M/S STARLIGHT SYSTEMS PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3(4), MUMBAI

ITA 1495/MUM/2023

AI Insights

The case involves M/s Starlight Systems Pvt. Ltd., the appellant, contesting the disallowance of expenses amounting to Rs.30,00,355 under section 14A of the Income Tax Act, 1961, by the DCIT, CC-3(4), the respondent. The disallowance was initially computed by the assessing officer during the assessment year 2017-18, as the assessee had not made any disallowance under section 14A read with Rule 8D for the exempt dividend income earned. The CIT(A) upheld this decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing the decision in Cargo Motors (P) Ltd. Vs. DCIT, directed a reevaluation of the disallowance, emphasizing the need to consider only those investments that yielded exempt income for the computation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130136 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 30-04-2023
• Other Referred Cases: Cargo Motors (P) Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH D. GAIKWAD
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

P a g e | 1 ITA No.1495/Mum/2023 M/s Starlight Systems Pvt. Ltd. Vs. DCIT, CC-3(4) IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.1495/Mum/2023 (A.Y. 2017-18) M/s Starlight Systems Private Limited, 5 th Floor, Suntech Centre, 37-40 Subhash Road, Vile Parle (East), Mumbai – 400 057 Vs. DCIT, CC-3(4) Room No. 1923, 19 th Floor, Air India Building Nariman Point Mumbai - 400021 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAFCS7733L Appellant .. Respondent [ Appellant by : Gaurav Kabra Respondent by : Suresh D. Gaikwad Date of Hearing 13.07.2023 Date of Pronouncement 26.07.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A)-51, Mumbai, dated 14.12.2022 for A.Y. 2017- 18. The assessee has raised the following grounds before us: “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in disallowing expenses of Rs.30,00,355/- u/s.14A of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal.” 2. The assessment u/s 143(3) of the Act in the case of the assessee was finalised on 14.10.2019. During the course of assessment the assessing officer noticed that assesse has earned dividend income of P a g e | 2 ITA No.1495/Mum/2023 M/s Starlight Systems Pvt. Ltd. Vs. DCIT, CC-3(4) Rs.30,00,355/- which was claimed as exempt income. The assessing officer further noticed that assessee has not made any disallowance u/s 14A r.w. rule 8D for earning the aforesaid exempt income. Therefore, the assessing officer has computed the disallowance as per Sec. 14A r.w. Rule 8D to the amount of Rs.66,82,000/- and restricted the same to the extent of exempt income of Rs.30,00,355/- and added to the total income of the assessee. 3. The assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 4. During the course of appellate proceedings before us the ld. Counsel referred page no. 52 of the paper book pertaining to notes to financial statement and contended that the investment on which the assessee has earned dividend income was only 5712 lacs as on 31.03.2017 and Rs.3381.75 lacs as on 31.03.2016. Similarly, the ld. Counsel also referred financial statement pertaining to F.Y. 2014-15 to F.Y. 2015-16. The ld. Counsel further submitted that while computing disallowance the assessing officer has not considered the average value of the investment on which the assessee has earned the exempt income. On the other hand, the ld. D.R supported the order of lower authorities. 5. Heard both the sides and perused the material on record. On perusal of the assessment order it is observed that assessing officer has suo moto calculated disallowance u/s 14A r.w.Rule 8D after taking into account average value of investment to the amount of Rs.6681.53 lacs without considering average value of investment which yielded exempt income during the year under consideration. The Hon’ble Delhi High Court in the case of Cargo Motors (P) Ltd. Vs. DCIT (2022) 145 taxman.com 641 (Delhi) held that for purpose of making disallowance of expenses under section 14A as per rule 8D, only those investment P a g e | 3 ITA No.1495/Mum/2023 M/s Starlight Systems Pvt. Ltd. Vs. DCIT, CC-3(4) were to be considered for computing average value of investment which yielded exempt income during relevant assessment year. Therefore, we restore this issue to the file of the assessing officer for computing the disallowance u/s 14A r.w.Rule 8D after examination of the relevant details filed by the assessee on the basis of average investment which yielded exempt income to the assessee. Therefore, ground of appeal of the assessee is allowed for statistical purposes. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 26.07.2023 Sd/- Sd/- (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 26.07.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.