VULVAN TRADERS P. LTD,MUMBAI vs. ITO 13(3)(3), MUMBAI

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ITA 5657/MUM/2016Status: DisposedITAT Mumbai27 June 2018AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed the ground regarding stock-in-trade, following the Supreme Court decision. However, for investments, the Tribunal directed the AO to consider only those yielding dividend income for disallowance calculation, referencing Special Bench and High Court decisions.

What were the facts?

The assessee appealed against the disallowance of ₹.3,67,209/- made under Section 14A read with Rule 8D(2)(iii). The assessee argued that stock-in-trade should not be considered for disallowance and that investments yielding no tax-free income should also be excluded.

What were the issues?

Whether stock-in-trade can be considered for disallowance under Section 14A, and whether investments not yielding tax-free income are includible in the disallowance calculation.

Which sections of the Income-tax Act were involved?

Section 14A

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

Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE

For Appellant: Shri Piyush Chaturvedi
For Respondent: Ms. Pooja Swaroop
Hearing: 18.04.2018Pronounced: 27.06.2018

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) – 21 Mumbai dated 18.07.2016 for the Assessment Year 2012-13.

2.

The only issue in the appeal of the assessee is that, the Ld.CIT(A) erred in sustaining the disallowance of ₹.3,67,209/- made by the Assessing Officer u/s. 14A r.w. Rule 8D (2)(iii) of the Act.

(A.Y: 2012-13) M/s. Vulvan Traders Pvt. Ltd., 3. We have heard the rival submissions, perused the orders of the authorities below. In so far as the Ground No.2 of the grounds of appeal, the Ld. Counsel for the assessee submitted that, assessee contended that the stock in trade cannot be considered for disallowance u/s.14A of the Act. He submitted that now this issue is decided against the assessee by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [402 ITR 640]. Thus this ground is dismissed.

4. Coming to Ground No.3 which it is the contention of the assessee that investments on which no tax free income was earned during the year under consideration cannot be considered for calculating the disallowance u/s. 14A and this issue is now decided by the Special Bench of the Delhi Tribunal in the case of ACIT v. Vireet Investments Private Limited [165 ITD 27]. Thus, respectfully following the said decision, we direct the Assessing Officer to consider only those investments which yielded dividend income for the purpose of computing the disallowance under Rule 8D(2)(iii) of the Act. In case no dividend has been received by the assessee during the year under consideration there shall not be any disallowance u/s. 14A of the Act in view of the decision of the Hon'ble Bombay High Court, [Nagpur Bench] in the case of Pr.CIT v. M/s. Ballarpur Industries Limited in ITA.No. 51 of 2016 dated 13.10.2016. Thus, we direct the Assessing Officer to compute the disallowance if any (A.Y: 2012-13) M/s. Vulvan Traders Pvt. Ltd., under Rule 8D(2)(iii) of the Act, keeping in view the decisions of the Hon'ble Bombay High Court as well as the Special Bench of the Tribunal. This ground is disposed off accordingly.

5.

In the result, appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open court on the 27th June, 2018.

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