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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed these appeals against the orders of the Commissioner of Income Tax (Appeals)-9, Chennai in &
:-2-: & 2089/Mds/2017 66/(2014-15)/CIT(A)-9 dated 30.05.2017 for ays 2011-12 and 2012-13, respectively.
M/s. Ennore Tank Terminals Pvt. Ltd., the assessee is in the business of owning, operating and maintaining the Jetty and back up storage and handling of third party bulk liquid cargo catering to the requirements of importers and exporters through Ennore Port. While making the assessment for ays 2011-12 & 2012-13, the AO noticed that the assessee had earned dividend income at Rs. 73,03,908/- & Rs. 1,77,92,834/- in the respective assessment years and claimed it as exempt income u/s. 10(34).
The AO observed that the expenditure attributable to earning of these exempt income ought to be disallowed u/s. 14A r.w.r. 8D. The assessee stated that the investments were made out of mixed funds i.e., both from share capital as well as from the term loan. The AO by relying on the decision of the Hon’ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd., 328 ITR 81 and invoking provisions of section 14A r.w.r. 8D worked out the expenditure attributable to the earning of exempt income under Rule 8D(2)(ii) & 8D(2)(iii) at Rs. 1,79,99,525/- & Rs. 1,81,31,202/- for ays 2011-12 & 2012-13, respectively. Aggrieved, the assessee filed appeals before the CIT(A).
:-3-: & 2089/Mds/2017
3. The CIT(A) upheld the disallowances made u/s. 8D(2)(ii) & 8D(2)(iii) for both the ays 2011-12 & 2012-13 However, he found that the assessee earned exempt income of Rs. 73,03,908/- & Rs. 1,77,92,834/- for ays 2011-12 & 2012-13, respectively. However, the AO disallowed Rs. 1,79,99,525/- & Rs. 1,81,31,202/-. Relying on the Delhi High Court decision in the case of Joint Investment Pvt. Ltd., 372 ITR 694, the Punjab & Haryana High Court decision in the case of Empire Package Pvt. Ltd., of 2015 dated 12.01.2016, the Jurisdictional ITAT decision in the case of Ambattur Clothing Ltd., in ITA No. 1643/Mds/2014 and ITA No. 910/Mds/2014 dated 28.12.2015 following the decision of Mumbai Bench of Tribunal in the case of M/s. Daga Global Chemicals Pvt. Ltd., in ITA No. 5592/Mum/2012 dated 01.01.2015, the CIT(A) held that the disallowances made u/s. 14A cannot exceed the exempt income and hence, directed the AO to restrict the disallowances u/s. 14A to the extent of exempt income earned of Rs. 73,09,908/- & 1,77,95,834/- for ays 2011-12 & 2012-13, respectively. He deleted the balance disallowances in the respective assessment years.
Aggrieved, the Revenue filed the common grounds of appeal which is extracted as under:
“2.1 The CIT(A) erred in restricting the disallowance made u/s. 14A r.w.r. 8D to the extent of exempt income earned when the provisions of :-4-: & 2089/Mds/2017 the said section as well as Rule 8D does not provide for any such exception. 2.2 The CIT(A) failed to appreciate that as per CBDT Circular No. 5/2014 dated 11.02.2014, disallowance u/s. 14A is eligible even when there is no exempt income earned during that the relevant previous year. 2.3 The CIT(A) failed to consider the fact that when assessee had mixed bag of funds i.e., both from the share capital and also from the term loan and huge investments were made in assets yielding exempt income.
Similar decision of the appellate forum in various cases have not been accepted and further appeal is pending before the Hon’ble High Court.”
The DR placing reliance on the CBDT Circular No. 5/2014 dated 11.02.2014, submitted that the disallowances have to be made under Rule 8D(2) of the Income Tax Rules, 1962. Therefore, the CIT(A) was not justified in restricting the disallowances to the extent of the exempted income earned by the assessee.
On the contrary, Shri P. Ranga Ramanujam, the Authorised Representative for the assessee submitted that the CIT(A) by placing reliance on the order of the Tribunal in Southern Petrochemical Industries v. DCIT (993 TTJ 161), the judgement of Delhi High Court in Joint Investments Pvt. Ltd v. CICT (2015) 372 ITR 694 and the judgement of Punjab & Haryana High Court in Empire Package Pvt. Ltd., in ITA No. 415
:-5-: & 2089/Mds/2017 of 2015 dated 12.01.2016, found that the disallowances have to be restricted to the extent of exempted income earned by the assessee.
Further, the AR relied on the decision of this tribunal in the assessee’s own case in dated 18.09.2017.
We heard the rival submissions and perused the relevant material available on record. The Assessing Officer computed the disallowances by applying Rule 8D(2)(ii) & 8D(2)(iii) at Rs. 17999525 (1699982+999543) and Rs. 18131202 (16738269+1392932) for ays 2011-12 & 2012-13, respectively. The CIT(A) by following the judgement of Delhi High Court in Joint Investments Pvt. Ltd., (Supra) and judgement of Punjab & Haryana High Court in Empire Package Pvt. Ltd., (Supra) and the order of this Tribunal in Ambattur Clothing Ltd, in dated 28.12.2015 directed the Assessing Officer to restrict the disallowances to the extent of exempted income earned by the assessee. This Tribunal on similar facts in the assessee’s own case for assessment year 2010-11 did not find any reason to interfere with the order of the lower authority and dismissed the revenue’s appeal in ITA No. 1047/Mds/2017 dated 18.09.2017. Since, there is no change in fact and in law, by following the above decisions, the Revenue’s appeals are dismissed.
:-6-: & 2089/Mds/2017
In the result, Revenue’s appeal in & 2089/Mds/2017 are dismissed.
Order pronounced on Wednesday, the 08th day of November, 2017 at Chennai.