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Facts
The case involves cross-appeals for AY 2016-17 against the CIT(A)'s order in proceedings under Section 143(3). The assessee challenged a disallowance of Rs. 38,58,216/- under Section 14A read with Rule 8D and the denial of Education Cess deduction. The Revenue's cross-appeal concerned a tax effect below the minimum threshold prescribed by a CBDT circular.
Held
The Tribunal dismissed the Revenue's cross-appeal due to the tax effect being below the prescribed limit of Rs. 60,00,000/-. The assessee's ground regarding the Education Cess was not pressed and was rejected. The assessee's appeal regarding the Section 14A read with Rule 8D disallowance was allowed, as the Assessing Officer failed to record satisfaction under Section 14A(2) for making the disallowance.
Key Issues
1. Whether disallowance under Section 14A read with Rule 8D is sustainable without recorded satisfaction by the Assessing Officer under Section 14A(2). 2. Whether Revenue's appeal is maintainable if the tax effect is below the prescribed limit set by a CBDT circular.
Sections Cited
Income Tax Act, 1961, Section 143(3), Section 14A, Section 14A(2), Rule 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Sh. Satbeer Singh Godara & Sh. M. Balaganesh
Asstt. Year : 2016-17 DCIT, Vs Montage Enterprises Pvt. Ltd., Central Circle-27, C-53, Shashi Garden, Near New Delhi-110055 Pocket-V, Gurudwara, Mayur Vihar, Phase-I, New Delhi-110091 (APPELLANT) (RESPONDENT) PAN No. AACCM8173H Assessee by : Sh. M. P. Rastogi, Adv. Revenue by : Sh. Akhilesh Kumar Yadav, Sr. DR Date of Hearing: 05.12.2024 Date of Pronouncement: 13.12.2024 ORDER Per Satbeer Singh Godara, Judicial Member: These assessee and Revenue cross appeal and Assessment Year 2016-17, arise against the CIT(A)-29, New Delhi’s order dated 22.10.2020 in case No. 162/2019-20, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “The Act”).
Heard both the parties at length. Case file perused.
Montage Enterprises Pvt. Ltd. Rs.53,25,779/- i.e. less than the minimum prescribed amount of Rs.60,00,000/- as per the CBDT latest circular no. 2/2024 dated 07.09.2024 admittedly made applicable with retrospective effect. We thus reject the Revenue’s instant appeal as involving lower than the above prescribed tax effect of Rs.60,00,000/- subject to all just exceptions.
We are now left with the assessee’s appeal raising the following twin substantive grounds:
“1. On the facts and in the circumstances of the case, the lower authority has erred in confirming disallowance to the extent of Rs.38,58,216/- u/s 14A read with Rules 8D. It is contended that Section 14A is not applicable in the case of the appellant.
2. That on the facts and circumstances of the case, the ld. CIT(Appeals) was not justified and grossly erred in not allowing deduction of Education Cess on Income Tax in computing total income under the normal provisions of the Act for the Assessment Years 2015-15 and 2016- 17.”
Learned counsel at the outset does not press for the assessee latter substantive ground raising the issue of education cess as an allowable business deduction. Rejected accordingly.
This leaves us with the assessee’s former issue of correctness of both the lower authorities action making section 14A r.w. Rules 8D disallowance of Rs.38,58,216/- relating to it’s exempt income. We note during the course of hearing that this is a recurring issue between the parties since A.Y. 2008-09 which formed subject matter of adjudication in this tribunal’s various orders. More particularly, the latest of them is dated 20.06.2024 in assessee’s appeal for A.Y. 2014-15 holding therein that such a disallowance is not sustainable in absence of any section 14A(2) satisfaction Montage Enterprises Pvt. Ltd. having drawn by the Assessing Officer qua its books of account. That being the undisputed case from the Revenue side as well, we adopt judicial consistency to accept the assessee’s instant foremost substantive ground in very terms. This assessee’s appeal is partly allowed therefore. Necessary computation shall follow as per law.
6.1 No other ground or arguments has been pressed before us.
To sum up, this assessee’s appeal is partly allowed and the Revenue cross appeal is dismissed in above terms. A copy of this common order be placed in the respective case files.
Order Pronounced in the Open Court on 13/12/2024.