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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)
Both the appeals filed by the assessee are directed against the order passed by the learned CIT(A)-24, Mumbai and they relate to A.Y. 2013-14 & 2014-15. Both the appeals were heard together and are being disposed of by this common order for the sake of convenience.
Only issue urged in both these appeals is relating to disallowance u/s. 14A of the Act confirmed by the learned CIT(A).
I have heard the parties and perused the record. The assessee is engaged in the business of real estate. In the return of income, the assessee did not make any disallowance u/s. 14A of the Act though it had claimed dividend income received from M/s. Apna Sahakari Bank Limited as exempt. Hence, the Assessing Officer disallowed a sum of ` 18.99 lakhs and ` 14.27 lakhs u/s. 14A of the Act respectively in A.Y. 2013-14 & 2014-15.
In the appellate proceedings before the learned CIT(A), the assessee contended that dividend income from M/s. Apna Sahakari Bank Limited is 2 Jalaram Enterprises Pvt. Ltd.
taxable and the same has been wrongly claimed as exempt. Accordingly, it was submitted that disallowance u/s. 14A of the Act is not called for, since the assessee did not earn any exempt income. The assessee also submitted that identical addition was made in A.Y. 2011-12 & 2012-13 and the same was deleted by the learned CIT(A) on the ground that divided income received from M/s. Apna Sahakari Bank Limited is taxable and no exempt income was earned. Accordingly it was prayed that disallowance made u/s. 14A of the Act in both the years should be deleted. However, the learned CIT(A) did not agree with the contentions of the assessee and also distinguished the decision rendered by his predecessor as under:- “First of all, the appellant has claimed the said dividend income as exempt and it had not offered the same to tax. Secondly, mixed funds were utilized by the appellant for making investments. Thirdly, the appellant had incurred interest expenditure on the borrowed capital and claimed in the accounts. Fourthly, the quantum of dividend that has to be taxed is very much less than the disallowance computed as provided in the statute which is against the interest of revenue. Lastly, the appellant has not filed a revised return or revised computation before the passing of the assessment order so as to get bailed out of the issue.” Accordingly, the Ld CIT(A) confirmed the addition made u/s 14A in both the years.
Learned AR submitted that dividend income received from M/s. Apna Sahakari Bank Limited is taxable, since the bank has not paid any taxes u/s. 115-O of the Act. Accordingly she prayed that the direction may be given to the Assessing Officer to tax the dividend income and delete the disallowance u/s. 14A of the Act, since the assessee did not earn any exempt income.
3 Jalaram Enterprises Pvt. Ltd.
On the contrary, learned Departmental Representative supported the orders passed by the learned CIT(A).
I have heard the rival submissions and perused the record. I noticed that the Assessing Officer has proceeded to compute disallowance u/s. 14A of the Act since the assessee had claimed dividend income received from M/s. Apna Sahakari Bank Limited as exempt. Now, the assessee has submitted that the dividend income is not exempt and taxable. In my view, this is a new fact brought on record by the assessee and the same changes whole scenario of computation of total income. Hence the Ld CIT(A) has expressed the view as extracted above, particularly brought the fact that the mixed funds have been used to make investments and the assessee has paid interest expenditure also. Since new fact has been brought on record, in my view, the entire issue requires examination at the end of the Assessing Officer.
I noticed that the learned CIT(A) has observed that the assessee himself has claimed dividend income as exempt. In my view the said observation is not in accordance with law, since income otherwise taxable cannot escape taxation because the assessee claimed the same as exempt. This is in accordance with the principle that there is no estoppels against law.
Accordingly, I set aside the order passed by the learned CIT(A) and restore this issue in both the years to the file of the Assessing Officer with the direction to examine taxability of dividend income and also issue relating to disallowances.
4 Jalaram Enterprises Pvt. Ltd.
In the result, both the appeals of the assessee are treated as allowed for statistical purposes. Order has been pronounced in the Court on 8.11.2017.