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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against the order dated 19/10/2015 passed by the Ld. Commissioner of Income Tax (Appeals)-9, Mumbai, for the assessment year 2012-13, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).
The revenue has challenged the impugned order passed by the Ld CIT(A) on the following effective grounds:-
1. “On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to delete disallowance made u/s 14A read with Rule 8D(2)(iii) even when the assessee failed to establish that there is no direct nexus of exempt income and expenditure.
2 Assessment Year: 2012-13
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to delete disallowance made u/s 14A read with Rule 8D(2)(iii) on the ground that assessee has not used interest bearing funds and the assessee has made investments out of its own funds without appreciating the fact that the assessee has not maintained separate accounts for investments yielding exempt income and investments yielding taxable income.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO to delete disallowance made u/s 14A read with Rule 8D (2)(iii) on investments made by the assessee in its group companies, without appreciating the fact that such investments are highly strategic in nature and expenditure is certainly required for making decisions related to the said investments.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not taking cognizance of the CBDT Circular No. 5 of 2014 dated 11.2.2014 which states that disallowance u/s 14A r.w. Rule 8D needs to be made even when no exempt income is earned.”
At the very outset, the Ld. counsel for the assessee submitted that the tax effect in this case is below Rs. 10 lacs and as per and as per the CBDT Circular No. 21 of 2015, dated 10/12/2015, the present appeal is not maintainable. The Ld. Counsel relied on the decision of ITAT Mumbai Bench rendered in DCIT vs. M/s. Dome Bell Electronics India Ltd, ITA No 2480/Mum/2012.
On the other hand, the Ld. DR submitted that though the tax effect in this case is below Rs. 10,00,000/-. However, the amount of tax comes to Rs. 10,13,923/- if the education cess of 3% is included in the total amount of the Tax-. The Ld. DR further submitted that as per the judgment of the Hon’ble Supreme Court delivered in CIT vs. K. Srinivasan, 1972 AIR 491, income tax includes surcharge and on the same analogy, education cess also comes within 3 Assessment Year: 2012-13 the definition of tax and in the present appeal the amount of tax comes to Rs. 10,13,923/ after including education cess of Rs. 29,532/-. Since, the amount of tax exceeds Rs. 10,00,000/-, there is no merit in the contention of the assessee. Hence, the appeal should be decided on merits.
We have heard the rival submissions and also gone through the case relied upon by the Ld. DR. We notice that in case of CIT vs. K. Srinivasan (supra), the question before the Hon’ble Supreme Court was that whether the words “income tax” in the Finance Act of 1964 include surcharge and additional surcharge. The Hon’ble Court answered the question in affirmative. However, in the case before us, the issue is in relation to education cess and not surcharge. Since, it has not been specifically mentioned in Circular No 21 of 2015(supra) that the Tax includes education cess, in our considered view the education cess is not required to be included in the tax while calculating the tax effect. So, in the present case the tax effect exclusive of education cess comes to Rs. 9,84,391/- i.,e., below the threshold limit.
Further, we find that the issues raised in appeal do not fall under any of the exceptions specified in para 8 of the Circular. Since, it has been specifically clarified in the Circular aforesaid that the instruction will apply retrospectively to all the pending appeals; the present appeal filed by the revenue is not maintainable. We, therefore, dismiss the same in limine.