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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Shamim Yahya
O R D E R This appeal by the assessee is directed against order of learned CIT(A) dated 10.10.2016 and pertains to assessment year 2011-2012.
The grounds of appeal
read as under:- “1. On facts and in law, the learned Commissioner of Income-tax (Appeals) [hereinafter referred to as "Ld. CIT(A)"] had erred in not directing the Assessing Officer to exclude the investments amounting to Rs.4,95,00,754/- as on 31.03.201 1 on which no exempt income was received during the year for disallowance u/s.!4A r.w.r. 8D. Under the facts and circumstances of the matter, he ought to have direct the Assessing Officer to exclude the investments amounting to Rs.4,95,00,754/- while computing the disallowance made u/s. 14A r.w.r. 8D.
2. On facts and in law, the Ld. C!T(A) had erred in including the value of shares held as stock-in-trade while computing disallowance as per Rule 8D r.w.s. 14A of the I.T. Act. Under the facts and circumstances of the matter, he ought to have excluded the shares held as stock-in-trade for the purview of Rule 8D r.w.s. 14A.
. M/s.Camelot Enterprises Private Limited. 3. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal
, at any time before or at, the time of hearing of the appeal, so as to enable the Hon. ITAT to decide this appeal according to law.”
3. Brief facts of the case are as under:-
4. During the assessment proceedings, the assessee was asked to provide the working of disallowances under section 14A of the Act. In response, the assessee vide letter dated 08/01/2014 has stated that the assessee has not incurred any interest expenditure and hence only 0.5% of the average investments should be disallowed as disallowance under section 14A. On examination of the working provided by the assessee, the A.O. observed that while arriving at figure of average investment, the assessee did not consider the value held as stock in trade. The A.O. hold that the AR of the assessee was confronted on the issue of considering the value of stock in trade, and after discussing this issue, the disallowance made under section 14A r.w.r. 8D is computed as under.
1. Opening Stock and Investment as on 01.04.2010 Rs. 4,67,208/- Closing Stock and Investment as on 31.03.2011 Rs. 12,26,75,300/- Total Rs. 12,31,42,508/- Average of stock and Investment Rs. 6, 15,7 1,245/- 0.5% of Average Investment Rs. 3,07,856/- 2 Interest Paid Nil Total Disallowance under section 14A rwr 8D Rs. 3,07,856/-
5. Upon assessee’s appeal, learned CIT(A) confirmed the addition holding as under:-
. M/s.Camelot Enterprises Private Limited. “The facts available on records suggest that the Ld. AO has not made any disallowance under Rule 8D(2)(i) and 8D(2)(ii). However, the Ld. AO has made disallowance under Rule 8D(2)(iii) at Rs. 3,07,856/-. In view of above discussions and respectfully following the decision of Hon'ble Third Member Bench, ITAT, Mumbai in the case of D.H. Securities P Ltd (supra), the action of the Ld. AO in disallowing 0.5% of average value of investments (including both investments made in shares and in closing stock of shares) stands confirmed. However, since the Ld. AO has been directed above to re- compute the average value of investments after excluding the value of investments made in non convertible debentures, income from which is not exempt, so the Ld. AO is directed to re-compute the disallowance under Rule 8D(2)(iii) at 0.5% of average value of investments as recomputed and directed herein. In result the Ld. AO shall re-compute the disallowance under section 14A rw Rule 8D as per above directions.”
Against the above order, assessee is in appeal before the ITAT.
I have heard both the Counsel and perused the records. I find that the first ground raised by the assessee is covered in assessee’s favour by the decision of the Special Bench of the Tribunal as under:-
Special Bench decision in the case of ACIT v. Vincent Investment P. Ltd., order dated 22.06.2017. Only those investments are to be considered for computing the average value of investment which yield exempt income during the year.
As regards the second ground raised, I find that the same is covered in favour of the assessee by the decision of Hon’ble Punjab & Haryana High Court in the case of State Bank of Patiala and Hon’ble Calcutta High Court decision in the case of CIT v. G.K.K. Capital Market Ltd. 392 ITR 196. In these
. M/s.Camelot Enterprises Private Limited. cases, it was expounded that where shares held as stock in trade the expenses relatable there to cannot be disallowed u/s 14A.
No decision of Hon’ble jurisdictional High Court to the contrary has been produced before me. The decision of Hon’ble jurisdictional High Court in the case of Godrej & Boyce no way disputes the above proposition. Accordingly, I set aside the issue raised in this appeal to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh in light of the case laws cited hereinabove.
In the result, this appeal filed by the assessee stands allowed for statistical purposes.