ACIT 3 (2)(1), MUMBAI V. M/S LML LTD, MUMBAI

ITA 1/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4447 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Earning of tax free income; Proportionate interest; Notional interest; Rule 8D; Set aside
• Section: 143(3); 142(1); 14A; 260A; 143(1); 201; 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 01 /MUM/20 20 ( / ASSESSMENT YEAR: 20 12 - 1 3 ) ACIT - 3(2)(1) ROOM NO.674, 6 TH FLOOR, AAY AKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 . / VS. M/S. LML LTD. 714, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI - 400021. ./ ./ PAN/GIR NO. : AAACL0141N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 12 / 0 8 /20 2 1 /DATE OF PRONOUNCEMENT: 01 /09 / 20 21 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FI LED THE PRESENT APPEAL AGAINST THE ORDER DATED 23 . 10 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 09 MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 12 - 1 3 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1. 'WHETHER O N THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF DELAYED PAYMENTS OF PROVIDENT FUND AND ESIC AMOUNTING TO RS.29,50,937/ - BY RELYING ON THE DECISION OF HON'BLE JTAT, MUMBAI FORAY 2009 - 10 WHICH WAS BASED ON THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF REVENUE BY : SHRI BRAJENDRA KUMAR ( D R) ASSESSEE BY: NONE ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 2 M/S. HINDUSTAN ORGANIC CHEMICALS LTD., 366 ITR 001 (2014) WITHOUT APPRECIATING THE FACT THAT THE SAID DECISION OF THE HON'BLE COURT HAS NOT BEEN ACCEPTED BY THE REVENUE AND SLP IS FILED BEFORE THE HON'BLE SUPREME COURT WHICH IS PENDING FOR DECISION AND FURTHER NOT APPRECIATING THE FACT THAT THE DEPARTMENT HAS CHALLENGED THE DECISION OF THE ITATFOR AY2009 - 1O IN ITA NO. 4396/MUM/2013 AND HAS FILED APPEAL U/S. 260A TO THE HO N'BLE BOMBAY HIGH COURT VIDE INCOME TAX APPEAL NO. 1689/2017. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.1,38,99,000/ - ATTRIBUTABLE TO THE INTEREST FREE ADVANCE TO M/S. VESP A CAR COMPANY LTD (VCCL) WITHOUT APPRECIATING THE FACT THAT THE ASSEESEE HAD TO INCUR HUGE INTEREST EXPENSE ON BORROWED FUNDS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S. 14A WHICH WAS CO MPUTED AS PER RULE 8D OF I T.RULES 1962 ON THE BASIS OF CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 WHICH CLEARLY STATES THAT IT IS NOT NECESSARY TO EARN EXEMPT INCOME IN A PARTICULAR YEAR IN WHICH THE DISALLOWANCE IS MADE. 4. WHETHER ON THE FACTS AND CIRCUM STANCES AND IN LAW, THE LD. CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE U/S. 14A TO THE EXEMPT INCOME EARNED DURING THE YEAR WHICH IS CONTRARY TO CBDT CIRCULAR NO.5/2014 WHICH CLARIFIES THAT THE RULE 8D RW.S. 14A OF THE ACT PROVIDES FOR DISALLOWANCE O F THE EXPENDITURE EVEN ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 3 WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND , ALTER, DELETE OR ADD GROUNDS WHICH MAY BE NECESSARY. ? ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 27 .0 9 .20 1 2 DECLARIN G A TOTAL LOSS TO THE TUNE OF RS. 13,44,56,717 / - FOR THE A.Y.2012 - 1 3 . THE RETURN WAS PROCESSED U/ S 143(1) OF THE ACT. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TWO WHEELERS VEHICLES . ON VERIFICATION, IT WAS FOUND THAT THE AMOUNT OF RS.218.27 LAKHS AND RS .940.01 LAKHS WERE RECEIVABLE FROM VCCL LTD WHICH HAS BEE N SHOWN AS OTHER LOANS AND ADVANCES. THE ASSESSEE WAS HAVING SUBSTANTIAL BORROWING S ON WHICH INTEREST EXPENSES WERE ALLOWED. THE PROPORTIONATE INTEREST IN SUM OF RS.1158.28 WAS DISALLOWED AND ADDED T O THE INCOME OF THE ASSESSEE. THE AO ALSO NOTICED THAT THE ASSESSEE WAS DEDUCTING EMPLOYEE CONTRIBUTION FUND WHICH WAS DEPOSITED LATER, THEREFORE, AN AMOUNT OF RS.29,50,937/ - WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. SOME DISALLOWANCE U/S 14A R.W.S. 8D OF RS.1,17,410/ - WAS ALSO MADE AND AFTER SOME OTHER DISALLOWANCE , THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.( - )11,74,83,247/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BUT THE REVENUE WAS NOT SATISFIED, THEREFORE, FILED THE PRESENT APPEAL BEFORE US. ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 4 ISSUE NO.1 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE FIRST ISSUE IS IN CONNECTION WITH THE DELAYED DEPOSIT OF THE PAYMENTS OF PROVIDENT FUND AND ESIC AMOUNTING TO RS.29,50,937/ - BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 4.3.2 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE W RITTEN SUBMISSION FILED BY THE APPELLANT. THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS.29,50,937/ - ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO ESIC AND PP U/S. 36(1)(VA) BY HOLDING THAT THEY ARE NOT ELIGIBLE FOR DEDUCTION SINCE, THERE IS A DELAY IN DEPOSIT ING THE SAME ON OR BEFORE THE DUE DATE UNDER THE RESPECTIVE ACT. ON THE OTHER HAND, THE APPELLANT RELIED UPON VARIOUS CASE LAWS AND URGED THAT NO DISALLOWANCE IS CALLED FOR AS THE APPELLANT HAS MADE THE PAYMENTS TOWARDS EMPLOYEE'S CONTRIBUTION FOR PF/ESIC WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. 4.3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE APPELLANT. IT IS NOTICED THAT THE APPELLANT HAS MADE THE PAYMENTS TOWARDS EMPLOYEE'S CONTRIBUTION FOR PF/ESIC WITHIN THE DUE DATE OF TILING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. HENCE, THE FACTS OF THE CASE ARE SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHEMICALS LTD. (48 TAXMANN.COM 421) AND CIT VS. GH ATGE PATIL TRANSPORTS LTD. (368 ITR 749). RESPECTFULLY FOLLOWING THE DECISIONS OF THE JURISDICTIONAL HIGH COURT, THE CLAIM OF THE APPELLANT IN RESPECT OF EMPLOYEE'S CONTRIBUTION TOWARDS PF/ESIC ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 5 IS ALLOWED. ALSO, FIND THAT ON IDENTICAL FACTS AND CIRCUMSTANCES, THE HONBLE ITAT, MUMBAI, IN APPELLANT'S OWN CASE FOR AY. 2009 - 10 IN ITA NO. 4396/MUM/2013 DATED 31 - 03 - 2017, HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. ACCORDINGLY, DISALLOWANCE OF RS. 29,50,937/ - IS HEREBY DELETED. THIS GROUND IS ALLOWED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE FIND THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF DECISION IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHEMICALS LTD. (48 TAXMANN.COM 42 1) & CIT VS. GHATGE PATIL TRANSPORTS LTD. (368 ITR 749) AND THE DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2009 - 10 BEARING ITA. NO.4396/MUM/2013 DATED 31.03.2017. SINCE THE ISSUE HAS DULY BEEN COVERED BY THE DECISION OF HONBLE ITAT AS WELL AS THE OTHER DECISION MENTIONED ABOVE, THEREFORE, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS QUITE JUSTIFIABLE WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE, HENCE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST T HE REVENUE. ISSUE NO.2 6. ISSUE NO.2 IS IN CONNECTION WITH THE ALLOWANCE OF THE CLAIM OF INTEREST OF RS. 1,38,99,000/ - . THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS ARGUED THAT THE CLAIM OF THE INTEREST HAS WRONGLY BEEN ALLOWED. BEFORE GOING FURTHER, WE DEE M IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 4.1 1 HAVE CAREFULLY CONSIDERED THE GROUNDS OF APPEAL, SUBMISSIONS MADE BY THE APPELLANT AND ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961. ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 6 4.2 GROU ND NO. 1: THIS GROUND IS AGAINST THE ADDITION OF NOTIONAL INTEREST ON PART ADVANCES TO M/S. VESPA CAR COMPANY LTD. AMOUNTING TO RS. 1,38,99,000/ - . THE APPELLANT HAD ADVANCED INTEREST FREE LOAN TOTALLING TO RS. 1158.28 LAKHS TO VCCL LTD. AS PER THE AO, THE ADVANCE TO SUBSIDIARY COMPANY COULD NOT BE CONSTRUED TO BE FOR THE PURPOSE OF BUSINESS AND HENCE, PROPORTIONATE INTEREST ALLOCABLE TO LOAN OF RS. 1158.28 LAKHS (218.27 LAKHS + 940.01 LAKHS) WAS CALCULATED @ 12% AND ACCORDINGLY, AN AMOUNT OF RS. 1,38,99,000 / - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE APPELLANT BY THE AO. 4.2.1 THE APPELLANT HAS PROVIDED VARIOUS ARGUMENTS IN THE SUBMISSION. THE RELEVANT PORTION OF THE SUBMISSION IS REPRODUCED BELOW: 'THE SUM OF RS. 1,38,99,000/ - HAS BEEN DISALL OWED BASED ON THE DISCUSSION IN PREVIOUS ASSESSMENT YEARS SINCE THERE IS NO CHANGES IN FACTS OF THE CASE. THE ABOVE REFERRED HAS BEEN DECIDED BY THE 1TAT/CIT(A) IN PREVIOUS ASSESSMENT YEARS IN FAVOUR OF ASSESSEE. THE ABOVE REFERRED ISSUE HAS BEEN DEALT WIT H IN 1TAT'S ORDER FOR A. Y. 2009 - 10 ON PAGE 4 TO 8 AND PARA 8 & 9 OF THE ORDER. THE COPY OF ORDER DATED 31 - 03 - 201 7 IS ENCLOSED [PAGE NO. 12 TO 16/27 TO 29 OF PAPER BOOK).' 4.2.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT VIS A VIS THE AS SESSMENT ORDER. I FIND THAT ON IDENTICAL FACTS AND CIRCUMSTANCES, THE HON'BLE ITAT, MUMBAI, IN APPELLANT'S OWN CASE FOR ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 7 A.Y. 2009 - 10 IN ITA NO. 4396/MUM/2013 DATED 31 - 03 - 2017, HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT BY HOLDING AS UNDER: 'WE NOW AD VERT TO THE DISALLOWANCE OF RS.1,81,81,940/ - MADE UNDER SEC. 36(1) WHICH HAD BEEN DELETED BY THE CIT(A). THE LD. ASSAILING THE ORDER OF THE CIT(A) THEREIN SUBMITTED THAT THE DISALLOWANCE OF INTEREST OF RS. 1,81,81,940/ - (SUPRA) SO MADE BY THE AO IN RESPECT OF INTEREST FREE LOANS ADVANCED BY THE ASSESSEE COMPANY TO VCCL LTD. HAD WRONGLY BEEN DELETED BY THE CIT(A) FOR THE REASON THAT THE SIMILAR DISALLOWANCE HAD BEEN DELETED BY HIS PREDECESSOR IN A.Y. 2000 - 01 WHICH THEREAFTER WAS FOLLOWED BY THE SUCCESSOR C1T (A) WHILE DISPOSING OF THE APPEAL FOR A.1'. 