BLUE BLENDS (I) P.LTD,MUMBAI vs. DCIT RG 4(1), MUMBAI

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ITA 168/MUM/2013Status: DisposedITAT Mumbai27 April 2016AY 2009-103 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that no expenditure was incurred by the assessee to earn the dividend income, thus disallowing it under Section 14A was unjustified. Regarding depreciation, the Tribunal followed High Court decisions and allowed depreciation on assets forming part of the block of assets, even if not in use.

What were the facts?

The assessee company, declared sick, earned a small dividend income of Rs. 352/-. The Assessing Officer disallowed Rs. 5,42,831/- under Section 14A for expenses incurred to earn this exempt income. The assessee also claimed depreciation on certain assets, which was disallowed by the AO and confirmed by the CIT(A).

What were the issues?

Whether disallowance under Section 14A is justified when no expenditure is incurred to earn exempt income, and whether depreciation is allowable on assets forming part of the block of assets even if not in use.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM

Hearing: 07/04/2016Pronounced: 27/04/2016

O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, for the assessment year 2009-2010, in the matter of order passed u/s.143(3) of I.T.Act.

2.

The only grievance of the assessee relates to disallowance of Rs.5,42,831/- u/s.14A r.w.r.8D against earning of exempt dividend income of Rs.352/-.

3.

Rival contentions have been heard and record perused. Facts in brief are that the assessee company is a sick company since the F.Y.1999-2000 and was so declared-sick company by the BIFR. It did not incur any direct or indirect expenditure during the year under consideration to earn an income not includible in taxable income. All its 2 investments are strategic investments in its sister or associates concerns for its business purposes which were made before more than 15 to 20 years back for which no borrowed funds were used. We also found that it has not made any new investments in last 5-10 years and all of its movable and immovable assets are charged to its secured institutional lenders and banks. During the year under consideration it got a dividend of Rs.352/- on 18 Shares it holds in Assian Paints Ltd for which it has not incurred any direct or indirect expenses and cost of its investment in Asian Paints Ltd. Is Rs. 3900/- only out of its total investments of Rs.107409142/-.

4.

From the record, we found that assessee has not incurred any expenditure for earning dividend of Rs.352/-. Accordingly, we do not find any justification for the disallowance made u/s.14A amounting to Rs.5,42,831/-.

5.

The assessee is also aggrieved for disallowance on depreciation of Rs.13,09,788/- claimed on certain assets on its manufacturing unit. The AO disallowed claim of depreciation on the plea that certain units of assessee company were closed. However, the assessee has not make any claim of depreciation on its plant and machinery and electronic installation. The AO asked the details of unit-wise claimed by the assessee and disallowed claim of Rs.13,09,788/-, which was confirmed by the CIT(A).

6.

Ld. AR placed on record decision of Hon’ble Delhi High Court in the case of Oswal Agro Mills, 238 CTR 113, wherein it was also held that

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