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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out different orders of the CIT (A)-3, Mumbai in appeal Nos. CIT(A)-2&3/IT-145/12-13 dated 19-01-2015 & 27.02.2015. The Assessments were framed by DCIT-1(3), Mumbai for the A.Y. 2009-10 & 2010-11 vide orders of even date 01-02-2013 u/s 143(3) read with section 144C of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only common issue in these two appeals of the assessee is as regards to orders of CIT(A) confirming the additions made by AO by disallowing the expenses relatable to exempt income by invoking the provisions of Section 14A of the Act read with Rule 8D of the I.T. rule 1962 (hereinafter ‘the Rule’). The disallowance made in A.Y. 2010-11 is Rs.97,12,595/- and in A.Y. 2009-10 amounting to Rs.89,67,598/-.
Briefly stated facts are that the assessee has earned dividend income of Rs.91,99,908/- in A.Y. 2009-10 and amounting to Rs.5.16 crore in A.Y. 2010-11 and claimed the same as exempt u/s 10(34) of the Act. It was claimed by assessee before the AO as well as before CIT(A) that assessee has earned dividend income from investment in Aryan Mining and Trading Corporation Ltd. It was explained that Aryan Mining and Trading Corporation Ltd is an integral part of business of assessee, in as much as, the investment has been made with the sole object of ensuring consistent and uninterrupted supply of fines to Brahmani River Pellets Ltd., which is a group concern manufacturing iron ore fines, in which the assessee company is trading. It was claimed that the expenditure pertaining to the investment is for the purpose of business.
On these facts, the learned Counsel for the assessee stated that the tribunal in A.Y. 2008-09 in vide order dated 12-01-2016 as decide the issue in favour of assessee, wherein Tribunal vide para 6 and 6.2 held as under: -
6. The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. There is no denying that the investments in shares of Aryan Mining & Trading Corpn was made to ensuring consistent and uninterrupted supply of raw material to its Brahmani River Pellets Ltd Plant. Thus it can be safely concluded that the investment made in its associated company was purely on account of commercial expediency. Since the investment is of strategic nature, in our considered opinion, no disallowance u/s. 14A is called for. We draw support from the decision of the Tribunal in the case of M/s. J.M. Financial Ltd in and also from the decision of the Hon’ble High Court of Delhi in the case of Oriental Structural Engineers Ltd in ITA No. 605 of 2012. 6.1. A similar view is also taken by the Co-ordinate Bench of Chennai in the case of EIH Associated Hotels Ltd. in ITA Nos. 1503 and 1624/Mds/2012. For the sake of completeness of the adjudication, it would not be out of place to refer to the decision of the Hon’ble High Court of Delhi in the case of Cheminvest Ltd in ITA No. 749 of 2014 wherein the Hon’ble High Court has held that no disallowance can be made u/s. 14A in the year when there is exempt income earned by the assessee. Respectfully following the aforementioned decision of the Hon’ble High Court of Delhi in the light of our discussion made elsewhere, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the impugned disallowance made u/s. 14A r.w. Rule 8D of the Act.
In view of the above, the learned Counsel for the assessee stated that the issue is covered in favour of assessee and against the Revenue in assessee’s own case. When this was pointed out to the learned Senior DR, he fairly conceded the position. After hearing the rival contentions and going through the facts and circumstances of the case, we find that this issue has already been adjudicated by the co-ordinate bench of this Tribunal in assessee’s own case for the A.Y. 2008- 09. Respectively, following the same we reversed the orders of lower authorities in these two assessment years and allowed the appeals of the assessee.
In the result, the appeals of the assessee are allowed. Order pronounced in the open court on 28-11-2016.