2006 - 07, COUPLED WITH THE FACT THAT ON THE SIMILAR BASIS, THE DISALLOWANCE HAD BEEN DELETED BY THE CIT(A) IN THE CASE OF THE ASSESSEE WHILE DISPOSING OF THE APPEALS OF THE ASSESSEE COMPANY FOR A. Y. 2001 - 02, 2005 - 06, 2007 - 08 AND 2008 - 09. IT WAS VEHEMENTLY SUBMITTED BY THE LD. DR THAT RES - JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS. THAT ON THE OTHER HAND, THE LD. A.O. STRONGLY SUPPORTED THE ORDER OF THE C1T(A) AND THEREIN SUBMITTED THAT THE ADDITION/DISAL LOWANCE HAD RIGHTLY BEEN DELETED BY THE CIT(A) WE THOUGH IN AGREEMENT WITH THE CONTENTION OF THE LD DR. THAT THE RES - JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS, BUT THEN NOW WHEN IT REMAINS AS A MATTER OF FACT THAT THE FACTS INVOLVED IN THE CASE AS REGARDS THE ISSUE UNDER CONSIDERATION ARE THE SOME AS AGAINST THOSE WHICH WERE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE AFORESAID PRECEDING YEARS VIZ. A. V. 2000 - 01, 2001 - 02 TO 2005 - 06. 2005 - 06, 2007 - 08 AND 2008 - 09 AND NOTHING HAD BEEN DRAFT ON RECO RD BEFORE THE LOWER AUTHORITIES NOT BEFORE ITS WHICH COULD GO TO PERSUADE US THAT EITHER THE FACTS OR ISSUE INVOLVED THEREIN WERE DISTINGUISHABLE AS AGAINST THOSE INVOLVED IN THE AFORESAID PRECEDING YEARS, WE ARE ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 8 UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE T O THE VIEW OF THE LD. DL? THAT DESPITE FROM BEING NO SHIFT FROM THE FACTS WHICH WERE INVOLVED IN THE SAID PRECEDING YEARS, THE REASONING AND THE VIEW ADOPTED THEREIN BE LIABLE TO BE DISLODGED. WE ARE THUS; OF THE CONSIDERED VIEW THAT IN LIGHT OF OUR AFORES AID OBSERVATIONS, WE FIND NO REASON TO TAKE A VIEW DIFFERENT FROM THAT ARRIVED AT BY THE CIT(A). THUS, IN THE BACKDROP OF THE AFORESAID FACTS NOW WHEN IT EMERGES FROM THE RECORDS THAT IN THE BACKDROP OF THE FACT THAT THE DISALLOWANCE OF INTEREST PERTAINING TO THE AMOUNTS BY THE ASSESSEE COMPANY TO VCCL LTD IN ORDER TO FACILITATE THE LATTER - S ONETIME SETTLEMENT (OTS) OBLIGATION WITH BANKS AND FINANCIAL INSTITUTION AS CARRIED OUT BY THE A0 WHILE FRAMING THE ASSESSMENT HANDS OF THE ASSESSMENT COMPANY FOR A. V 1997 - 98, 1998 - 99 AND 1999 - 2000 WAS SUBSTANTIALLY MODIFIED OF APPEAL BY THE CIT(A) AS UNDER: ASSESSMENT YEAR AS PER AO AS PER CIT(A)S DIRECTIVES 1997 - 98 1,23,886 1,06,814 1998 - 99 43,55,815 3,90,265 1999 - 00 1,66,86,012 28,310 READ IN LIGHT OF THE FACT T HAT IN THE YEAR 1999 - 2000, THE AFORESAID COMPANY, VIZ. VCCL LTD REPAID THE SUM OF RS. 13.55 CRORES TO THE ASSESSEE COMPANY, IN THE IN THE BACKDROP OF THE FACTUAL POSITION THE DISALLOWANCE OF INTEREST PERTAINING TO THE SAID AMOUNT MADE BY THE AO FOR A. V 20 00 - 01 WAS DELETED BY THE C!T(A), WE ARE THEREOF OF TILE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS, SPECIFICALLY