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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-5, Pune dated 18-03-2016 for the assessment year 2010-11. The solitary issue raised by the assessee in appeal is against confirming of disallowance Rs.10,92,618/- u/s. 14A of the Act r.w. Rule 8D(2)(iii) of the Income Tax Rules, 1962.
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Shri Krishna Gujrathi appearing on behalf of the assessee submitted that the assessee is a partnership firm engaged in real estate development business. During the course of scrutiny assessment proceedings, the Assessing Officer made disallowance of Rs.14,07,200/- (Rs.3,14,582/- + Rs.10,92,618/-) u/s. 14A r.w. Rule 8D.
2.1 The assessee challenged the disallowance made by Assessing Officer before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) after appreciating the facts of the case and after considering various judgments of Hon’ble Jurisdictional High Court deleted the disallowance made by Assessing Officer under Rule 8D(2)(ii) i.e. Rs.3,14,582/-. However, the Commissioner of Income Tax (Appeals) confirmed the disallowance of Rs.10,92,618/- under Rule 8D(2)(iii). The ld. AR submitted that the assessee had categorically stated before the Commissioner of Income Tax (Appeals) that disallowance u/s. 14A cannot exceed the actual expenditure incurred for earning exempt income. The ld. AR pointed that indirect expenditure incurred by the assessee and debited to P & L Account is to the tune of Rs.25,78,927/-. Out of the aforesaid expenditure, expenditure to the tune of Rs.22,43,620/- is unrelated to earning of exempt income. Thus, disallowance under Rule 8D(2)(iii) cannot exceed Rs.3,35,307/- (Rs.25,78,927/- - Rs.22,43,620/-). In support of his submissions the ld. AR placed reliance on the following decisions : i. Gillette Group India (P.) Ltd. Vs. Assistant Commissioner of Income Tax, 16 ITR 57; ii. Income Tax Officer Vs. Pioneer Radio Training Services Pvt. Ltd., 43 CCH 62 (Del.-Trib.); iii. M/s. Search Enviro Ltd. Vs. ACIT, 2012 (3) TMI 509 (Mum.-Trib.).
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On the other hand Shri Aseem Sharma representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of assessee.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The only issue in appeal by the assessee is against confirming of disallowance of Rs.10,92,618/- u/s. 14A r.w. Rule 8D(2)(iii). The short contention of the assessee is that the disallowance u/s. 14A cannot be made beyond the expenditure debited to P & L account in relation to earning of exempt income. The ld. AR has referred to the P & L account at page 32 of the paper book and the details of Indirect Expenditure at page 34 of the paper book. The total indirect expenditure debited by the assessee to P & L account is to the tune of Rs.25,78,927/-. The claim of the assessee is expenditure to the tune of Rs.22,43,620/- is not in relation to earning of exempt income. Therefore, the expenditure that may be considered for making disallowance u/s. 14A is Rs.3,35,307/- (Rs.25,78,927/- - Rs.22,43,620/-). We observe that the assessee had furnished the details of indirect expenditure before the Commissioner of Income Tax (Appeals), however, the Commissioner of Income Tax (Appeals) has not considered the submissions of the assessee on this aspect.
We find that the Delhi Bench of the Tribunal in the case of Gillette Group India (P.) Ltd. Vs. Assistant Commissioner of Income Tax (supra) has restricted the disallowance u/s. 14A to the extent of expenditure debited to P & L account. Similar view has been taken in the case of Income Tax Officer Vs. Pioneer Radio Training Services Pvt. Ltd. (supra) and in the case of M/s. Search Enviro Ltd. Vs. ACIT (supra). In light of the decisions referred above, in principle we agree with the proposition mooted
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by the ld. AR. However, we are of considered view that the indirect expenditure referred to by the ld. AR needs verification. Accordingly, we deem it appropriate to remit this issue back to the file of Assessing Officer to examine the expenditure relatable to earning exempt income and thereafter made disallowance u/s. 14A, in accordance with the decisions discussed above. The appeal of the assessee is allowed for statistical purpose, accordingly.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced on Wednesday, the 08th day of August, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 08th August, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-5, Pune 3. 4. The Pr. CIT-4, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune