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Income Tax Appellate Tribunal, B Bench, Mumbai
Before: Shri G.S. Pannu & Shri Sandeep Gosain
Per G.S. Pannu, AM
This appeal has been filed by the Revenue against the order of the CIT(A)-2, Mumbai dated 30.09.2015 for A.Y. 2010-11.
Although Revenue has raised multiple grounds of appeal but the dispute essential is on two issues, which we shall take in seriatim.
3. The respondent assessee, a company incorporated under Companies Act, 1996, is inter alia, engaged in the business of manufacturing and trading in rubber chemicals. For the assessment year under consideration it had filed return of income declaring an income of `51,03,95,635/-, which was subjected to scrutiny assessment whereby the total income has been determined at `51,16,37,200/-. Assessee was aggrieved with the assessment on two counts, mainly the disallowance of expenditure under Section 14A of the Income Tax Act (hereinafter “the Act”) and denial of MAT credit pertaining to assessment years 2007-07 to M/s. NOCIL Limited 2008-09 of `7,89,18,699/-. In so far as disallowance under Section 14A of the Act is concerned the CIT(A) has since reduced it to `3,26,900/-, Revenue is aggrieved on this count. On the issue of denial of MAT credit by the AO, the CIT(A) has accepted the plea of the assessee and directed the AO to allow the same after due verification. The aforesaid is also in dispute before us. In so far as the disallowance under Section 14A of the Act is concerned, it is notable that the AO calculated the disallowance by applying Rule 8D(2)(iii) of the I.T. Rules, 1962, i.e. out of administrative expenditure, amounting to `12,41,565/-. The CIT(A) noted that in A.Y. 2007-08 the Tribunal, vide its order in dated 10.04.2014, had restricted the disallowance to 5% of the exempt income, and on that basis he scaled down the disallowance to `3,26,900/-.
On this aspect the learned A.R. vehemently pointed out that so far as the decision of the Tribunal for A.Y. 2007-08 is concerned, same would not be applicable ispo facto to the year under consideration because in the current year provisions Rule 8D are applicable, which was not the case for A.Y. 2007-08.
Per contra, the learned A.R. pointed out that notwithstanding the other arguments of the assessee, even if Rule 8D(2)(iii) of the I.T. Rules is to be applied, the same should be applied by excluding the investments on which no exempt income has been earned. It is further pointed out that the investments in this year are almost the same as those in the last year. In this regard reliance has been placed on the decision of the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investment P. Ltd. 165 ITD 27 (Del).
Considering the aforesaid short point raised by the learned A.R. we deem it fit and proper to set aside the order of the CIT(A) and restore the matter back to the file of the AO to rework out the disallowance under Section 14A of the Act by applying Rule 8D(2)(iii) of the I.T. Rules, 1962 by M/s. NOCIL Limited excluding the investments on which no exempt income has been earned during the year. We may mention here that if the ensuing recomputation results in disallowance of an amount lower than `3,26,900/- sustained by the CIT(A) then the excess shall be ignored and the disallowance should be retained at `3,26,900/-. Ostensibly we are dealing with the appeal preferred by the Revenue and it is a trite law that an appellant cannot be worse-off after adjudication of its Ground in appeal. With these directions the ground of appeal No. 1 is disposed of as above.
7. In so far as the issue relating to denial of MAT credit for assessment years 2006-07 to 2008-09 is cornered, the relevant discussion is contained in para 5.2 of the assessment order. As per this discussion it is seen that for assessment years 2006-07 to 2008-09 assessee company had paid tax under MAT provisions only on account of set off of brought forward business loss and unabsorbed depreciation against the tax computed under normal provisions of the Act. The AO further notes that the assessment for earlier A.Y. 2004-05 has since been reopened and the entire business loss and unabsorbed depreciation brought forward were disallowed in terms of Section 72A(4) of the Act because of the demerger of the two units of assessee company. This led the AO to deny the claim of MAT credit of `7,89,18,699/- during the year against tax liability. The CIT(A), however, noted that the basis of denial by the AO, i.e. revised assessment for A.Y. 2004-05 has been set aside by the CIT(A) vide his order dated 04.12.2013 holding that transfer of specified assets and liabilities of the Petrochemical Division and Plastic Product Division did not amount to demerger as defined under Section 2(19AA) of the Act and accordingly it was held that provisions of Section 72A(4) of the Act were not applicable. Accordingly the CIT(A) held that the unabsorbed business loss and depreciation relating to the said Divisions were available for set off in the hands of the assessee. As the basis which prevailed with the AO to deny the credit was altered by the appellate authority, the CIT(A) deemed it
M/s. NOCIL Limited fit to allow assessee’s claim for MAT credit for assessment years 2006-07 to 2008-09 subject to due verification by the AO.
At the time of hearing it was a common ground between the parties that so far as the order of the CIT(A) for A.Y. 2004-05 dated 04.02.2013 is concerned, the same has since been approved by the Tribunal vide its order in dated 24.05.2017, a copy of which was placed on record. It was also a common point between the parties that the said decision of the Tribunal dated 24.05.2017 (supra) continues to hold field as it has not been altered by any higher authority. Therefore, the basis adopted by the CIT(A) to accept assessee’s claim for grant of MAT credit for earlier assessment years 2006-07 to 2008-09 against tax liability of the current year is quite justified. Thus his decision is hereby affirmed. This, on this aspect Revenue fails.
In the result, the appeal filed by Revenue is partly allowed for statistical purposes.