IN LIGHT OF THE4 VERY FACT THAT NO MATERIAL HAD BEEN PLACED ON RECORD BEFORE US WHICH COULD GO ON THE BASIS OF WHICH WE COULD BE PERSUADED TO HOLD THAT THE FACTS INVOLVED DURING THE YEAR UNDER ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 9 CONSIDERATION ON THE AFORESAID ISSUE ARE DISTINGUISHABLE AS AGAINST THOSE INVOLVED IN THE AFORESAID ORDERS, WE ARE OF THE CONSIDERED VIEW THEY REMAINS NO SCOPE FOR CARRYING OUT ANY DISALLOW ANCE OF INTEREST CONNECTED WITH THE AMOUNT FUNDED FOR OTS. THAT AS REGARDS THE CURRENT AMOUNT OUTSTANDING IN RESPECT OF VCCL LTD. (EXCLUDING THE AMOUNT) OUTSTANDING ON ACCOUNT OF, WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF ANY MATERIAL BEING PLAC ED ON RECORD BY THE LD. DR, IN ORDER TO PERSUADE US TO TAKE A VIEW OTHERWISE FOR THE REASON THAT ANY NEW FACTS HAD EMERGED DURING THE YEAR UNDER CONSIDERATION, WE ARE CONSTRAINED TO CONCLUDE THAT AS STAND COVERED FROM THE FINDINGS OF THE LOWER AUTHORITIES IN THE CASE OF THE ASSESSEE FOR THE PRECEDING YEARS, AS NO NEXUS HAD BEEN PROVED BY THE A0 IN RESPECT OF THE CURRENT AMOUNT OUTSTANDING IN RESPECT OF THE AFORESAID COMPAN 76Y, VIZ. VCCL LTD. AND THE BORROWED FUNDS, THEREFORE, NO DISALLOWANCE AS REGARDS ANY PART OF THE SAID AMOUNT IS CALLED FOR UNDER SEC. 36(1)(III) OF THE ACT, IN THE HANDS OF THE ASSESSEE COMPANY. WE THUS, IN LIGHT OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE CIT(A) BY WAY OF A REASONED ORDER HAD RIGHTLY DELETED THE ADD ITION/DISALLOWANCE OF RS. 1,81,81,940/, THUS, THE ORDER OF THE CIT(A) TO THE SAID EXTENT IS UPHELD AND THE GROUND OF APPEAL NO. 2 RAISED BY THE REVENUE BEFORE US IS DISMISSED.' 4.2.3 SINCE THERE IS NO CHANGE IN THE FACTS AND THE LAW CONTINUES TO BE THE SAM E, RESPECTFULLY FOLLOWING THE ORDER OF THE JURISDICTIONAL HONBLE ITAT IN APPELLANT'S OWN CASE FOR A.V.2009 - 10, THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST ON INTEREST FREE LOAN ADVANCED TO VCCL OF RS. 1,38,99,000/ - IS DELETED. THIS GROUND IS ALLOWED. ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 10 7. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 IN ITA. NO.4396/MUM/2013 DATED 31.03.2017, THEREFORE, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS QUITE CORRECT WHICH IS NOT LIABLE TO BE INTERFERED WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NOS. 3 & 4 8. UNDER THESE ISSUES THE REVENUE HAS CHALLENGED THE ALLOWANCE OF CLAIM RAISED IN VIEW OF THE SECTION 14A R.W. RULE 8D OF THE ACT. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 4.4.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS SUBMISSION MADE BY THE APPELLANT. THE APPELLANT ARGUED THAT SINCE THE DIVIDEND INCOME EARNED BY THE APPELLANT IS RS.43.334/ - , HENCE THE DISALLOWANCE U/S 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. AS PER THE EVOLVED JUDICIAL VIEW, THE DISALLOWANCE PRO VIDED UNDER SECTION 14A CANNOT BE MORE THAN THE EXEMPT INCOME EARNED BY THE APPELLANT. IN THE INSTANT CASE, THE APPELLANT HAS EARNED DIVIDEND INCOME OF RS. 43,334/ - ONLY, HENCE THE DISALLOWANCE NEEDS TO BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE APPE LLANT. IT HAS BEEN HELD BY VARIOUS COURTS THAT THE DISALLOWANCE U/S 14A READ 8D SHOULD BE RESTRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR. THE DECISIONS ARE AS UNDER: ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 11 ( I ) JOINT INVESTMENT PVT. LTD. (HON'BLE DELHI HIGH COURT) (372 ITR 694) ( II ) NIMBUS COMMUNI CATIONS LTD. (HON'BLE ITAT, MUMBAI) 47 ITR(T) 496 ( III ) DAGA GLOBAL CHEMICALS PVT. LTD. (HONBLE ITAT, MUMBAI)(ITA NO.5592/MUM/2012) ( IV ) PEST CONTROL INDIA PVT LTD VS DCIT (MUM ITAT) (ITA NO.5048/MUM/2016 & ITA NO. 5608/MUM/2016) A . PR.CIT VS MIS EMPIRE PACKAGE PVT. L TD. (PUNJAB & HARYANA HIGH COURT (ITA NO. 415 OF 2015) ( V ) SANGHAVI EXPORTS INTERNATIONAL P LTD VS ACIT (ITA NO.3405/MUM/2015) 4.2.3 THE ISSUE OF RESTRICTION OF THE DISALLOWANCE UNDER SECTION 34A TO THE EXEMPT INCOME HAS BEEN CONCLUSIVELY DECIDED THE HON'BLE S UPREME COURT IN ITS RECENT JUDGEMENT IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT ( 91 TAXMANN.COM 154). THE HON'BLE SUPREME COURT IN PARA 40 OF THE JUDGEMENT HAS OBSERVED AS UNDER: 'WE NOTE FROM THE FACTS IN THE STATE BANK OF PATIALA CASES THAT THE AO, WH ILE PASSING THE ASSESSMENT ORDER, HAD ALREADY RESTRICTED THE DISALLOWANCE TO THE AMOUNT WHICH WAS CLAIMED AS EXEMPT INCOME BY APPLYING THE FORMULA CONTAINED IN RULE 81) OF THE RULES AND HOLDING THAT SECTION 14A OF THE ACT WOULD BE APPLICABLE. IN SPITE OF T HIS EXERCISE OF APPORTIONMENT OF EXPENDITURE CARRIED OUT BY THE AO, CIT(A) DISALLOWED THE ENTIRE DEDUCTION OF EXPENDITURE. THAT VIEW OF THE CIT(A) WAS CLEARLY UNTENABLE AND RIGHTLY SET ASIDE BY THE ITAT.' ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 12 4.2.4 THUS IT IS CLEAR THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT MADE BY THE AO CANNOT BE MORE THAN THE EXEMPT INCOME AS PER THE SETTLED JUDICIAL POSITION. HENCE THE DISALLOWANCE NEEDS TO BE RESTRICTED TO THE EXEMPT INCOME EARNED OF RS.43,334/ - . THE AO IS DIRECTED TO DELETE THE BALANCE DISALLOWANC E OF RS.74,076/ - . THE GROUND OF APPEAL IS PARTLY ALLOWED. 9. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM ON THE BASIS OF DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (91 TAXMANN.COM 154) . MOREOVE R, WE FIND THAT THIS ISSUE HAS ALSO COVERED BY DECISION OF HONBLE DELHI BENCHES IN THE CASE OF VIREET INVESTMENT 82 TAXMANN.COM. 415 IN WHICH IT IS SPECIFIC HELD THAT THE NO DISALLOWANCE COULD BE MADE BEYOND THE EXEMPT INCOME. ACCORDINGLY, IT IS QUITE CLE AR THAT THE FINDING OF THE CIT(A) IS QUITE CORRECT WHICH IS NOT LIABLE TO BE INTERFERED WITH AT THIS APPELLATE STAGE. ISSUE NOS. 5 & 6 10 . ISSUE NOS. 5 & 6 ARE FORMAL IN NATURE WHICH IS NOT REQUIRED FOR AD JUDICATED. 11 . IN THE RESULT, THE APPEAL FILED BY T HE REVENUE IS HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 / 09 / 202 1 SD/ - SD/ - ( SHAMIM YAHY A ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 27 / 09 / 2021 VIJAY PAL SINGH ( SR. P.S. ) ITA NO. 01 /M UM /2020 A.Y.20 12 - 13 13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI