PRAHLADKUMAR JHUNJHUNWALA HUF,MUMBAI vs. INCOME TAX OFFICER 17(2)(2), MUMBAI

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ITA 1894/MUM/2018Status: DisposedITAT Mumbai03 August 2018AY 2008-093 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A cannot exceed the dividend income earned by the assessee. Therefore, the disallowance was restricted to the dividend income.

What were the facts?

The assessee treated short-term capital gains on share sales as business income. The Assessing Officer disallowed expenses under Section 14A for earning dividend income. The CIT(A) upheld the disallowance but treated short-term capital gains as business income.

What were the issues?

Whether the disallowance under Section 14A should be restricted to the dividend income earned by the assessee.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI R.C. SHARMA, HONBLE & SHRI C.N. PRASAD, HONBLEShri Prahladkumar Jhunjhunwala (HUF) v.

For Appellant: Shri M. Subramanian
For Respondent: Ms. N. Hemalatha
Hearing: 29.05.2018Pronounced: 03.08.2018

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 32, Mumbai dated 25.01.2018 for the Assessment Year 2008-09.

2.

Assessee has raised the following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) -32, Mumbai (A.Y: 2008-09) Shri Prahladkumar Jhunjhunwala (HUF) erred in treating the short term capital gain on sale of shares of ₹.5,83,271/- as business income.

2. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) -32, Mumbai erred in sustaining the addition u/s. 14A of ₹.4,61,185/-.”

3.

At the time of hearing, Ld. Counsel for the assessee submitted that assessee has earned dividend income of ₹.1,02,827/- and the Assessing Officer by invoking section 14A of the Act disallowed ₹.4,61,185/- as expenses attributable for earning dividend income. Learned Counsel for the assessee submitted that Assessing Officer treated both the long term as well as short term capital gains as business income and computed the disallowance u/s. 14A of the Act. However, the Ld.CIT(A) accepted the claim of the assessee in respect of long term capital gain, and in respect of short term capital gain Ld.CIT(A) treated the same as business income of the assessee but sustained the disallowance u/s. 14A as made by the Assessing Officer. The only submission made before us by the Ld. Counsel is that the disallowance u/s. 14A should be restricted to dividend income earned by the assessee.

4.

We have heard the rival submissions, perused the orders of the authorities below. On hearing both the sides, we are of the considered view that the disallowance u/s. 14A cannot exceed the dividend income earned by the assessee. Thus accepting the submission of the assessee, we direct the Assessing Officer to restrict the disallowance u/s.14A of the (A.Y: 2008-09) Shri Prahladkumar Jhunjhunwala (HUF) Act to the dividend income earned by the assessee. Ground No.2 raised by the assessee is partly allowed and the Ground No.1 is dismissed.

5.

In the result, appeal of the assessee is partly allowed.

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