DCIT CIR. 3(3)(2), MUMBAI vs. WHITE PEARL HOTELS & INVESTMENT PVT. LTD., MUMBAI

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ITA 2340/MUM/2016Status: DisposedITAT Mumbai12 April 2017AY 2012-133 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal confirmed the deletion of the disallowance by the CIT(A). It followed the Delhi High Court's decision in Cheminvest Ltd., which held that disallowance under Section 14A requires actual receipt of income not included in total income.

What were the facts?

The Assessing Officer (AO) made a disallowance under Section 14A read with Rule 8D for expenditure related to exempted income. The assessee argued that no exempted income was earned, and the AO himself noted this in the assessment order.

What were the issues?

Whether expenditure disallowance under Section 14A is permissible when the assessee has not earned any exempt income. Whether the AO can invoke Section 14A when he himself notes the absence of exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

For Appellant: Shri Ishwar P. Rathor, AR
For Respondent: Shri B. Satyanarayan Raju, DR, Shri Ishwar P. Rathor, AR

This appeal by the Revenue is arising out of the order of CIT(A)-8, Mumbai, in appeal No. CIT(A)-8/IT-138/14-15 dated 27-01-2016. The Assessment was framed by DCIT Circle-3(3), Mumbai for the A.Y. 2012-13 vide order dated 01-10-2014 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by AO on account of the claim of expenditure relatable with exempted income by invoking the provisions of Section 14A of the Act reads with Rule 8D of the Income Tax Rules 1962 (hereinafter the ‘Rules). For this Revenue has raised following three grounds: -

“1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) is right in deleting the addition of Rs. 1,33,61,478/- made by the assessing

White Pearl Hotels & Investment Pvt. Ltd.AY:12-13 officer under section 14A read with rule 8D(2) of IT Act 1961?

2.

Whether on the facts and in the circumstances of the case and in law, Cd. CIT(A) is right in not considering the fact that the amount of disallowance u/s 14A has to be computed as per rule 8D when the computation of the assessee was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s Godrej & Boyce Mfg. Co. Ltd."

3. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) Is right in holding that no exempt income has been earned by the assessee from the investment during the year and therefore no disallowance u/s. 14A r.w.r. 8D could be made, which is in contravention to the CBDT's circular No.5 of 2014 dated 11-02-2014 ."

3.

At the outset, the learned Counsel for the assessee drew our attention to the assessment order Para 5.4 wherein the AO has recorded the fact that the assessee does not have any exempted income. But according to AO the assessee had made long term investment in shares etc. In view of the above learned Counsel for the assessee stated that Tribunal decision in assessee’s own case for AYs. 2009-10 and 2020-11 in and 4314/Mum/2014 vide order dated 23-11-2015 and also in ITA No. 7519/Mum/2014 for AY 2011-12 dated 24-08-16 has deleted the disallowance by following the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. (2015) 378 ITR 33 (Del).

4.

We find that Hon'ble Delhi High Court has clearly held that there should be actual receipt of income which is not included in the total income of the assessee during the relevant previous year relevant to AY under consideration for the purpose of disallowing any expenditure in relation to that income by invoking the provisions of Section 14A of the Act read with Rule 8D of the Rules. Respectfully, following the Tribunal’s decision assessee’s own case and White Pearl Hotels & Investment Pvt. Ltd.AY:12-13 Hon'ble Delhi High Court in the case of Cheminvest Ltd (supra), we confirm the order of CIT(A) deleting the disallowance.

5.

In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 12-04-2017.

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