DCIT 9(3)(2), MUMBAI vs. GARDEN COURT DISTILLERIES P.LTD, MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the CIT(A)'s decision, finding that the assessee's own interest-free funds exceeded investments and that disallowance should be computed only with reference to investments yielding exempt income. The Tribunal found the CIT(A)'s approach fair and reasonable.
What were the facts?
The Revenue appealed against the CIT(A)'s order regarding disallowance under Section 14A. The assessee had earned exempt dividend income but made no suo-moto disallowance. The AO computed disallowance under Rule 8D, which was partially deleted by the CIT(A).
What were the issues?
Whether the disallowance under Section 14A and Rule 8D was correctly computed, considering the assessee's interest-free funds and the nature of investments.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by revenue for Assessment Year [AY] 2013- 14 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 16 [CIT(A)], Mumbai, Appeal No.CIT(A)-16/IT-665/ACIT 9(3)(2)/2015-16 dated 17/06/2016. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax, Central Circle 9(3)(2) u/s 143(3)
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.
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