Avinash Nivruti Bhosale, Pune V. Deputy Commissioner of Income tax, Pune

ITA 1239/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0635 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Earning of tax free income; Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.1239/PUN/2017 / ASSESSMENT YEAR : 2012-13 AVINASH NIVRUTI BHOSALE, 2, ABIL HOUSE, RANGE HILL CORNER, GANESH KHIND ROAD, PUNE 411 007 PAN : ABTPB8151F VS. DCIT, CIRCLE-2, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASS ED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, PUNE ON 27.0 2.2017 IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMA TION OF DISALLOWANCE OF RS.54,50,000/- U/S.14A OF THE INCOME- TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. APPELLANT BY SHRI NIKHIL PATHAK & SHRI NIMIT GUJRATHI RESPONDENT BY SHRI PANKAJ GARG DATE OF HEARING 17-09-2019 DATE OF PRONOUNCEMENT 17-09-2019 ITA NO.1239/PUN/2017 AVINASH N. BHOSALE 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E EARNED EXEMPT INCOME OF RS.80.14 LAKH AS SHARE FROM PARTNERSHIP FIRMS AND RS.25.05 LAKH AS DIVIDEND AND PPF INTEREST ETC. NO DISALLOWANCE U/S.14A WAS OFFERED. THE ASSESSING OFFICER, ON GETTING SATISFIED, COMPUTED THE DISALLOWANCE U/S.14A READ WITH RULE 8D(2)(III) AT RS.54,50,000/-, BEING 0.5% OF THE AVERAGE VALUE OF INVE STMENTS. THE LD. CIT(A) AFFIRMED THE DISALLOWANCE. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. THE LD. AR FAIRLY ADMITTED THAT THE DISALLOWA NCE U/S.14A IS CALLED FOR. HE, HOWEVER, SUBMITTED THAT IN COMPUTIN G SUCH DISALLOWANCE ONLY THOSE INVESTMENTS SHOULD BE CONSIDERE D WHICH HAVE YIELDED EXEMPT INCOME. 5. ORDINARILY THE DISALLOWANCE IS MADE AT 0.5% OF THE AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D(2)(III). HOWEVER, IN THIS REGARD, IT IS RELEVANT TO NOTE THAT THE HONBLE DELHI HIGH COURT IN ACB INDIA LTD. VS. CIT (2015) 374 ITR 108 (DEL) HAS HELD THAT THE AVERAGE VALUE OF INVESTMENTS, FOR THE PURPOSES OF RULE 8D(2)(III), SHOULD BE CONFINED TO THOSE SECURITIES IN RESPECT OF WHICH EXEMPT INCOME IS EARNED AND NOT THE TOTAL INVESTMENTS. SIMILAR VIEW HAS BEEN TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENTS (P) LTD. (2017) 165 ITD 27 (DEL) ( SB) ITA NO.1239/PUN/2017 AVINASH N. BHOSALE 3 HOLDING THAT ONLY THOSE INVESTMENTS SHOULD BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENTS WHICH YIELD EXEMPT INCOME DURING THE YEAR. RESPECTFULLY FOLLOWING THE PRECEDENTS , WE SET-ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)(III) IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS. 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SY AL) JUDICIAL MEMBER VICE P RESIDENT PUNE; DATED : 17 TH SEPTEMBER, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-3, PUNE 4. 5. 6. THE PR. CIT-2, PUNE , , / DR B, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.1239/PUN/2017 AVINASH N. BHOSALE 4 DATE 1. DRAFT DICTATED ON 17-09-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-09-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *