PIEM HOTELS LTD,MUMBAI vs. ADDL CIT RG 3(2), MUMBAI
What did the Tribunal hold?
The Tribunal noted that similar issues for prior assessment years were set aside to the AO for fresh consideration. Therefore, the matter was also set aside to the AO for a de novo decision, allowing the assessee to present all arguments.
What were the facts?
The assessee company, engaged in hotel and catering services, earned tax-free dividend income. The Assessing Officer (AO) disallowed expenses under Section 14A, calculating it as per Rule 8D, which the assessee contested.
What were the issues?
The primary issue was the correctness and justification of the disallowance of expenses under Section 14A, particularly the method of calculation as per Rule 8D.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMIT SHUKLA
आदेश ORDER अिमत शु�ला, �या. स.: PER AMIT SHUKLA, JM:
The aforesaid appeal filed by the assessee is against impugned order dated 06.12.2013, passed by CIT(A)-4, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2010-11, vide which following grounds have been raised :
1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in passing the order u/s 250 of the Act partly allowing the appeal filed by the appellant.
2. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in confirming the disallowance on account of expenses u/s 14A of the Act amounting to Rs. 34,06,820/-.
2 Piem Hotels Ltd ITA 978/M/2014 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in rejecting the appellant’s claim of disallowance u/s 14A of the Act without following the provisions of Rule 8D(1).
4. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not appreciating that the disallowance of Rs. 34,06,820/- determined by the Assessing Officer applying Rule 8D(2) was incorrect and unjustified”.
Brief facts are that, the assessee company is engaged in business of Hotel & Catering services. The AO noted that assessee company has shown investment to the extent of Rs. 102,25,71,000/- from which a dividend income earned has not been included in the total income of the assessee. The assessee received tax free dividend income of Rs. 1,63,06,763/-, which has been claimed as exempt. In response to the show cause notice, assessee submitted that it has estimated Rs. 34,309/- for the purpose of disallowance u/s 14A and no further disallowance is called for. However, the AO rejected the assessee’s explanation with regard disallowance offered in the return of income and held that same is to be calculated as per Rule 8D only and accordingly, disallowance of Rs. 31,41,129/- was worked out as per the formula laid down under Rule 8D.
Before the CIT(A), assessee submitted that, it has disallowed salary and administrative expenses of staff of two persons of Rs. 31,000/- and Demat Charges at Rs. 3,309/-. Later on, the assessee had revised its computation and had offered the disallowance of Rs. 5,71,600/-. The AO, after filing of the revised computation has not given any satisfactory reasons, as to why such a disallowance offered by the assessee is not appropriate. The assessee’s submissions in this regard has been dealt by the CIT(A)
3 Piem Hotels Ltd ITA 978/M/2014 in detail and following the earlier year decision of the CIT(A), he confirmed the said disallowance made by the AO.
Before us, it has been admitted that, this issue stands covered in favour of the assessee by the order of the Tribunal in assessee’s own case for the assessment year 2009-10 and also AY 2008-09, wherein the Tribunal has set aside the matter to the file of the AO. After considering the impugned order and also orders of the Tribunal for the AYs 2008-09 & 2009-10, we find that this issue of disallowance u/s 14A has been set aside to the file of the CIT(A) to analyse the investment pattern and accordingly to decide the issue afresh in accordance with the law. However, we are of the opinion that this matter required fresh consideration from the AO. Therefore, we set aside this matter to the file of the AO and direct him to deal and decide the issue afresh and an opportunity should be afforded to the assessee to raise all its arguments, including legal issues as culled out from judicial pronouncements in support of its contentions. Accordingly, the ground raised by of the assessee is treated as allowed for statistical purposes.
In the result, appeal of the assessee stands allowed for statistical purposes. Order pronounced in the open court on 30th October, 2015.
Sd/- Sd/- (िड. क�नाकर राव) (अिमत शु�ला) लेखा सद�य �याईक सद�य (D. KARUNAKARA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 30th October, 2015 ��त/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) -4, Mumbai. 4) The CIT -3, Mumbai.
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