ACIT 2(2)(1), MUMBAI V. PANATONE FINVEST LIMITED, MUMBAI

ITA 3249/MUM/2024

AI Insights

The case involves an appeal by the Revenue against the order of the National Faceless Appeal Centre, Delhi, concerning the assessment year 2006-07. The primary issues revolved around the disallowance under Section 14A related to investments yielding exempt income and the adjustments under Section 115JB of the Income Tax Act. The Revenue contended that the CIT(A) erred in allowing the actual expenses related to such investments and in deleting the disallowance without appreciating the provisions that mandate adjustments to the book profit under Section 115JB. The Tribunal, however, did not proceed with the substantive issues due to the low tax effect involved, adhering to the CBDT's Circular on monetary limits for filing appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471391 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA KUMAR
• Assessee Lawyers: SUKHSAGAR SYAL
• Keywords: Tax effect; Earning of tax free income
• Section: 143(3); 201; 11; 22; 12; 10; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 3249/MUM/2024 Assessment Year: 2006-07 ACIT-2(2)(1), R No. 545, 5th floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. Vs. Panatone Finvest Ltd., House 24 Homi Mody Street, Mumbai G.P.O.-400001. PAN NO. AAACP 9523 G Appellant Respondent Assessee by : Mr. Sukhsagar Syal Revenue by : Mr. Krishna Kumar, Sr. DR Date of Hearing : 29/11/2024 Date of pronouncement : 21/02/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 30.03.2024 passed by the National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2006-07. The relevant grounds raised by the Revenue are reproduced as under: 1. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in allowing assessee the actual expenses related to investments yielding exempt income w/s. 115JB r.w.s. 14A, ignoring the provision of explanation 1 () of Section 1 1 5JB of the Act?\" 2. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Act reveals that the tinkering with P & L a/c. as prepared in accordance with the provision of the Company's Act is permissible to the extent provided in explanation 1 to Section 115JB (2) of the Act and clause (f) to explan the book profit to be increased with the expenditure relatable to any income to which Section 10 (other than Section 10(38) of the Act. Section 11 or 12 of the Act applies?* 3. \"Whether on the facts and in th law the Ld. CIT(A) erred in deleting the disallowance u/s.14A without appreciating the fact that provisions of Section the Finance Act 2001 w.e.f. 01.04.1962 and ignoring the provision of clause (f) to explanation (1) to Section 115JB(2).* 4. \"Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the disallowance u/s.14A amounting of Rs.88, 19,62,087/ suo moto admitted and requested to restrict the disallowance under clause (f) of explanation (1) to Section 115JB(2)p\" 5. \"Whether on the facts and circumstances of the case and law, the Ld.CIT(A) erred in deleting the disallowance u/s.14A without appreciating the fa substitute the total income computed under normal provision by that computed under MAT provisions 2. The Ld. Departmental Representative (DR) submitted that there was a delay of 22 days in filing th copy of the letter filed by the AO wherein he has mentioned that due to excess work load of filing writ petitions, scrutiny reports and other time barring matters, delay occurred in filing present appeal, which was due to bona fid the delay in filing appeal is condoned and appeal is admitted for adjudication. ITA No. related to investments yielding exempt income w/s. 115JB r.w.s. 14A, ignoring the provision of explanation 1 () of Section 1 1 5JB of 2. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that perusal of Section 115JB of the Act reveals that the tinkering with P & L a/c. as prepared in accordance with the provision of the Company's Act is permissible to the extent provided in explanation 1 to Section 115JB (2) of the Act and clause (f) to explanation 1 to Section 115JB (2) of the Act permits the book profit to be increased with the expenditure relatable to any income to which Section 10 (other than Section 10(38) of the Act. Section 11 or 12 of the Act applies?