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

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ITA 6048/MUM/2011Status: DisposedITAT Mumbai07 March 2017AY 2008-094 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's argument that only investments yielding exempt income should be considered for disallowance. Therefore, the issue was restored to the AO for recalculation.

What were the facts?

The assessee company, engaged in film production and related activities, claimed exempt income from dividends and long-term capital gains. The AO disallowed Rs. 35,07,280 under Section 14A read with Rule 8D, considering all investments. The CIT(A) confirmed this disallowance.

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D should be calculated on all investments or only those yielding exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Hearing: 16.1.2017

O R D E R PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee against the order dated 22.6.2011 passed by the ld. CIT(A)-3, Mumbai for the assessment year 2008- 09 wherein the assessee has challenged the confirmation of disallowance of Rs.35,07,280/- as made by the AO under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.

2.

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.

3.

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.

4.

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/.

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