ACIT 13(1)(1), MUMBAI vs. NAVYUG KRISHI SADHAN P. LTD, MUMBAI

O R D E R Per Rajesh Kumar, Accountant Member

The aforesaid appeal has been filed by the Revenue against the order of the CIT(A)-21, Mumbai, dated 31.01.2018, which in turn arises out of the assessment order passed u/s 143(3) of the I.T. Act, 1961 for A.Y. 2014-15.

“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is correct in deleting the disallowance of Rs.5,30,300/- made U/S.14A r.w.r. 8D relying on decision of Hon'ble ITAT in assessee's own case for AY 2013-14 deleting quantum addition on the same issue without appreciating the fact that this decision is not accepted by the department and further appeal is filed before various authorities? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. C1T(A) was correct in deleting the disallowance without appreciating the fact that the Auditors of the assessee vide col. 11 of ITA 2656/Mum/2018 Navyug Krishi Sadhan Pvt Ltd Form No. 3CA of Audit Report u/s. 44AB worked out disallowance at Rs. 62,33,780/-?

3. The facts in brief are that during the assessment proceedings, assessee earned dividend of ` 51,04,491/-, which was claimed as exempt u/s. 10 of the Income tax Act, 1961. The assessee made suo moto disallowance of ` 85,000/- u/s. 14A of the Act. According to the AO, the assessee has not calculated the disallowance in terms of section 14A read with Rule 8D, and therefore, rejected the contentions of the assessee. The ld AO applied the provisions of section 14A of the Act and calculated the disallowance of ` 62,33,780/- comprising of ` 57,19,780/- u/r. 8D(2)(ii) and ` 5,14,000 u/r.

8D(2)(iii) and after making allowing deduction in respect of suo motto disallowance of Rs. 85,000/- made a net addition of ` 61,48,780/- to the income of the assessee and framed assessment u/s. 143(3) of the Act, dated 19.09.2016.

ITA 2656/Mum/2018 Navyug Krishi Sadhan Pvt Ltd

8D(2)(ii) is not called for. Thus, we do not find any infirmity in the order of the CIT(A), which has been passed following the decision of the co-ordinate Bench in the assessee’s own case. So far as disallowance u/r 8D(2)(iii) is concerned, the assessee has itself disallowed a sum of ` 85,000/-. The learned CIT(A) deleted the disallowance as made by the AO u/r 8D(2)(iii) by following the co-ordinate Bench decision in the case of the assessee for A.Y. 2013-14 by holding that investment in subsidiary and group companies are to be excluded while calculating disallowance u/s. 14A read with Rule 8D(2(iii), as the purpose of investment was to gain control over the subsidiary. We are not in agreement with the conclusion drawn by the CIT(A) as the same is against the decision made by the Hon’ble Apex Court in the case of Maxopp Investment Ltd. vs. CIT 402 ITR 640. In our opinion, the AO has rightly computed the disallowance under Rule 8D(2)(ii) and made the disallowance accordingly. We, are therefore, inclined to set aside the findings of the CIT(A) on this issue and uphold the order of the AO. The AO is directed to allow the deduction of suo-moto disallowance of expenses of Rs.85,000/- from the disallowance as made u/s. 14A r.w.r 8D(2)(iii). This ground is partly allowed.

ITA 2656/Mum/2018 Navyug Krishi Sadhan Pvt Ltd

Since we have already decided the issue partly in favour of the assessee, ground nos. 2 & 3 need not be adjudicated.

Order pronounced in the open court on this day of 27th June, 2019