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Income Tax Appellate Tribunal, DELHI BENCH “SMC” NEW DELHI
Before: SHRI S.V. MEHROTRA :
This appeal, preferred by the assessee, is directed against the order dated 18-12-2013, passed by the ld. CIT(A)-XV, New Delhi in appeal no. 221/11-12/CIT(A)-XV, relating to A.Y. 2009-10.
Brief facts of the case are that the assessee, in the relevant assessment year was engaged in finance and leasing. It had filed its return of income declaring loss of Rs. 1,82,92,936/-. The AO noticed that assessee had earned
Ganga Kaveri Credit & Holding P Ltd. Vs. ACIT dividend income of Rs. 28,55,485/-. After considering the assessee’s submissions in regard to disallowance to be made u/s 14A, the AO computed the disallowance at Rs. 1,73,65,881/- and, accordingly reduced the total loss at Rs. 9,27,055/-.
3. Ld. CIT(A) dismissed the assessee’s appeal. Being aggrieved, the assessee is in appeal before us and has taken following grounds of appeal:
“1. That the order passed by the learned Commissioner of Income Tax (Appeals) is bad in law.
2. That the learned Commissioner of Income Tax (Appeal), erred in rejecting appellant's contention that the disallowance under section 14A cannot exceed Rs. 4,02,133/- being 0.5% of the average value of the opening and closing balance of investment in shares of Apollo Tyres Ltd on which such dividend income has been received by the assessee company, thereby confirming the addition of Rs. 1,73,65,881/- made by the assessing officer u/s 14A of the Income Tax Act, resulting in reduction of returned Loss to that extent.
3. Without prejudice to appellant's above contention, the learned Commissioner of Income Tax (Appeals) erred in rejecting appellant's contention that the amount of disallowance u/s 14A cannot exceed the amount of dividend income earned during the year under assessment.”
4. At the time of hearing, ld. counsel did not press ground nos. 1 & 2.
Accordingly, the same are dismissed as not pressed.
Ganga Kaveri Credit & Holding P Ltd. Vs. ACIT 5. Apropos ground no. 3, ld. counsel for the assessee submitted that in view of the decision of Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. Vs. CIT (ITA 117/2015 dated 25-2-2015), the amount of disallowance u/s 14A cannot exceed the amount of dividend income.
6. I have considered the submissions of both the parties and find that Hon’ble Delhi High Court in para 9 in the case of Joint Investments Pvt. Ltd. (supra), has observed as under:
“In the present case , the AO has not firstly disclosed why the appellant/ assessee’s claim for attributing Rs. 2,97,440/- as a disallowance under section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee’s claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO, an aspect which is completely unnoticed by the CIT(A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum i.e. Rs. 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.”
Ganga Kaveri Credit & Holding P Ltd. Vs. ACIT 6.1. Respectfully following the decision of Hon’ble High Court, I direct for restricting the disallowance u/s 14A to Rs. 28,55,485/-.
In the result, assessee’s appeal is partly allowed.
Order pronounced in open court on 08/10/2015.
Sd/- (S.V. MEHROTRA) ACCOUNTANT MEMBER Dated: 08/10/2015. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi.
Ganga Kaveri Credit & Holding P Ltd. Vs. ACIT -+ Date Initial
Draft dictated on -10.2015 PS
2. Draft placed before author .10.2015 PS
Draft proposed & placed before the second JM/AM member
Draft discussed/approved by Second Member. JM/AM
Approved Draft comes to the Sr.PS/PS PS/PS
Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
Date on which file goes to the AR
Date on which file goes to the Head Clerk.
Date of dispatch of Order.