M/s. Jagdale Industries Private Limited, Bangalore V. Deputy Commissioner Of Income Tax, Central Circle- 1(4), Bangalore

ITA 1622/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2552 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 11-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: L BHARATH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER IT A NO. 1 622 /BANG/2019 ASSESSMENT YEAR: 2013 - 14 M/S JAGADALE INDUSTRIES PVT. LTD., NO.782, 15 TH CROSS, JP NAGAR, 1 ST PHASE, BENGALURU 560 078. PAN: AAACJ4499B VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(4) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI L. BHARATH, CA RESPONDENT BY : SHRI PRIYADARSHINI MISHRA, J CIT( DR)(ITAT), BENGALURU. DATE OF HEARING : 27.02.2020 DATE OF PRONOUNCEMENT : 18 .0 3 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 15.05.2019 OF THE CIT(APPEALS)-11, BENGALURU RELATING TO ASSES SMENT YEAR 2013-14. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION I N THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF EXPENSES INCURRED IN EARNING EXEMPT INCOME IN TERMS OF SECTION 14A OF THE INCOME-TAX ACT, 1961 [THE ACT] R.W. RULE 8D(2)(II) & (III) OF THE INCOME-TAX RULES, 1962 [TH E RULES]. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF DRUGS, PHARMACEUTICAL AND FOOD PRO CESSING. IT IS NOT IN ITA NO.1622/BANG/2019 PAGE 2 OF 3 DISPUTE THAT THE ASSESSEE EARNED DIVIDEND INCOME. THERE IS NO REFERENCE TO THE QUANTUM OF DIVIDEND INCOME EARNED BY THE ASS ESSEE IN ANY OF THE ORDERS OF THE REVENUE AUTHORITIES. THE ASSESSEE CL AIMS THAT THE DIVIDEND EARNED BY IT IS ONLY A SUM OF RS.6,600/- WHICH IS N OT CHARGEABLE TO TAX UNDER CHAPTER III [SECTION 10(34)] OF THE ACT. THE PROFIT & LOSS ACCOUNT IN NOTE NO.21 SHOWS THAT THE DIVIDEND INCOME EARNED IS ONLY A SUM OF RS.6,600/-. BY APPLYING THE FORMULA IN RULE 8D(2(I I) & (III) OF THE RULES, THE AO COMPUTED DISALLOWANCE U/S.14A OF THE ACT AT A SU M OF RS.10,08,791/- WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE . THE DISALLOWANCE MADE BY THE AO WAS CONFIRMED BY THE CIT(APPEALS). 4. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TIM E OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE RESTRICTED HIS ARG UMENTS ONLY TO THE EFFECT THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD BE RESTRICTED TO THE EXTENT OF DIVIDEND INCOME EARNED BY THE ASSESSE E IN THE LIGHT OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF JOINT INVESTMENTS (P) LTD. V. CIT, 372 ITR 694 WHEREIN A VIEW WAS TAKEN THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME . SIMILAR VIEW WAS EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT V. HOLCIM INDIA PVT. LTD., 272 CTR 282 (DEL) . THESE DECISIONS WERE CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FUTURE CORPORATE RESOURCES LTD V. ACIT, ITA NO.4658/MUM/2015 DATED 2 6.07.2017 RELATING TO AY 2011-12 AND IT WAS HELD BY THE TRIBUNAL MUMBA I BENCH THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT DIS ALLOWANCE U/S. 14A OF THE ACT IN THE PRESENT CASE SHOULD BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. SINCE THE QUANTUM OF DIVIDEND INCO ME IS NOT FOUND SPELT OUT IN THE ORDERS OF THE REVENUE AUTHORITIES, WE RE MAND THE ISSUE TO THE AO ITA NO.1622/BANG/2019 PAGE 3 OF 3 FOR THE LIMITED PURPOSE OF ASCERTAINING THE QUANTUM OF EXEMPT INCOME EARNED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDI NGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED TO THE EXTENT INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF MARCH, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNATANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 18 TH MARCH, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.