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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI AMARJIT SINGH
The captioned appeal by the Revenue is directed against the order of CIT(A)-8, Mumbai dated 22.04.2016, pertaining to the Assessment Year 2012-13, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 31.03.2015 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In its appeal, Revenue has raised the following Grounds of appeal:-
M/s. Devkant Synthetics (I) Pvt. Ltd.
“1. Whether on the facts and circumstances and in law, the Ld. CIT(A) was right in restricting the disallowance u/s 14A of the Income Tax Act to 5% of dividend earned during the year, relying upon the Hon'ble ITAT’s decision for the A.Yrs. 2010-11 and 2011-12 in assessee’s own case without appreciating the fact that the A.O. had correctly worked out the disallowance as per the provisions of section 14A r.w.s. 8D.
2. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the Assessing Officer restored.”
In brief, the relevant facts can be summarised as follows. The assessee is, inter-alia, engaged in the activity of investment as well as trading in shares and securities. In the course of assessment proceedings, the Assessing Officer noted that during the year under consideration assessee had earned dividend income of Rs.37,30,170/-, which was exempt in terms of Sec.10(34) of the Act and assessee was incurring interest expenditure as well as other expenses and, therefore, required the assessee to show cause as to why the relevant expenses not be disallowed in terms of Sec. 14A of the Act. Before the Assessing Officer, assessee contended that it was engaged in share trading activity and that the shares and securities were held for trading purposes. Assessee had received dividend on shares purely as an incidental income whereas its substantive purpose was to earn trading income. Be that as it may, the Assessing Officer applied the formula contained in Rule 8D of the Income Tax Rules, 1962 (in short ‘the Rules’) and computed the disallowance of Rs.4,16,40,986/- for the purposes of Sec. 14A of the Act. Out of the total disallowance, Rs.3,87,71,910/- was worked out from interest expenditure in terms of Rule 8D(2)(ii) of the Rules and balance of Rs.28,69,076/- was worked out as per Rule
M/s. Devkant Synthetics (I) Pvt. Ltd.
8D(2)(iii) of the Rules. When the matter reached the CIT(A), assessee canvassed that the disallowance u/s 14A of the Act made in the instant year is similar to that made in Assessment Years 2009-10, 2010-11 and 2011-12, which have since been considered by the Tribunal in to 2665/Mum/2015 dated 28.10.2015 (and Corrigendum dated 16.11.2015) and the disallowance made by the Assessing Officer has been restricted to 5% of the dividend income. The CIT(A) considered the submissions put forth by the assessee and has concluded that the facts and circumstances of the instant year are similar to those decided by the Tribunal in assessee’s own case for Assessment Years 2009-10, 2010-11 and 2011-12 and, therefore, he followed the precedents and restricted the disallowance made by the Assessing Officer u/s 14A of the Act to 5% of the dividend income. Against such a decision of the CIT(A), Revenue is in appeal before us as per the aforestated Grounds of appeal.
4. Before us, the learned representative for the assessee filed a Paper Book, inter-alia, enclosing the submissions made before the lower authorities as also the copy of the order of the Tribunal dated 28.10.2015 (with corrigendum) (supra). Reliance has also been placed on the judgments of the Hon'ble Bombay High Court in the case of India Advantage Securities Ltd., of 2013 dated 17.03.2015 and in the case of HDFC Bank Ltd., Writ Petition no. 1753 of 2016 dated 25.02.2016.
The ld. DR appearing for the Revenue has sought to place reliance on the stand of the Assessing Officer, but has not canvassed any M/s. Devkant Synthetics (I) Pvt. Ltd.
arguments which would distract from the finding of the CIT(A) that the facts and circumstances of the case in this year are similar to those in Assessment Years 2009-10, 2010-11 and 2011-12, which have since been considered by the Tribunal. In this view of the matter, we are unable to interfere with the finding of the CIT(A), which is based on the decision of the Tribunal in assessee’s own case in to 2665/Mum/2015 dated 28.10.2015 (supra). Notably, the decision of the Tribunal dated 28.10.2015 (supra) continues to hold the field and has not been altered by any higher authority.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15th September, 2017.