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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI G.S. PANNU & SHRI C.N. PRASAD
PER C.N. PRASAD (JM) 1. These two cross appeals are filed by the Assessee and Revenue against the order of the Commissioner of Income Tax (Appeals)-7, Mumbai dated 28.03.2012 for the Assessment Year 2008-09.
The First ground in the grounds of appeal of the assessee is against the confirmation of disallowance made u/s 14A r.w. Rule 8D2(iii) in the normal computation of income.
The Learned Counsel for the assessee before us contends that only those investments which yielded dividend income during the year should be considered for computing the disallowance Rule 8D2(iii) r.w.s 14A and this contention is supported by the recent Hon'ble Special Bench decision of Delhi Bench in the case of ACIT v. Vireet Investments Private Limited [82 Taxman.com 415].
Ld. DR supported the orders of the authorities below.
Heard rival contentions, we find similar issue has come up in assessee’s own case for the Assessment Year 2009-10 and 2010-11 in ITA.No 5693 & 5928/Mum/2012 and ITA.No.5537 & 5764/Mum/2013 respectively, and the Hon'ble Tribunal by order dated 31.08.2017
3 ITA.No.4326/MUM/2012 (A.Y: 2008-09) ITA.No.4794/MUM/2012 (A.Y: 2008-09) Reliance Capital Ltd., following the Special Bench decision in the case of ACIT v. Vireet Investments Private Limited (supra) directed the Assessing Officer to recompute the disallowance under Rule 8D2(iii) keeping in view the decision of the Hon'ble Special Bench by considering only those investments which yielded dividend income during the Assessment Year observing as under:-
“18. We have heard both the parties perused the orders of the authorities below and the decisions relied on. The Assessing Officer in this case noticed that assessee has received huge dividend income and also there was suo moto disallowance by the assessee towards expenses @ 0.5% of average investments at ₹.5,27,66,409/- and ₹.5,76,30,721/- for the Assessment Years 2009-10 and 2010-11 respectively. The assessee in the course of assessment proceedings furnished reply explaining the reasons for allocating only these expenses as attributable for earing exempt income. However, not convinced with the reply the Assessing Officer after elaborate discussion made in the Assessment Order computed the disallowance of expenses at 0.5% of average value of investments under Rule 8D(2)(iii) at ₹.21,54,43,581/- and ₹.33,46,51,469/-. However, since the assessee itself disallowed ₹.5,27,66,409/- and ₹.5,76,30,721/-, Assessing Officer has made net disallowance of ₹.16,26,77,172/- and ₹.20,70,20,748/- for the Assessment Years 2009-10 and 2010-11 respectively. The Assessing Officer also rejected the without prejudice contention of the assessee that only dividend yielded investments should be considered for computing the disallowance.
The Ld.CIT(A) following the decision of the Special Bench in the chase of Cheminvest Limited [121 ITD 318] affirmed the order of the Assessing Officer. The decision relied on by the Ld.CIT(A) has been reversed by the Delhi High Court in the case of Cheminvest Limited Vs. CIT [378 ITR 33 Delhi]. Recently the Special Bench of the Delhi Tribunal in the case of ACIT v. Vireet Investments Private Limited(supra) held that only those investments are to be considered for computing average value of investments which yielded exempt income during the year while computing the disallowance Rule 4 ITA.No.4326/MUM/2012 (A.Y: 2008-09) ITA.No.4794/MUM/2012 (A.Y: 2008-09) Reliance Capital Ltd., 8D(2)(iii). Therefore, respectfully following the said decision we hold that the disallowance computed u/s 14A r.w. Rule 8D by the Assessing Officer is not correct. Thus we restore this issue to the file of the Assessing Officer with a direction to re-compute the disallowance under Rule 8D(2)(iii) in view the decision of the Delhi Bench in the case of ACIT v. Vireet Investments Private Limited (supra) by considering only those investments which yielded dividend income during the Assessment Years 2009-10 and 2010-11. This common Ground is allowed for statistical purpose.”
Thus, respectfully following the said decision, we restore this issue to the file of the Assessing Officer with a direction to recompute the disallowance under Rule 8D2(iii) by considering only those investments which yielded dividend income during the Assessment Year 2008-09. This ground of appeal is allowed for statistical purpose.
7. The next issue in the appeal of the assessee is in respect of disallowance made u/s 14A while computing the book profits u/s 115 JB of the Act.
We find that this issue also decided by the Coordinate Bench observing as under: - “20. The second common ground of appeal
is in respect of disallowance u/s 14A while computing the book profits u/s 115JB of the Act.
21. This issue is also covered by the decision of the Special Bench Delhi in the case of ACIT v. Vireet Investments Private Limited (supra) wherein it has been held that computation under Clause(f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of I.T.
5 ITA.No.4326/MUM/2012 (A.Y: 2008-09) ITA.No.4794/MUM/2012 (A.Y: 2008-09) Reliance Capital Ltd., Rules. Thus respectfully following the said decision we direct the Assessing Officer to compute the book profits u/s 115JB of the Act in accordance with the directions of the Special Bench (supra). This common ground of appeal is allowed for statistical purpose.”
9. Thus, respectfully following the said decision we direct the Assessing Officer to compute the book profits in accordance with directions of the Hon'ble Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra).
10. Coming to the Revenue’s appeal, the only grievance of the Revenue is that Ld.CIT(A) erred in directing the Assessing Officer to adopt the disallowance at ₹.35,00,000/- under 115JB for working out book profits in respect of ₹.4.62 Crores as adopted by the Assessing Officer u/s 14A of the Act.
This ground of appeal is restored to the file of the Assessing Officer to compute the book profits u/s 115JB in view of the decision of the Delhi Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra) wherein it has been held that computation under Clause(f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of I.T. Rules. The grounds raised by the revenue in its appeal on this issue is allowed for statistical purpose.
6 ITA.No.4326/MUM/2012 (A.Y: 2008-09) ITA.No.4794/MUM/2012 (A.Y: 2008-09) Reliance Capital Ltd., 12. In the result appeal of the assessee as well as Revenue are partly allowed for statistical purposes.
Order pronounced in the open court on the 13th September, 2017.