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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAM LAL NEGI
This appeal by the Revenue is directed against the order of CIT(A)-41, Mumbai dated 30.08.2011, pertaining to the Assessment Year 2008-09, which in turn has arisen from order dated 31.12.2010 passed by the Assessing Officer, Mumbai under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, Revenue has raised the following revised Grounds of appeal :-
“i) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in directing the Assessing Officer to make
2 M/s. Archana Syntex Pvt. Ltd. disallowance under section 14A as per decision of ITAT Mumbai bench in the case of DCIT Vs. HDFC Bank Lt, 217/Mum/2008 when disallowance for this year has to made as per the provisions of rule 8D in accordance with the decision of Mumbai High Court in the case of Godrej and Boyce Manufacturing Company Limited 234 CRT 1. ii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in directing the assessing officer to make disallowance under section 14A as per decision of ITAT Mumbai bench in the case of DCIT Vs. HDFC Bank Ltd 217/Mum/2008 when Ld. CIT(A) could not find any error in the computation of disallowance made as per rule 8D by the assessing officer.”
Although the Revenue has raised two Grounds of appeal, but the solitary dispute arises from the action of the CIT(A) in deleting the disallowance of Rs.37,97,198/- made by the Assessing Officer by invoking Sec. 14A of the Act.
4. In brief, the relevant facts are that the respondent-assessee is a company incorporated under the provisions of Companies Act, 1956 and is, inter-alia, engaged in the business of processing, trading of cloth, knitted fabric and yarn. In the course of assessment proceedings, Assessing Officer noticed that assessee had made investments amounting to Rs.75,94,39,565/- whereas in the computation of income filed, assessee has not made any disallowance u/s 14A of the Act. Sec. 14A of the Act prescribes that no deduction shall be allowed in respect of expenditure incurred by assessee in relation to an income which does not form part of the total income under the Act. Before the Assessing Officer, assessee contended that no disallowance was required to be made u/s 14A of the Act since assessee did not earn any income which 3 M/s. Archana Syntex Pvt. Ltd.
was exempt under the Act. The Assessing Officer disregarded the plea of assessee as according to him, the fact that assessee had made investments, which would generate exempt income, the expenses relatable to such investment was also liable to be disallowed u/s 14A of the Act. As a consequence, he applied the provisions of Rule 8D of the Income Tax Rules, 1962 and accordingly disallowed an expenditure of Rs.37,97,198/- which was 0.5% of the average investments. The CIT(A) has not approved the action of Assessing Officer and instead directed the Assessing Officer to follow the decision of Mumbai Bench of Tribunal in the case of DCIT vs. HDFC Bank Ltd., dated 29.6.2011. Against such a decision, Revenue is in appeal before us.
At the time of hearing, the learned representative for the respondent-assessee pointed out that there is no dispute to the fact- position that during the year under consideration assessee has not earned any exempt income and for this, he has referred to the assessment order wherein such position has been noted. On this basis it is pointed out that no disallowance u/s 14A of the Act is permissible in view of the judgment of Hon'ble Delhi High Court in the case of Cheminvest Ltd., 378 ITR 33. In this manner, the learned representative has sought to defend the conclusion of CIT(A).
The ld. DR appearing for the Revenue has not disputed the factual matrix brought out by the learned representative for the assessee.
4 M/s. Archana Syntex Pvt. Ltd.
In view of the fact that assessee has not earned any exempt income during the year under consideration, the judgment of Hon'ble Delhi High Court in the case of Cheminvest Ltd. (supra) clearly bars disallowance of any expenditure by invoking Sec. 14A of the Act. In this view of the matter, we affirm the ultimate decision of CIT(A), albeit on a different ground.
In the result, appeal of Revenue is dismissed.
Order pronounced in the open court on 30th September, 2016.