GLANCE INVESTMENTS INDIA P.LTD,MUMBAI vs. ITO WD 2(1)(4), MUMBAI

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ITA 5792/MUM/2014Status: DisposedITAT Mumbai07 April 2016AY 2010-115 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 since no exempt income (dividend income) was earned by the assessee, there was no question of disallowance under Section 14A read with Rule 8D. Consequently, the addition made while calculating book profit under Section 115JB was also deleted.

What were the facts?

The assessee company was engaged in financing and investment activities. The Assessing Officer disallowed Rs. 41,68,433/- under Section 14A read with Rule 8D, which was confirmed by the First Appellate Authority. The assessee contended that no dividend income was earned during the year.

What were the issues?

Whether disallowance under Section 14A is permissible when no exempt income is earned. Whether disallowance made under Section 14A can be added back for computing book profit under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI

Before: Shri Joginder Singh & Shri Rajendra

For Appellant: Shri Manish V. Shah
Hearing: 06/04/2016

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 24/07/2014 of the ld. First Appellate Authority, Mumbai. The first ground raised in this appeal pertains to confirming the addition of Rs.41,68,433/- made u/s 14A of the Income Tax Act, 1961 (hereinafter the Act) read with rule-8D of the Income Tax Rules, 1962 (hereinafter the rules).

2.

During hearing, the ld. counsel for the assessee, Shri Manish V. Shah, contended that no dividend income was earned during the current year, therefore, there should be no disallowance. He relied upon the decision of the Tribunal in the case of M/s Weizmann Ltd. vs ACIT (ITA No.7551/Mum/2012) order dated 22/04/2015. This factual matrix was not controverted by the ld. DR, Mrs. Neelima V. Nadkarni.

1.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company, at the relevant time, was engaged in financing and investment activities, declared income of Rs.32,70,396/- and the assessment u/s 143(3) of the Act was determined at Rs.74,38,800/- on 30/03/2013. While coming to this conclusion, the ld. Assessing Officer disallowed a sum of Rs.41,68,433/- u/s 14A of the Act

M/s Glance Investments (India) Pvt. Ltd. r.w.r. 8D of the Rules. We find that even before the ld. Assessing Officer as well as before the Commissioner of Income Tax (Appeal) , the claim of the assessee was that no exempt income was earned by the assessee. Identical plea was raised before us. Since, no exempt income was earned by the assessee, therefore, there is no question of disallowance. In CIT vs Gujarat Narmada Valley Fertilizers Company Ltd. (ITA No.1151 of 2013), CIT vs Sridev Enterprises 192 ITR 165 (Karnataka) and the Bombay Bench of the Tribunal in Godery Philip India Ltd. vs ACIT (ITA No.7682/Mum/2010) held that no disallowance u/s 14A should be made on opening balance of investment. The Hon’ble Punjab & Haryana High Court in CIT vs Hero Cycles Ltd. 323 ITR 518, Gujarat High Court in CIT vs UTI Bank Ltd. (215 taxman 8)(Guj.) and the Tribunal in CIT vs M/s Jayshree Petro Chemicals Ltd. (ITA No.7292/Mum/ 2011) held that, where no expenditure has been incurred, there is no question of disallowance as per Rule-8D(2)(iii). In the present/current year, since, no dividend income was earned by the assessee, therefore, there is no question of disallowance. We hold so.

3.

The next ground pertains to addition of the same amount computed u/s 14A r.w.r. 8D while calculating the book profit u/s 115JB of the Act. The crux of argument is that this ground is consequential to the aforementioned ground. The ld. DR did not controvert the contention of the assessee. In the aforesaid ground, we have held that since,

M/s Glance Investments (India) Pvt. Ltd. there was no dividend income, therefore, there is no question of disallowance. In ACIT vs Spray Engineering Devices Ltd. (2012) 23 taxman.com 267 (Chandigarh), Reliance Industrial Infrastructure Ltd. vs Addl. CIT (69 & 70/Mum/2009), it was held that disallowance u/s 14A made under normal provisions of the Act cannot be added back, while computing book profit u/s 115JB of the Act. Identical ratio was laid down in M/s Essar Teleholding Ltd. vs DCIT (ITA No.3850/Mum/2010). Thus, it is consequential in nature.

Finally, appeal of the assessee is allowed.

This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing 06/04/2016.

Sd/- Sd/- (Rajendra) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 07/04/2016 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

1.

अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR,

M/s Glance Investments (India) Pvt. Ltd.

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