AHA HOLDINGS P. LTD,MUMBAI vs. DCIT 6(1), MUMBAI

This appeal has been filed by the assessee against the order dated 24/07/2014 passed by the Commissioner of Income Tax (Appeals)-14, Mumbai, for the assessment year 2010-11, whereby the Ld. CIT (A) has partly allowed the appeal filed against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that the assessee company engaged in the business of trading, filed its return of income for the relevant assessment year declaring nil income, after claiming current year’s loss of Rs. 66,99,702/-. Since, the case was selected for scrutiny notices u/s 143 (2) and 142 (1) were served on the assessee. In response thereof the authorized representative of the assessee appeared before the AO and furnished the details called for by the AO.

Aggrieved by the assessment order, the assessee carried the matter to the Ld. CIT (A) in first appeal. The Ld. CIT (A) after hearing the assessee, partly allowed the appeal and directed the AO to modify the computation u/s 14A read with Rule 8D.

Still aggrieved, the assessee has preferred this appeal before the Tribunal on the following effective ground:-

The assessee has further raised an additional ground which reads as under:- “While computing the book profit u/s 115JB, the learned Dy.CIT was not justified in adding an amount of Rs. 75,98,115/- as disallowance u/s 14 A r.w. Rule 8D”

Before us, the Ld. counsel for the assessee submitted the additional ground raised

We have heard the rival submissions and also gone through the material on record including the cases relied upon by the assessee. One of the grievance of the assessee is that The Ld. CIT (A) has wrongly confirmed the disallowance made by the AO u/s 14A of the Act read with Rule 8D(iii) of the Income Tax Rules 1962. So far as disallowance u/s 14A read with 4 Assessment Year: 2010-11 Rule 8D(2)(ii) is concerned we notice that the Ld. CIT(A) has partly allowed this ground of appeal by issuing direction to the AO to exclude investment in PMS, Debentures of Citi Finance Consumer Finance Property, Painting and sculpture, venture/Pvt. Equity as they will generate taxable income and not exempt income. Therefore the same cannot be considered for computation of average value of investment generating exempt income. So far as the disallowance u/s 14A read with Rule 8D (2)(iii) is concerned the Ld. CIT (A) has upheld the findings of the AO holding that the argument of Ld. AR regarding apportionment of staff and other expenses is dismissed as no documentary evidence to substantiate the same has been produced.

The AO has worked out the disallowance at Rs. 51,08,570/- under Rule 8D(2)(iii), whereas the assessee has claimed the exempt income of Rs. 3,79,213/-. In the light of the judgment of the Hon’ble Delhi High Court passed in Joint Investments Pvt. Ltd. the disallowance cannot exceed the exempt income claimed by the assessee. Hence, we set aside this issue to the file of AO for determining the amount of disallowance in accordance with the law laid down by the Hon’ble Delhi High Court in Joint Investments Pvt. Ltd. (supra). We further direct the AO to given credit of suo moto disallowance made by the assessee while computing the amount of disallowance. Hence, we allow this ground of appeal for the statistical purposes.

So far as the additional ground is concerned, the Special Bench of Delhi ITAT in ACIT vs. Vireet Investments Pvt. Ltd. for the A.Y. 2008-09, has held that the computation under clause f of explanation-I to section 115JB (2) is required to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income Tax Rules, 1962. The Bench has further held that only those 5 Assessment Year: 2010-11 investments are to be considered for computing the average value of investments, which yield exempt income during the year. We, therefore, restore this issue to the file of the AO for deciding afresh in accordance with the decision of ITAT, Delhi Bench aforesaid. Hence, this ground of appeal is allowed for the statistical purposes.