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Income Tax Appellate Tribunal, DIVISION BENCH ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
PER BENCH:
All the above appeals have been filed by the Assessee against the separate orders of Ld. CIT(A)-2, Chandigarh dt. 24/08/2017.
Since the the effective grounds raised by the assessee in all the appeals relates to addition under section 14A, therefore all the appeals were heard together and are being disposed off by way of this common order.
We shall deal with ITA No. 1532/Chd/2017 for A.Y. 2008-09 as a lead case in which assessee has raised the following grounds:
That the CIT(A) erred both on facts and in law in upholding the disallowance of Rs. 17,73,840/- made by the AO under section 14A. The said disallowance has been upheld without appreciating the decision of the Hon’ble Income Tax Appellate Tribunal in the appellant’s own case in ITA No. 579/Chd/2011 pertaining to A.Y. 2007-08. 2. That the CIT(A) erred in facts and in law in upholding the disallowance of Rs. 17,73,840/- as against receipt of exempted income of Rs. 4,80,870/-. 3. That the CIT(A) erred in facts and in law in upholding the working of the quantum of disallowance by the Assessing Officer u/s 14A. r.w Rule 8D of the Income Tax Rules, 1962.
Brief facts of the case are that the assessee has received dividend income as tabulated below whereas the addition made by the Assessing Officer invoking the provisions of Section 14A read with rule 8D (2).
Assessment Year Dividend Received by the Disallowance made by Assessee (in Rs.) Assessing Officer under section 14A (in Rs.) 2008-09 480870 1773840 2009-10 481500 9708720 2010-11 534300 1871123 2011-12 536360 1840832 2014-15 670660 4018146
The Ld. CIT(A) confirmed the addition on the grounds that the assessee has failed to establish that the investments have been made out of surplus funds in the earlier years.
Before us, the Ld. AR has submitted that the funds invested are very old and no new investments have been done in the years under consideration.
Sl. No. Name of the Company in Year of Investment Amount of which the amounts were Investment (in Rs.) invested 1 Indian Potash Supply Agency 1970 to 1993 660000 2 Central Warehousing 2005 to 2010 10,600 Corporation 3 Punjab Alkalis and Chemicals 1983 to 1994 11275000 Ltd. 4 Food Technologies of India 1988 51,00,000 5 Mark Hort, Potatoes India Ltd. 2003 750000
The Ld. AR submitted that the above investments have been made by the assessee out of its own funds and no borrowed funds whatsoever have been used for investments and argued that in fairness of things the disallowance may be restricted to the exempt income.
Ld. DR relied on the order of the Assessing Officer.
Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. Vs. CIT and in case of Daba Global Chemical Pvt. Ltd. Coordinate Bench of ITAT Mumbai held that disallowance under section 14A r.w.r 8D of the Rules cannot exceed the exempt income. If any disallowance could be made that is to be restricted to the tax exempt income. Similar view has been taken by the Hon’ble Delhi High Court in the case of Cheminvest Ltd.
Hence, keeping in view the judicial pronouncement on the issue, the fact that the investments are old and made from the years 1970 to 2003, the assessee has not borrowed any funds or loans for investment purpose and the investments has been done out of the surplus funds and based on the arguments of the Ld. AR , we hereby direct the disallowance be restricted to the dividend income earned.
In the result, all the appeals of the assessee are partly allowed.
Order pronounced in the open Court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 13/07/2018 AG Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR