CRYSTALINE EXPORTS PRIVATE LTD,MUMBAI vs. INCOME TAX OFFICER 3(1)(3), MUMBAI

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ITA 1377/MUM/2018Status: DisposedITAT Mumbai28 March 2019AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that computation under Section 115JB should not be made by resorting to Section 14A and Rule 8D. It also held that only investments yielding exempt income should be considered for disallowance. Furthermore, if own funds exceed investments, disallowance of interest is unwarranted.

What were the facts?

The assessee company filed its return declaring Nil income. The Assessing Officer made an addition of Rs. 1,36,864/- under Section 14A. The CIT(A) confirmed this addition.

What were the issues?

Whether disallowance under Section 14A and Rule 8D is applicable to income computed under Section 115JB and whether investments not yielding exempt income should be considered for disallowance.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI

Before: SHRI RAVISH SOOD & SHRI N.K. PRADHAN

For Appellant: Mr. Sunil Hirawat, AR
For Respondent: Mr. Abi Rama Kartikiyen, Sr. DR
Hearing: 27/03/2019Pronounced: 28/03/2019

ORDER

PER N.K. PRADHAN, AM

1.

This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-8, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

2.

The grounds of appeal

filed by the assessee read as under:

1. On the facts and in law, the Ld. CIT(A) had erred in confirming the addition of Rs.1,36,864/- to the income computed u/s 115JB being the amount arrived at by the AO as per Rule 8D r.w.s 14A of the Act.

2. On the facts and in law, the Ld. CIT(A) had failed to appreciate that investment on which exempt income was received are required to be excluded for disallowance u/s 14A r.w.s. 8D. Under the facts and circumstances of the matter, he ought to have restricted the disallowance u/s 14A r.w.r. 8D(2)(iii) at Rs.51,638/-.

3. On the facts and in law, had erred in confirming the disallowance of Rs.26,528/- under Rule 8D(2)(ii) r.w.s. 14A without appreciating the facts that own funds are much more than the investment in assets, the income of which is exempt from tax.

3. In a nutshell, the facts are that the assessee-company filed its return of income for the assessment year (AY) 2012-13 on 25.09.2012 declaring total income at Rs. Nil. In the assessment completed u/s 143(3) of the Act, the Assessing Officer (AO) made an addition of Rs.1,36,864/- u/s 14A of the Act.

4. In appeal, the assessee submitted before the Ld. CIT(A) that the AO should not have made a disallowance of Rs.1,36,864/- which is above the suo motu disallowance of Rs.95,159/- made by the appellant. The Ld. CIT(A) observed that the assessee itself had filed the revised working of disallowance of Rs.1,36,864/- instead of Rs.95,159/-. Keeping the above fact in mind, the Ld. CIT(A) confirmed the disallowance of Rs.1,36,864/- made by the AO u/s 14A of the Act.

5. Before us, the Ld. counsel of the assessee submits that no disallowance should be made u/s 14A r.w. Rule 8D to the income computed u/s 115JB in view of the decision of the Special Bench of the Tribunal in ACIT v. Vireet Investment Pvt. Ltd. in for AY 2008-09. Also it is argued that disallowance u/s 14A r.w. Rule 8D should be restricted to the investments on which exempt income is received. In this regard reliance is placed by him on the decision in Vireet Investment Pvt. Ltd. (supra).

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