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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Assessee by: Ms. Dinkle Hariya Department by: Shri B. Satyanarayana Raju सुनवाईकीतारीख / Date of Hearing: 03.10.2016 घोषणाकीतारीख /Date of Pronouncement:06.01.2017 आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 14.11.2011 passed by the Commissioner of Income Tax (Appeals) - 5, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2008- 09.
The assessee has raised the following grounds:- “1.1 The learned Commissioner of Income Tax (Appeals) – 5, Mumbai [“ld. CIT(A)”] erred in confirming the action of the Income Tax Officer 2(2)(3), Mumbai [“the A.O.”], in disallowing Rs.7,06,766/- on the ITA No.1094.M.12 A.Y. 2008-09
ground of alleged expenditure incurred for earning dividend income of Rs.2,02,028/-. 1.2 The CIT(A) failed to appreciate that: (i) there was no nexus between incurred by the appellant during the year and earning of the dividend income; ii) the provisions of section 14A of the Income Tax Act, 1961 (“the Act”) and / or Rule 8D of the Income Tax Rule 8D of the Income Tax Rule, 1962 were not applicable, in the facts of the appellant’s case; and iii) Assuming – but not admitting that section 14A of the Act was applicable, the computation of the disallowance was not in accordance with the law. 1.3 It is submitted that, in the facts and circumstances of the case, and in law, no such disallowance was called for. 1.4 Without prejudice to the above, it is submitted that the disallowance is arbitrary, excessive and not in accordance with the law.
The brief facts of the case are that the assessee filed its return of income on 23.09.2008 declaring total loss to the tune of Rs.1,64,144/- and book profit u/s.115JB of the Income Tax Act, 1961 ( in short “the Act”) to the tune of Rs.5,51,878/- for the A.Y.2008-09. The assessee has revised its return on 30.12.08 and has revised its tax liability under MAT to the tune of Rs.29,211/- as against Rs.55,188/- shown in the original return. The assessee has claimed credit for advance tax of Rs.1,40,000/-, TDS Rs.5,26,225/- and refund of Rs.6,09,380/- in its return. The return was processed u/s.143(1) of the Act. The case was selected for scrutiny and notice u/s.143(2) of the Act dated 03.08.2009 was issued and served upon 2
ITA No.1094.M.12 A.Y. 2008-09 the assessee on 06.08.2009. Subsequently, notice u/s.142(1) of the Act along with questionnaire was issued and served upon the assessee. The Assessing Officer found that the assessee received the dividend income to the tune of Rs.2,02,028/- which was exempt u/s.10(34) of the Act but did not made disallowance u/s.14A of the Act. Thereafter, the Assessing Officer applied the provision u/s.14A r.w.Rule 8D of the Act and disallowed the expenditure to the tune of Rs.7,06,766/-. The said disallowance was confirmed by the CIT(A) in the order in question, therefore the assessee has filed the present appeal before us. ISSUE NO.1.1 TO 1.4:- 4. All the issues leads to the question that the disallowance u/s.14A r.w.Rule to the tune of Rs.7,06,766/- is wrong against law and facts or not. It is in dispute that the assessee earned the dividend income to the tune of Rs.2,02,028/- and did not disallowed any expenditure. The contention of the assessee is that the Assessing Officer did not record the satisfaction with regard to the correctness of the claim of the assessee in respect of the expenditure incurred in relation to exempt income and the Assessing Officer has disallowed the expenditure to the tune of Rs.7,06,766/- against the dividend income or Rs2,02,028/- which is more than the dividend income hence, the finding of the Assessing Officer which has been confirmed by the CIT(A) is wrong against law and facts and liable to be set aside and also placed reliance upon the law settled in Graviss Hospitality Ltd. Vs. DCIT (67 SOT 184)(Mum.Trib) and Joint Investments Pvt. Ltd. Vs. CIT (ITA
ITA No.1094.M.12 A.Y. 2008-09 No.117 of 2015)(Del.HC) and Pinnacle Brocom Pvt. Ltd. Vs. ACIT (ITA No.6247 of 2012) (Mum).
On the other hand the learned representative of the department has strongly relied upon the order passed by the CIT(A) in question. By giving the careful thoughts to the contention raised by the learned representative of the parties and by going through the record, it came into the notice that the Assessing Officer failed to record his satisfaction with regard to the correctness of the claim of the assessee. No doubt in view of the said circumstances and in view of the law settled in Graviss Hospitality Ltd. Vs. DCIT (67 SOT 184)(Mum.Trib) and Joint Investments Pvt. Ltd. Vs. CIT (ITA No.117 of 2015)(Del.HC) and Pinnacle Brocom Pvt. Ltd. Vs. ACIT (ITA No.6247 of 2012) (Mum), we are of the view that the order of the Assessing Officer confirmed by the CIT(A) is not justifiable. Anyhow, the assessee has earned the dividend income to the tune of Rs.2,02,028/- whereas the Assessing Officer has disallowed the expenditure to the tune of Rs.7,06,766/- which is more than the exempt income. It is also not in accordance with law specifically in view of the law settled in Pinnacle Brocom Pvt. Ltd. Vs. ACIT (ITA No.6247 of 2012) (Mum). In view of the said circumstances, we are of the view that the order of the CIT(A) is wrong against law and facts and is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to reassess the expenditure incurred to earn the exempt income in view of the above mentioned law and by giving an opportunity of being heard to the assesse. Accordingly, all these issues are decided in favour of the assessee against the revenue. 4
ITA No.1094.M.12 A.Y. 2008-09