MUKTA ARTS LIMITED,MUMBAI vs. ACIT., 11(1), MUMBAI

Earlier, the appeal was dismissed in limine for non-prosecution by the Tribunal on 26.11.2012. Thereafter, vide MA No.142/Mum/2013 the assessee prayed for restoration of original appeal and the Tribunal vide order dated 11.10.2013 passed in Miscellaneous Application restored the appeal for fresh hearing. Hence, this is a second inning of the litigant before the tribunal.

Brief facts of the case are that the assessee filed its original return of income on 29.9.2008 declaring a total income of Rs.3,67,88,592/- and revised return of income on 23.3.2009 declaring the same income revising the TDS claim only. The return was processed under section 143(1) and thereafter the case was selected for scrutiny wherein the statutory notices under section 143(2) and 142(1) were issued and served to the assessee. The assessee company is engaged in the business of production, distribution, and exhibition and also derives income from hiring of studio facilities for production of film, TV serials and advertisements etc.

The issue raised in ground no.1 is against the confirmation of disallowance of Rs.35,07,280/- by ld.CIT(A) as made by the AO u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. During the course of assessment proceedings, the AO observed that the assessee has earned exempt income on which it did not show any direct expenditure incurred but definitely has incurred some indirect expenses as without incurring any expenditure, investments in shares could not have been made and as a result the same was claimed against the taxable income of the assessee. The AO calculated disallowance u/s 14A r.w.r.8D by applying 0.5% of the average investment which came to Rs.35,07,280/.