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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
This is an appeal filed by the assessee against the Order of the Commissioner of Income Tax (Appeals)-8, Chennai, in dated 26.06.2018 for the AY 2015-16.
Shri R.Clement Ramesh Kumar, Addl.CIT, represented on behalf of the Revenue and Shri T.Vasudevan, Adv., represented on behalf of the assessee.
In the assessee’s appeal, the assessee has raised two issues one being against the disallowance u/s.14A and the second against the addition of disallowance u/s.14A to the book profit u/s.115JB when computing MAT. It was submitted by the Ld.AR that the issues in this appeal are squarely covered by the decision of the co-ordinate Bench of this Tribunal in the assessee’s own case for the immediately preceding AY in dated 20.06.2019, wherein, the co-ordinate Bench of this Tribunal has held as follows:
“….4. The ld. Authorized Representative submitted that the ld. CIT(A) failed to appreciate that there was absence of recording of satisfaction that the borrowed funds had been invested in earning the exempt income, the predominant investment was made by the assessee was in the subsidiary company and this cannot be taken as an investment to earn exempt income, therefore, the reliance placed by the ld. CIT(A) on the decision of Hon'ble Supreme Court in the case of M/s. Godrej and Boyce Manufacturing Co. Ltd. (CA No.7020/2011) is not correct. When the Bench pointed out to the fact that the Hon'ble Apex Court held that the dominant purpose for which the investment is made by the assessee may not be relevant as s. 14A applies irrespective of the purpose for which the investment is made and the expenditure attributable to the exempt income has to be disallowed. Then, the ld. AR submitted relying on the decision of Hon’ble High Court of Delhi in the case of Joint Investments Pvt. Ltd. vs. CIT [2015] 372 ITR 694 (Del.), the disallowance u/s. 14A of the Act r/w r. 8D of the Rules may be restricted to the extent of exempt income. In respect of the quantum of disallowance made u/s.14A of the Act r/w r. 8D of the Rules added to the income u/s. 115JB of the Act, the ld. DR submitted that in accordance with the Special Bench decision in the case of Vireet Investment Pvt. Ltd. v. ACIT ITAT Delhi Bench [2017] 82 taxmann.com 415 (Del-Trib.) (SB) dated 16.06.2017, the addition be deleted.
5. We heard the rival submissions and gone through the relevant material on record. The assessee received Rs. 7,07,302/- being dividend income from various investments and claimed them as exempt income. The AO records a finding that the assessee has incurred interest expenses at 12.11 Cr. on the borrowed funds and out of which invested in equities. Therefore, on due satisfaction, he invoked s. 14A r/w r. 8D rightly. The ld. CIT(A) records a finding that the assessee also claimed exclusion of long term capital gain from mutual funds to the extent of Rs. 91,58,329/-. Therefore, the ld. CIT(A) confirmed the disallowance made by the AO u/s. 14A of the Act r/w r. 8D of the Rules. In accordance with Hon’ble High Court of Delhi judgment relied on by the AR, supra, the disallowance u/s. 14A r/w r. 8D has to be restricted the extent of exempt income. However, it is not clear from the orders of the lower authorities what is the total quantum of exempt income on which the impugned disallowance has to be made. Therefore, we direct the AO to re-determine the disallowance, afresh. The assessee shall furnish the relevant materials in support of its contention before the AO and shall comply with the requirements of the AO in accordance with law. The AO, after affording
due opportunity of being heard to the assessee and on examination of the materials on which the assessee relies on in support of its contention etc. shall determine the disallowance as directed, supra. With regard to the addition made u/s. 115 JB of the Act, the Special Bench in the decision, supra, held that the computation under clause(f) of Explanation 1 to s. 115JB(2) of the Act is to be made without resorting to computation as contemplated u/s. 14A of the Act r/w r. 8D of the Rules. Following the decision of Special Bench, we find merit the corresponding grounds raised by the assessee and hence, the assessee plea on this aspect is allowed ”.
In reply, the Ld.DR vehemently supported the order of the AO and the Ld.CIT(A).
We have considered the rival submissions.
As it is noticed that both the issues in this appeal are squarely covered by the decision of the co-ordinate Bench of this Tribunal in the assessee’s own case for the immediately preceding AY, with the identical directions, the appeal filed by the assessee is disposed off. In respect of the disallowance u/s.14A, the issue is restored to the file of the AO for re- adjudication in view of the decision of the Hon’ble Delhi High Court in the case of M/s.Joint Investments Pvt. Ltd. vs. CIT [2015] reported in 372 ITR 694, referred to supra, and in respect of the addition u/s.14A which has been considered as adjustment in computing the book profit u/s.115JB, in view of the decision of the Hon’ble ITAT Delhi Special Bench in the case of M/s.Vireet Investment Pvt. Ltd. vs. ACIT, reported in 82 taxmann.com 415 (Del-Trib.) (SB) dated 16.06.2017, referred to supra, it is directed that the said adjustment is not be made when computing the book profit u/s.115JB.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.