section 14A when exempt income is minimal.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Dr. Pramod Nikalje, DR
Hearing: 13.08.2019Pronounced: 21.08.2019

AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

This appeal of the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-2, Mumbai [in short CIT(A)], in Appeal No CIT(A)-2/IT/28/2016-17 vide order dated 01.01.2018. The Assessment was framed by the Income Tax Officer, Ward-1(2)(3) Mumbai 2 (in short ‘ITO/ AO’) for the A.Y. 2013-14 vide order dated 03.03.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2.

The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by AO in regard to expenses relatable to exempt income and restricting the same to the extent of exempt income i.e. dividend income by invoking the provisions of section 14A of the Act read with Rule 8D(2)(iii) of the Rules. For this Revenue has raised the following ground: - “Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in concluding that disallowance under section 14A r.w.r 8D(2)(iii) of the Act may be restricted to the extent of dividend income?.”

3. Briefly stated facts are that the assessee received dividend income of ₹ 926/- which is claimed as exempt. This is admitted fact that the AO invoked the provisions of section 14A of the Act read with Rule 8D(2) and thereby disallowed under Rule 8D(2)(iii) being 0.5% of average value of investment at ₹ 10,99,44,725/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) restricted the disallowance to the extent of exempt income following the decision of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Delhi). Aggrieved, Revenue came in appeal before Tribunal.

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