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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 27.11.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
The various grounds raised
by the assessee are as under:
1. The learned CIT(A) erred in confirming the action of the Assessing Officer of confirming the disallowance of Rs 17.18.351/- under Section 14A of the Income-tax Act, 1961 ('the Act') r.w. Rule 8D of the Income-tax Rules, 1962 ('l.T. Rules') after considering the fact that the Appellant Company has suo motto disallowed an amount of Rs 32.099/- towards such expenditure.
2. Without prejudice to the above ground, the learned CIT(A) erred in confirming the disallowance under Section 14A of the Act r. w Rule 8D of the l.T. Rules ignoring the fact that while working out such disallowance, strategic investments made by 2 M/s. Brics Gilt Finance Pvt. Ltd. the Appellant Company ought to have been excluded for the purposes of computing average value of investments.
Without prejudice to the above grounds, the learned CIT(A) erred in confirming the disallowance Section 14A of the Act r. w Rule 8D of the l.T. Rules ignoring the fact that while working out such disallowance, only those investments which have yielded dividend income during the year has to be considered for the purposes of computing average value of investments.
The Appellant craves leave to add to, alter or amend the above Grounds of Appeal as and when advised.”
3. Ground No.1 is general in nature and needs no adjudication.
4. The issue raised in second ground appeal is not pressed at the time of hearing by the Ld. A.R. of the assessee and therefore the same is dismissed as not pressed.
5. The only issue which is required to be adjudicated is against the order of Ld. CIT(A) erring in confirming the disallowance under section 14A of the Act read with rule 8D of the Rules ignoring the fact that only those investments which yield dividend income during the year have to be considered for the purpose of computing the average value of investments and consequent disallowance.
The facts in brief are that assessee earned exempt income by way of dividend of Rs.22,58,210/- which was claimed as exempt under section 10(34) of the Act. The assessee also made suo-moto disallowance of Rs.32,099/- under section 14A towards an exemption income without applying the rule 8D(2). The AO invoked rule 8D(2) and accordingly computed the disallowance at Rs.17,50,450/- comprising only disallowance under rule 8D2(iii) and after allowing the deduction of suo-moto
3 M/s. Brics Gilt Finance Pvt. Ltd. disallowance, a net addition of Rs.17,18,351/- was made to the income of the assessee vide order dated 27.11.2013 passed under section 143(3) of the Act.
After hearing both the parties and perusing the material on record, we observe that the only issue pressed for adjudication before us is that while computing the disallowance under section 14A rule 8D2(iii) of the Act, only those investments are required to be included for the purpose of calculating the average investments which yield exempt income during the year. We find merit in the submissions of the Ld. A.R. and that only those investments yielding exempt income has to be considered for calculating the average investments. The issue is squarely covered by the decision of Tribunal in the case of ACIT vs. Vireet Investments (2017) 82 taxmann.com 415 Delhi –Tribunal Special Bench wherein it has been held that only those investments are to be considered for computing average value of investments which yielded exempt income during the year. We, therefore, respectfully following the co-ordinate bench of the Tribunal, direct the AO to compute the disallowance after taking into account only those investments which yielded exempt income and for the purpose of average investment. Ground No.3 is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 20.05.2019.