* \"Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance u/s.14A without appreciating the fact that provisions of Section 14A(1) was inserted in the Finance Act 2001 w.e.f. 01.04.1962 and ignoring the provision of to explanation (1) to Section 115JB(2).* \"Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the disallowance u/s.14A amounting of Rs.88, 19,62,087/ - without appreciating the fact that the assessee mitted and requested to restrict the disallowance under clause (f) of explanation (1) to Section 115JB(2)p\" \"Whether on the facts and circumstances of the case and law, the Ld.CIT(A) erred in deleting the disallowance u/s.14A without appreciating the fact that the object of deeming provision is to substitute the total income computed under normal provision by that computed under MAT provisions u/s. 115JB» The Ld. Departmental Representative (DR) submitted that there was a delay of 22 days in filing this appeal. He submitted a copy of the letter filed by the AO wherein he has mentioned that due to excess work load of filing writ petitions, scrutiny reports and other time barring matters, delay occurred in filing present appeal, which was due to bona fide reasons. In view of reasons explained, the delay in filing appeal is condoned and appeal is admitted for Panatone Finvest Ltd 2 ITA No. 3249/MUM/2024 related to investments yielding exempt income w/s. 115JB r.w.s. 14A, ignoring the provision of explanation 1 () of Section 1 1 5JB of 2. \"Whether on the facts and circumstances of the case and in law, perusal of Section 115JB of the Act reveals that the tinkering with P & L a/c. as prepared in accordance with the provision of the Company's Act is permissible to the extent provided in explanation 1 to Section 115JB (2) of the Act ation 1 to Section 115JB (2) of the Act permits the book profit to be increased with the expenditure relatable to any income to which Section 10 (other than Section 10(38) of the Act. e circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance u/s.14A without 14A(1) was inserted in the Finance Act 2001 w.e.f. 01.04.1962 and ignoring the provision of \"Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the disallowance u/s.14A amounting of without appreciating the fact that the assessee mitted and requested to restrict the disallowance under \"Whether on the facts and circumstances of the case and law, the Ld.CIT(A) erred in deleting the disallowance u/s.14A without ct that the object of deeming provision is to substitute the total income computed under normal provision by that The Ld. Departmental Representative (DR) submitted that is appeal. He submitted a copy of the letter filed by the AO wherein he has mentioned that due to excess work load of filing writ petitions, scrutiny reports and other time barring matters, delay occurred in filing present appeal, e reasons. In view of reasons explained, the delay in filing appeal is condoned and appeal is admitted for 3. At the outset, the Ld. Authorized Representative submitted that tax effect involved in the present appeal is below the threshold limit of Rs.60 lakhs prescribed by the Central Board of Direct Taxes (CBDT) for preferring appeal before the Tribunal vide its Circular No. 09/2024 dated 17 of the tax effect has been filed by the Ld. Authorized Rep is as under: In the matter of ACIT 2(2H1) vs Panatone Finvest Limited Calculation of tax effect- Paras 5.1 and 5.2 of the Circular 5 of 2024 dated 15 March 2024 Para 5.1- Tax effect = (X) Tax on total income assessed ( chargeable had such income been reduced by the amount of income in respect of issues against which appeal is filed Determination of X- Para 5.2 Particulars Where A= total income assessed as per general provisions Where B= total income that would have been chargeable had the total income assessed as per general provision reduced by the amount of the disputed issues under general provision Where C= Total income assessed as per Section 115JB Where D= Total income that would have been chargeable had the total income assessed as per 115JB was reduced by the amount of disputed issues under 115JB ITA No. At the outset, the Ld. Authorized Representative submitted that tax effect involved in the present appeal is below the threshold it of Rs.60 lakhs prescribed by the Central Board of Direct Taxes (CBDT) for preferring appeal before the Tribunal vide its Circular No. 09/2024 dated 17th September, 2024. The relevant calculation of the tax effect