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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: HON’BLE SHRI SAKTIJIT DEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member):- 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2014-15 contest the order of Ld. Commissioner of Income-Tax (Appeals)-5, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-
M/s. Pudumjee Industries Ltd. Assessment Year-2014-15 5/ITO-2(2)(3)/IT-270/2016-17/172/17-18 dated 29/12/2017 on following Grounds of appeal: - 1. "Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting addition made on account of disallowance u/s 14A r.w. Rule 8D(ii) of the Act without appreciating the fact that from AY 2008-09 disallowance has to be mandatorily be calculated as per Rule 8D?" 2. "Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting addition made on account of disallowance u/s 14A r.w. Rule 8D(ii) of the Act without appreciating the fact that the decision in the case of M/s. HDFC Ltd is not applicable since the same has been rendered keeping in mind the investment of Bank and hence Bank specific?" 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing AO not to add the disallowance u/s 14A to the book profit u/s 115JB while computing the total income of the appellant relying on the decision of the Special Bench of ITAT Delhi in the case of Vireet Investment Pvt Ltd (82 taxmann.Com 415) overlooking the fact that the AO had correctly made the computation as per clause (f) in explanation 1 to section 115JB(2) of the Act which mandates disallowance of expenditure relatable to the income to which section 10 or section 11 or section 12 of the Act applies?" As evident from grounds of appeal, the only issue involved under the appeal is disallowance u/s 14A. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax-Circle-2(2)(2), Mumbai [AO] u/s. 143(3) on 19/12/2016 wherein the income of the assessee was determined at Rs.108.38 Lacs after sole disallowance u/s. 14A as against Nil return filed by the assessee on 29/09/2014. The disallowance u/s 14A for Rs.108.38 Lacs was also added back while computing Book Profits u/s. 115JB.
2. The assessee being resident corporate assessee was stated to be engaged in manufacturing and selling of paper & pulp. During assessment proceedings, it transpired that the assessee earned exempt dividend income of Rs.10.23 Lacs but did not offer any suo-moto disallowance u/s 14A against the same. The assessee had closing investment of Rs.17.72 M/s. Pudumjee Industries Ltd. Assessment Year-2014-15 Crores. The assessee, inter-alia, submitted that the investments were sourced out of internal accruals. However, not satisfied, Ld. AO, applying Rule 8D, computed aggregate disallowance of Rs.108.38 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.99.52 Lacs and expense disallowance at 0.5% of average investments u/r 8D(2)(iii) for Rs.8.86 Lacs.
3. Aggrieved, the assessee agitated the same with partial success before Ld. CIT(A) vide impugned order dated 29/12/2017 wherein Ld. first appellate authority while confirming expense disallowance u/r 8D(2)(iii), deleted interest disallowance u/r 8D(2)(ii) in view of the fact that assessee’s own funds were more than the investments and therefore, no disallowance was required in terms of judgment of Hon’ble Bombay High Court rendered in CIT vs. HDFC Bank Ltd. (2014 366 ITR 505). The adjustment of disallowance u/s 14A while computing Book Profits u/s. 115JB was deleted by placing reliance on the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415]. Aggrieved, the revenue is in further appeal before us.
The Ld. Authorised Representative [AR], at the outset, drew our attention to the fact that identical issue arose in assessee’s favor for AY 2013-14 and the revenue agitated the issue in similar manner before this Tribunal vide order dated 13/03/2019, a copy of which has been placed on record. It has been submitted that the revenue’s appeal was dismissed and therefore, the issue under consideration was M/s. Pudumjee Industries Ltd. Assessment Year-2014-15 squarely covered by the earlier decision of Tribunal in assessee’s own case. The Ld. DR could not controvert the aforesaid position.
Upon careful consideration, we find that undisputed position that emerges is the fact that the assessee’s own funds were more than the investments made by the assessee and therefore, a presumption was to be drawn in assessee’s favor that the investments were made out of own funds as held by Hon’ble Bombay High Court rendered in CIT vs. HDFC Bank Ltd. (2014 366 ITR 505). This position has been reiterated by Hon’ble Apex court in the recent decision of CIT Vs. Reliance Industries Ltd. (Civil Appeal No. 10 of 2019 dated 02/01/2019) wherein Hon’ble Court has held as under: - Insofar as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. The Tribunal has also followed its own order for Assessment Year 2002-03. In view of the above findings, we find no reason to interfere with the judgment of the High Court in regard to the first question. Accordingly, the appeals are dismissed in regard to the first question.
Secondly, this issue has already been adjudicated by the Tribunal in assessee’s own case for AY 2013-14. Therefore, no infirmity could be found in the impugned order so far as the disallowance of interest expenditure u/r 8D(2)(ii) is concerned.
M/s. Pudumjee Industries Ltd. Assessment Year-2014-15 6. The addition of disallowance of Section 14A while computing Book Profits u/s. 115JB has been deleted by Ld. first appellate authority by placing reliance on the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415]. No contrary decision has also been placed on record by the revenue. There is nothing on record which suggest that the assessee has debited any actual expenditure in the Profit & Loss Account and secondly, this issue has also been adjudicated by Tribunal in assessee’s favor for AY 2013-14. Viewed from any angle, the impugned order would require no interference in this regard.
Resultantly, the appeal stands dismissed. Order pronounced in the open court on 23rd April, 2019. Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 23/04/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.