SEAMLESS SYNDICATION SERVICES LTD,MUMBAI vs. DCIT CEN CIR 6(3), MUMBAI

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ITA 4012/MUM/2017Status: DisposedITAT Mumbai31 October 2017AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 14A disallowance is not applicable if the assessee has not earned any exempt income. Therefore, the CIT's order under Section 263 was erroneous.

What were the facts?

The CIT revised the AO's assessment, believing the AO incorrectly applied Rule 8D for disallowance under Section 14A. The CIT directed the AO to rework the disallowance. The assessee argued no disallowance was warranted as no dividend income was earned.

What were the issues?

Whether disallowance under Section 14A is mandatory even if no exempt income is earned by the assessee. Whether the CIT's revisionary order under Section 263 was justified.

Which sections of the Income-tax Act were involved?

Section 14A,Section 10(34),Section 263

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI

Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN

For Appellant: Shri Sanjay R. Parikh
For Respondent: Shri Manjunatha Swamy, DR
Hearing: 09/10/2017Pronounced: 31/10/2017

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order by the Commissioner of Income Tax-13, Mumbai u/s 263 of the Income Tax Act 1961, (the ‘Act’).

M/s Seamless Syndication Services Ltd.

2.

The grounds of appeal

filed by the assessee read as under: 1) The learned Principal Commissioner of Income Tax 13, Mumbai (Pr. CIT) erred on facts and in law in holding that the Deputy Commissioner of Income Tax - 13(2)(1), Mumbai (AO) had only applied the third limb of Rule 8D and the wholesome view was not taken leading to error and prejudice to the interest of revenue. 2) The learned Pr. CIT erred in holding that the AO had not put Rule 8D into operation correctly. 3) The Pr. CIT erred in directing the AO to rework the disallowance u/s. 14A at Rs.11,27,693/- by considering the interest to be disallowed as per Rule 8D(i) at Rs.10,71,064/-. 4) The appellant prays that your honour hold that the order passed by the AO is neither erroneous nor prejudicial of the interest of revenue, which would justify its revision u/s. 263 of the Income-tax Act.

3. Briefly stated, the facts of the case are that the CIT observed that the Assessing Officer (AO) while making the scrutiny assessment has considered the third limb of Rule 8D but failed to make complete disallowance u/s 14A r.w. Rule 8D of the Income Tax Rule, 1962. Therefore, he directed the AO to rework the said disallowance.

4. Before us, the Ld. counsel of the assessee submits that the assessee had not earned any dividend income during the impugned assessment year. Hence it has not claimed any income as exempt u/s 10(34) of the Act. Therefore, it is submitted by him that no disallowance u/s 14A r.w. Rule 8D be made in the instant case.

M/s Seamless Syndication Services Ltd.

5.

On the other hand, the Ld. DR supports the order passed by the CIT.

6.

We have heard the rival submissions and perused the relevant materials on record. We find that the assessee has not earned any dividend income during the impugned assessment year. It is evident from the audited accounts for the FY 2011-12. It has not claimed any income as exempt u/s 10(34). In the case of CIT v. Shivam Motors (P) Ltd. (2015) 55 taxmann.com 262 (All), it has been held that in absence of any tax free income earned by the assessee, disallowance u/s 14A could not be made. In a similar vein, it has been held in Cheminvest Ltd. v. CIT (2015) 61 taxmann.com 118 (Del) that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Respectfully following the above judgments, we hold that the CIT erred in passing the order u/s 263. Accordingly, we cancel the said order. 7. In the result, the appeal is allowed. Order pronounced in the open Court on 31/10/2017. Sd/- Sd/- (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/10/2017 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent.

M/s Seamless Syndication Services Ltd.

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