has been filed by the Ld. Authorized Rep In the matter of ACIT 2(2H1) vs Panatone Finvest Limited- ITA No 249/Mum/2024 Paras 5.1 and 5.2 of the Circular 5 of 2024 dated 15 March 2024 Tax effect = (X) Tax on total income assessed (-) (Y) Tax that would have been chargeable had such income been reduced by the amount of income in respect of issues against which appeal is filed Para 5.2- tax on assessed income for 115JB cases X= (A Amount in INR Remarks Where A= total income assessed as per (2,85,38,570) As per order u/s 143(3) rws 254 dated 31 December 201 8 Where B= total income that would have been chargeable had the total income assessed as per general provision been reduced by the amount of the disputed issues under general provision (2,85,38,570) C= Total income assessed as per 98,69,516 Where D= Total income that would have been chargeable had the total income was reduced by the amount of disputed issues under Nil (98,69,516- 98,69,516) As the total income chargeable under section 115JB cannot be a negative figure. Panatone Finvest Ltd 3 ITA No. 3249/MUM/2024 At the outset, the Ld. Authorized Representative submitted that tax effect involved in the present appeal is below the threshold it of Rs.60 lakhs prescribed by the Central Board of Direct Taxes (CBDT) for preferring appeal before the Tribunal vide its Circular September, 2024. The relevant calculation of the tax effect has been filed by the Ld. Authorized Representative ITA No 249/Mum/2024 Paras 5.1 and 5.2 of the Circular 5 of 2024 dated 15 March 2024 (Y) Tax that would have been chargeable had such income been reduced by the amount of income in respect of issues tax on assessed income for 115JB cases X= (A-B) + (C-D) Remarks As per order u/s 143(3) rws 254 dated 31 December 201 8 As the total income chargeable under section 115JB cannot be a negative figure. X= (A-B) + (C-D) Tax on X @7.5% + Applicable Cess Determination of Y Tax effect = X-Y 3.1 The Ld. DR could not controvert the computation of the tax effect which is admittedly below the threshold limit prescribed by the CBDT (supra). A dismissed as withdrawn with liberty to file Miscellaneous Application for recalling the appeal in case, t appeal is found to be more than the prescribed limit or the appeal is falling in any of the exceptions to the said Circular 3. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on Sd/- (RAJ KUMAR CHAUHAN JUDICIAL MEMBER ITA No. 98,69,516 Tax on X @7.5% + Applicable Cess 7,55,018 As per order dated 31 December 201 Nil (98,69,516- 98,69,516) As the total income chargeable under section 115JB cannot be a negative figure. Furthermore, 'tax that would have been chargeable' can also not be a negative figure. 7,55,018 Under the permissible monetary threshold limit of INR 50,00,000 as per Circular 5 of 2024 dated 15 March 2024 issued by CBDT The Ld. DR could not controvert the computation of the tax is admittedly below the threshold limit prescribed by . Accordingly, the appeal of the Revenue is dismissed as withdrawn with liberty to file Miscellaneous r recalling the appeal in case, the tax effect in the to be more than the prescribed limit or the appeal is any of the exceptions to the said Circular of CBDT In the result, the appeal of the Revenue is dismissed. nounced in the open Court on 21/02/2025. Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Panatone Finvest Ltd 4 ITA No. 3249/MUM/2024 As per order u/s 143(3) rws 254 dated 31 December 2018 As the total income chargeable under section 115JB cannot be a negative figure. Furthermore, 'tax that would have been chargeable' can also not be a negative figure. Under the permissible monetary threshold limit of INR 50,00,000 as per Circular 5 of 2024 dated 15 March 2024 issued by CBDT The Ld. DR could not controvert the computation of the tax is admittedly below the threshold limit prescribed by ccordingly, the appeal of the Revenue is dismissed as withdrawn with liberty to file Miscellaneous he tax effect in the to be more than the prescribed limit or the appeal is of CBDT. In the result, the appeal of the Revenue is dismissed. /02/2025. Sd/- PRAKASH KANT) ACCOUNTANT MEMBER Mumbai; Dated: 21/02/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No. Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Panatone Finvest Ltd 5 ITA No. 3249/MUM/2024 BY ORDER, (Assistant Registrar) ITAT, Mumbai "