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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Amit Shukla, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. Commissioner of Income Tax(Appeals), Mumbai-16 (in short ‘CIT(A)’}, dated 04.09.2015 passed against assessment order u/s 143(3), dated 27.07.2014 for Assessment Year 2011- 12 on the following Grounds: “The Learned CIT (A) has erred in confirming disallowance of Rs. 282894/- u/s Section 14 r.w.r 8D(2)(iii) disregarding the fact that the appellant case is 2 Eco Recycling Ltd. covered u/s 8D(1)(b) Further the learned CIT (A) erred in not restricting the disallowance u/s 14 read with Rule 8D to the extent of exempt income which in appellant case was Rs. 148829/- The Learned CIT(A) has erred in confirming disallowance of Preliminary expenses of Rs 619273/- on ground that the appellant did not press the ground before him . This is contrary to facts since the appellant stood by the submissions made vide the Statement of facts and letters dated 18/08/2015 and 28/08/2015 filed before the Learned CIT(A) which has mentioned in Pages 2 to 5 of his order.” During the course of hearing following Additional Grounds were also filed by the assessee: “1.On the facts and in the circumstances of the case & in law, the learned C.I.T. (A) erred in confirming addition to the extent of Rs.2,82,894/- made u/s 14A although the provision of section 14A has no application as no expenditure has been incurred in relation to the earning of exempt income. 2.On the facts and in the circumstances of the case & in law, the learned C.I.T. (A) erred in confirming the addition of Rs.6,19,558/- made as 'Deduction u/s.35D'and that too without assigning any proper reason.
On the facts and in the circumstances of the case & in law, the learned A.O. erred in making an addition of an amount of Rs.30,667/- u/s 41(1) of the act and that too without assigning any proper reason. 4.On the facts and in the circumstances of the case & in law, the learned A.O. erred in adding an amount of Rs.5,46,,558/- u/s 14A read with rule 8D of the I.T. Rules, while computing the book profit u/s 115JB of the Act. The Appellant craves leave to add, alter, amend or delete any or all of the grounds of appeal
at any time.”
2. During the course of hearing, arguments were made by Shri M. Subramanian, Authorised Representatives (AR) on behalf of the Assessee and by Shri Prakash Mane, Departmental Representative (CIT-DR) on behalf of the Revenue.
3 Eco Recycling Ltd.
3. Ground No.1 of main grounds and ground no.1 of additional grounds: These grounds deal with the disallowance u/s 14A. The brief facts are that the AO made total disallowance u/s 14A of Rs.5,46,558/- which was reduced to Rs.2,82,894/- by Ld. CIT(A). The Ld. CIT(A) had deleted the disallowance made by the AO under Rule 8D(2)(ii) pertaining to the interest, but sustained the disallowance made under sub-clause (iii) @ 0.5% of average value of investment amounting to Rs.2,82,894/-. 3.1. During the course of hearing, Ld. Counsel of the assessee fairly submitted that exempt income was received in the form of dividend amounting to Rs.1,48,829/- and therefore, amount of disallowance could not have exceeded this amount. 3.2. Per contra, Ld. DR did not raise any objection in this regard. 3.3. We have considered the submissions made by both the sides. The law in this regard is well settled now that the disallowance under Rule 8D(2)(iii) cannot exceed amount of exempt income. Under these circumstances, we direct the AO to reduce the disallowance to Rs.1,48,629/- being the amount of exempt income. The balance disallowance is directed to be deleted. Thus, the assessee gets part relief.
Ground No.2 of main grounds and Ground No.2 of additional grounds: These grounds deal with the disallowance made by the AO under section 35D for Rs.6,19,273/-. 4.1. With the assistance of both the parties, it was noted by us that the assessee had made detailed submissions before the Ld. CIT(A) for deletion of this disallowance. But, Ld. CIT(A)
4 Eco Recycling Ltd. wrongly observed in his order that this ground was not pressed by the assessee. Both the parties jointly stated that under these circumstances these grounds may be sent back to the file of the Ld. CIT(A). 4.2. It is noted by us that the assessee had made detailed submission before the Ld. CIT(A) on this issue vide its letters dated 18.08.2015 and 28.08.2015. Thus, Ld. CIT(A) ought to have decide this ground on merits. Thus, these grounds are sent back to the file of the Ld. CIT(A) for deciding fresh after giving adequate opportunity of hearing to the assessee and after considering entire material and submissions as may be placed by the assessee before the Ld. CIT(A). These grounds may be treated as allowed for statistical purposes.
Ground No.3 of Additional Grounds: This ground pertaining to addition made under section 41(1) for Rs.30,667/- was not pressed during the course of hearing, therefore same is dismissed.
Ground No.4 of Additional Grounds: This ground is with regard to adjustment to be made by the AO for computing book profit u/s 115JB for the amount of disallowance made u/s 14A. This ground was agreed to be consequential. Thus, the AO shall take into account and make adjustment of amount of exempt income credited in the Profit & Loss A/c as well as disallowance sustained u/s 14A while making adjustment in the book profits. This ground is decided accordingly.
In the result, the appeal filed the assessee is partly allowed.
5 Eco Recycling Ltd. Order pronounced in the open court at the conclusion of the hearing.