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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH.
ORDER PER G.S.PANNU,A.M: The captioned appeal filed by the Revenue pertaining to assessment year 2010-11 is directed against an order passed by CIT(A)- 47, Mumbai dated 24/12/2014, which in turn arises out of an order dated 28/03/2013 passed by the Assessing Officer under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal Revenue has raised the following Grounds of appeal:-
(Assessment Year : 2010-11) 1. “Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the Assessing Officer to restruct the disallowance u/s. 14A r.w. Rule 8D at Rs. 6,93,26,005/- instead of Rs. 105,83,54,495/-."
2. “Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the AO to delete the addition worked out u/s.14A r.w. Rule 8D of the Act while computing the book profits under section 115JB of the Act relying on the decision of Hon'ble ITAT in the assessee's own base for AY 2006-07 ignoring the fact that the decision has not been accepted by the department and appeal has been filed in Hon'ble High Court which is pending. "
At the time of hearing, it was a common point between the parties that the issues raised in the aforestated Grounds have been decided by the Tribunal in assessee’s own case for earlier assessment years. So however, in order to impart completeness to the order, the following discussion is relevant. The facts in brief are that the respondent assessee is a company incorporated under the provisions of the Companies Act, 1956, and is, inter-alia, engaged in the business of power generation. In the impugned assessment finalized under section 143(3) r.w.s. 153A of the Act, the Assessing Officer has made several additions/disallowances, which were subject matter of dispute before the CIT(A). One of the issues related to disallowance of Rs.105,83, 54,495/- made by invoking the provisions of section 14A of the Act. The Assessing Officer noted that assessee company had made investment, which would yield exempt income. It was further noticed by the Assessing Officer that the assessee had suo-motu disallowed a sum of Rs.6,93,26,005/- u/s.14A of the Act, which according to him was not in compliance with the disallowance computable in terms of Rule 8D of the Income Tax Rules, 1962 ( in short ‘the Rules’). As a consequence, the Assessing Officer determined the disallowance under (Assessment Year : 2010-11) section 14A of the Act by applying Rule 8D(2) of the Rules of Rs.105,83, 54,495/-.
Before the CIT(A), assessee made varied submissions on facts and in law. Ultimately, the CIT(A) noticed that in the present year, assessee had not received dividend or any other income which was exempt from tax and, therefore, no disallowance could be made in the instant year by invoking section 14A of the Act. So however, the CIT(A) also noticed that since assessee had made suo-motu disallowance of Rs.6,93,26,005/- under section 14A of the Act in the return of income filed in response to notice under section 153A of the Act, he directed the Assessing Officer to retain such disallowance on the ground that the corresponding expenditure could not be said to be incurred ‘wholly and exclusively for the purposes of business’. Against the decision of the CIT(A), Revenue is in appeal before us contending that there is no justification to reduce the disallowance to Rs.6,93,26005/- instead of Rs.105,83,54,495/- which was determined by the Assessing Officer under section 14A of the Act by applying Rule 8D of the Rules .
At the time of hearing, Ld. Representative for the assessee pointed out that so far as assessment year 2008-09 is concerned, the Tribunal vide & 982/Mum/2013 dated 31/7/2015, observed that the disallowance under section 14A of the Act is of no significance, inasmuch as, it would only lead to enhancement of the profits of assessee’s eligible business of generation of power and such enhanced profits would be eligible for the benefits under section 80IA of the Act. According to the Ld. Representative for the assessee,
(Assessment Year : 2010-11) similar situation is very much applicable in the instant year also and, therefore, the ultimate conclusion of the CIT(A) deserves to be upheld.
6. The Ld. Departmental Representative has not contested the factual matrix brought out by the Ld. Representative for the assessee. Apart therefrom, in our view, the decision of the CIT(A) that in the absence of any dividend or any other exempt income received in the instant year, no disallowance under section 14A of the Act is merited, is very much apt, as it is in line with the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT, 378 ITR 33 (Del). Thus, we have no hesitation in approving the stand of the CIT(A) on this aspect. In any case, so far as the decision of the CIT(A) in retaining the suo-motu disallowance made by the assessee is concerned, the same is not an issue before us. Thus, we hereby affirm the order of the CIT(A) on the aspect agitated by the Revenue. As a consequence, Revenue fails in Ground of appeal No.1.
7. In so far as the second Ground is concerned, the same relates to computation of ‘book profit’ in terms of section 115JB of the Act. The Assessing Officer, while computing book profit under section 115JB, added the amount of disallowance computed under section 14A of the Act. The assessee contended before the Assessing Officer that there was no justification for taking into consideration the disallowance under section 14A of the Act, while computing book profit under section 115JB of the Act. The CIT(A) has disagreed with the stand of the Assessing Officer on two counts Firstly, according to the CIT(A), in assessment year 2006-07, the Tribunal in assessee’s own case vide dated 22/2/2013 has considered a similar issue
(Assessment Year : 2010-11) and upheld the stand of the assessee following an earlier decision of the Tribunal in the case of Essar Teleholdings Ltd. vs. DCIT, dated 27/07/2011. Secondly, the CIT(A) noticed that in this year, assessee has not earned any exempt income and, therefore, no such income was credited to the P&L Account. As a consequence, no corresponding expenditure can be identified and, thus, the provisions were unworkable. In this manner, the addition made by the Assessing Officer has been deleted.
Before us, it was a common point between the parties that the decision of the Tribunal in assessee’s own case for assessment year 2006-07 dated 22/2/2013(supra) which has relied upon by the CIT(A), continues to hold the field as it has not been altered by any higher authority. As a consequence, we find no error on the part of the CIT(A) in relying upon the precedent and deleting the impugned addition. Moreover, even the factual aspect brought out by the CIT(A) is unexceptional and deserves to be upheld. We hold so. Thus, on Ground of Appeal No.2 also, the decision of the CIT(A) is affirmed.
In the result, appeal of the Revenue is dismissed as above.