DCIT 8(2), MUMBAI vs. NIRPAN SECURITIES P.LTD, MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the Commissioner (Appeals)'s decision, following a previous Tribunal ruling that disallowance under Section 14A should be restricted to 5% of exempt income when the rule 8D provisions are not blindly applicable.
What were the facts?
The assessee company earned tax-free dividend income but did not disallow any expenditure. The Assessing Officer disallowed Rs. 20,08,657 under Section 14A. The Commissioner (Appeals) restricted the disallowance to 5% of the exempt income.
What were the issues?
Whether the disallowance under Section 14A should be restricted to 5% of exempt income, and the applicability of Rule 8D.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI RAJENDRA & SHRI SAKTIJIT DEY
आदेश / ORDER शक्तिजीि दे, न्याययक सदस्य के द्वारा / PER SAKTIJIT DEY, J.M.
This is an appeal by the Revenue against the order dated 18th December 2013, passed by the learned Commissioner (Appeals)–17, Mumbai, for the assessment year 2009–10.
M/s. Nirpan Securities Pvt. Ltd. 2 2. The Department is aggrieved with the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to restrict the disallowance under section 14A to 5% of the exempt income.
Briefly the facts are, the assessee, a company, filed its return of income on 26th September 2009, declaring total income of ` 6,25,75,170, for the impugned assessment year. During the assessment proceedings, the Assessing Officer noticed that the assessee has earned tax free dividend of ` 89,32,661, but has not disallowed any expenditure towards such exempt income. When the assessee was called upon to explain why no disallowance under section 14A r/w rule 8D, has been made, the assessee stated that it has not incurred any expenditure for earning exempt income. The Assessing Officer not being satisfied with the submissions of the assessee, worked out disallowance at ` 20,08,657. Being aggrieved of such disallowance, the assessee preferred appeal before the learned Commissioner (Appeals).
Before the first appellate authority, though the assessee took a plea that no disallowance under section 14A r/w rule 8D, is called for but alternatively he also contended that, at best, 5% of the exempt income can be disallowed under section 14A of the Act. In this context, the assessee relied upon some decisions of the Tribunal. The learned Commissioner (Appeals) referring to the decision of the Tribunal, Mumbai Bench, in M/s. Arnab Griha Ltd. v/s DCIT, ITA no.5349/Mum. /
M/s. Nirpan Securities Pvt. Ltd. 3 2011 dated 26th September 2012, ultimately directed the Assessing Officer to restrict the disallowance under section 14A to 5% of the exempt income. Being aggrieved, the Revenue is in appeal before us.
We have considered the submissions of the parties and perused the material available on record. As could be seen, the Tribunal in Arnab Griha Ltd. (supra) being conscious of the fact that rule 8D has been made applicable from the assessment year 2008–09 held that only because the assessee has earned some exempt income provisions of section 14A r/w rule 8D cannot be applied blindly. Holding as above, the Tribunal directed for disallowance of 5% of the exempt income under section 14A of the Act. The learned Commissioner (Appeals) having followed the decision of the Tribunal as aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals). Accordingly, upholding the same, we dismiss the ground raised by the Revenue.
In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 16.10.2015
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