DCIT 9(3)(2), MUMBAI vs. GARDEN COURT DISTILLERIES P.LTD, MUMBAI

ITA.No.5562/Mum/2016 Garden Court Distilleries Private Limited Assessment Year-2013-14 of the Income Tax Act, 1961 on 29/02/2016. The solitary issue involved in the appeal is disallowance u/s 14A. None has appeared for assessee despite notice and no adjournment application is on record. Left with no option, we proceed to dispose-off the same on the basis of material available on record and after hearing Ld. Departmental Representative [DR]. 2.1 Briefly stated the assessee being resident corporate assessee engaged in the business of generation of power was assessed for impugned AY u/s 143(3) at Rs.1,76,70,860/- as against returned income of Rs.1,47,05,590/- e-filed by the assessee on 19/09/2013. The assessee has suffered disallowance u/s 14A for Rs.29,65,268/- and the same is the subject matter of this appeal. 2.2 During assessment proceedings, it was noted that the assessee earned exempt dividend income of Rs.2,99,750/- whereas it did not make any suo-moto disallowance u/s 14A against the same. The assessee contested the same on various grounds. However, not convinced, Ld. AO, applying Rule 8D, computed the same at Rs.29,65,268/- which comprised of interest disallowance as per Rule 8D(2)(ii) for Rs.26,77,816/- and expenses disallowance u/r 8D(2)(iii) @0.5% of average investment, which came to Rs.2,87,452/-.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 17/06/2016 where interest disallowance was deleted upon noticing that the borrowed funds obtained by the assessee were meant for specific purposes and further, interest free funds held in the shape of Share Capital far exceeded the investments made by the assessee. Regarding expense disallowance, ITA.No.5562/Mum/2016 Garden Court Distilleries Private Limited Assessment Year-2013-14 Ld. CIT(A) noted that the investments were strategic investment and further, the disallowance was to be computed with reference to those investment which yielded exempt income during the year. The disallowance, thus worked out, amounted to Rs.9,200/-. Aggrieved, the revenue is in further appeal before us. The Ld. DR placed reliance on the stand of Ld. AO.

Heard and perused relevant material on record. We find the matter to be factual one. The Ld. CIT(A), after due appreciation of material, reached a conclusion that own interest free funds far exceeded the investment. Secondly, the strategic investment and investments which yielded no exempt income were to be excluded for the purpose of computation of expenses disallowance. We find the approach to be a quite fair, reasonable & plausible and therefore, find no reason to interfere with the same.

Resultantly, revenue’s appeal stands dismissed. Order pronounced in the open court on 08th November, 2017.