SMT USHA SAMANI,MUMBAI vs. ITO 17(3)(5), MUMBAI

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ITA 4268/MUM/2018Status: DisposedITAT Mumbai13 June 2019AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that investments yielding no dividend income should not be considered for disallowance under Section 14A. However, dividend income from shares held as stock-in-trade is subject to disallowance as per the Apex Court's decision.

What were the facts?

The assessee claimed dividend income as exempt but made no disallowance under Section 14A. The Assessing Officer disallowed Rs. 12,66,166/- under Section 14A read with Rule 8D, considering both investment and stock-in-trade. The CIT(A) confirmed this disallowance.

What were the issues?

Whether dividend income from investments not yielding any income is subject to disallowance under Section 14A, and whether dividend income from stock-in-trade is also subject to such disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri Shamim Yahya (AM)

For Respondent: Shri Chaitanya Anjaria
Hearing: 11.6.2019Pronounced: 13.6.2019

This appeal by the assessee is directed against the order of learned CIT(A) dated 1.5.2018 and pertains to A.Y. 2012-13.

2.

The issue raised is that learned CIT(A) erred in upholding the disallowance made by the Assessing Officer u/s. 14A read with Rule 8D of the I.T. Rules amounting to Rs. 12,66,166/-.

3.

Brief facts of the case are that during the course of assessment, the Assessing Officer noted that the assessee has shown dividend income at Rs.22,49,982/- and claimed the same as exempt. However, the Assessing Officer noted that the assessee has not made any disallowance u/s. 14A of the Act. The assessee explained that it has earned income by utilizing infrastructure available with it with the help of the employees and claimed that no expenditure has been incurred. However, Assessing Officer was not satisfied. He observed that the assessee has earned dividend income from shares held as investment and stock in trade. He proceeded to hold that the dividend income on stock-in-trade should also be subjected to disallowance

2 Smt. Usha Samani u/s. 14A of the Act. Accordingly, he proceeded to make disallowance u/s. 14A read with Rule 8D amounting to Rs. 12,66,166/-.

4.

Upon assessee’s appeal learned CIT(A) confirmed the same. Against the above order, assessee is in appeal before the ITAT.

5.

Despite notice, none appeared on behalf of the assessee. An adjournment petition has been moved which has been rejected. Upon careful consideration, I note that claim of the assessee in this case is that the assessee has also not earned dividend income on some of investment and it is the plea of the assessee that the same should not be considered for disallowance u/s. 14A. I find that this proposition is duly supported by the order of Special bench of the ITAT in the case of Vireet Investment Pvt. Ltd. (58 ITR 313). Hence I direct that investment which had not yield any dividend income should not be taken into account for the purpose of computation of disallowance.

6.

As regards the claim that disallowance u/s. 14A should not be made for shares kept as stock-in-trade, I note that this issue is decided against the assessee by the decision of Hon'ble Apex Court in the case of Maxopp Investment Ltd. (Civil Appeal No. 104-109 of 2015). Accordingly, this plea of the assessee stands rejected.

7.

In the result, this appeal stands partly allowed for statistical purposes. Order has been pronounced in the Court on 13.6.2019.

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