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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G.S. PANNU, AM & SHRI AMARJIT SINGH, JM
सुनवाई की तारीख / Date of Hearing: 09-02-2018 घोषणा की तारीख /Date of Pronouncement: 09.02.2018 आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 27.02.2012 passed by the Commissioner of Income Tax (Appeals)-5, Mumbai [hereinafter referred to as the “CIT(A)”]. relevant to the Assessment year 2008-09.
The assessee has raised the following grounds:- “The grounds of appeal set out below are without prejudice to each other:
ITA. No.3516/M/2012 A.Y. 2008-09 1.On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of the sum of Rs.55,90,110/- made under the provisions of section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962 and treating the same as expenses incurred for earning exempt income by rejecting the explanation given by the appellant which is wrong and contrary to the provisions of Income Tax Act, 1961, and the Rules made thereunder. 2.(a) On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the Ld. AO’s action of adding a sum of Rs.55,90,110/- being the amount of expense disallowed by him u/s 14A r.w.r. 8D, to the book profit for the purpose of S.115JB of the Income Tax Act, 1961 which is wrong and contrary to the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the authorities below failed to appreciate that the provisions of section 14A(2), 14(A)(3) and Rule 8D are deeming provisions and the same cannot be extended to provisions of section 115JB of the Act. The Appellant craves leave to add, amend, supplement, alter and/or delete any of the above Grounds of Appeal
.”
3. The brief facts of the case are that the assesse filed its return of income on 28.09.2008 declaring total taxable income to the tune of Rs.9,41,62,411/- before set-off of brought forward unabsorbed losses/unabsorbed depreciation. The case was selected for scrutiny, thereafter, the notice u/s 143(2) of the I.T. Act, 1961 dated 12.08.2009 was issued and served upon the assessee. A notice u/s 142(1) of the Act was also issued. The assessee has shown the investment to the tune of Rs.36,24,73,620/- as on 31.03.2008. There was no dividend income during the relevant previous year. The Assessing Officer was of the view that the Assessee utilized interest bearing funds for making investment. The assessee has shown the investment to the tune of Rs.44,45,72,220/- and A.Y. 2008-09 36,24,73,620 as on 01.04.2007 & 31.03.2008 respectively. The said investment was in the nature of investment in the shares which give rise to exempt income. The assessee was having the interest free fund to the tune of Rs.140.7 Crores as on 31.03.2008 as against the interest bearing secured loan to the tune of Rs.366.2 Crores. The fund to the tune of Rs.519.6 Crores was used in the fixed assets as on 31.03.2008. In view of the said data and total investment to the tune of Rs.40,35,22,920/- was considered for application of provision u/s 14A r.w. Rule 8D of the Act. Accordingly, the AO disallowed an amount of Rs.55,90,110/- in view of the provision u/s 14A of the Act and accordingly, the book profit u/s 115JB of the Act was added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.1,88,85,990/-. in view of the provision u/s 115JB of the Act and Rs. Nil in view of the normal provision. The assessee filed an appeal the CIT(A) who confirmed the order of the AO, therefore, the assessee filed the present appeal before us. ISSUE NO.1 to2:-
5. Both these issues are inter-connected therefore are being taken up together for adjudication. Under these issues, the Assessee has challenged the confirmation of disallowance of a sum of Rs.55,90,110/- made in view of the provision of Section 14A of the I.T. Act, 1961 r.w. Rule 8D of the Act. The Ld. representative of the Assessee has argued that the assessee did not earned the exempt income therefore provision of Section 14A r.w. Rule 8D of the Act was not applicable upon the investment in view of the law settled in A.Y. 2008-09 case of Cheminvest Limited Vs. CIT (Tax Appeal 749 of 2014) (Delhi High Court) dated 02.09.2015. The assessee has also placed reliance upon the law settled in the case of CIT Vs. Delite Enterprises (Tax Appeal 110 of 2009) (Mumbai High Court), Shree Shyamkamal Finance & Leasing Co.(P) Ltd. Vs. ITO (21 SOT 42) (Mumbai ITAT), JCIT Vs. Holland Equipment Co. B.V. (3 SOT 810) (Mumbai ITAT), CIT Vs. M/s. Lakhani Marketing Inc. (49 taxmann.com 257) (Punjab High Court), CIT Vs. Corretech Energy (P.) Ltd. (2014) 223 Taxmann 130 Guj. High Court & CIT Vs. Winsome Textile Industries Ltd. 319 ITR 204 Punjab High Court. However, on the other hand, the Ld. Representative of the revenue has placed reliance upon the order passed in CIT(A) in question. After hearing the argument advanced by the Ld. Representative of the parties and perusing the record. We noticed that the assessee did not earn exempt income in the relevant assessment year. The assessee has showed the investment to the tune of Rs. 36,24,73,620/-. Merely utilization of fund nowhere attract the provision u/s 14A r.w. Rule 8D of the Act. This issue has duly been covered by decision of the Hon’ble Delhi High Court in ITA. No. 749/2014 title as Chemnivest Limited Vs. CIT-6 dated 02.09.2015. In the said case the substantial question of law was that whether disallowance u/s 14A of the Act can be made in a year in which no exempt has been earned or receivable by the assessee. The material finding has been given para 23 of the judgment in which the Hon’ble High Court of the Delhi was of the view ITA. No.3516/M/2012 A.Y. 2008-09