Niraj Kumar Associates Pvt.Limited, Pashan V. Assistant Commissioner of Income-tax, Circle - 2, Pune

ITA 2246/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0916 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-12-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 26-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM . / ITA NO.2246/PUN/2017 / ASSESSMENT YEAR : 2014-15 NIRAJ KUMAR ASSOCIATES PVT. LTD., 129/2, MONT VERT MARC PASHAN- SUS ROAD, PASHAN-411021. PAN : AAACN6424G ....... / APPELLANT / V/S. ACIT, CIRCLE-2, PUNE. / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 08.12.2020 / DATE OF PRONOUNCEMENT : 08.12.2020 / ORDER PER INTURI RAMA RAO, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, PUNE (CIT(A) FOR SHORT) DATED 30.08.2017 FOR THE ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL RELATES TO THE QUANTUM OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT). 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER :- THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF 2 ITA NO.2246/PUN/2017 RESIDENTIAL AND COMMERCIAL PROJECTS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 WAS FILED ON 16.03.2015 DECLARING TOTAL INCOME OF RS.39,54,618/-. AGAINST THE SAID RETUNED INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, PUNE (THE ASSESSING OFFICER FOR SHORT) AT A TOTAL INCOME OF RS.1,11,12,370/-. WHILE DOING SO, THE ASSESSING OFFICER MADE DISALLOWANCE OF CLAIM ON ACCOUNT OF PREMIUM ON CANCELLATION OF BOOKING OF RS.20,67,465/- AND FURTHER ADDITION OF RS.50,90,283/- U/S 14A OF THE ACT IN ADDITION TO SUO MOTTO DISALLOWANCE OF RS.1,41,66,358/-. 4. BEING AGGRIEVED AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A) CONTESTING ONLY ADDITION MADE U/S 14A OF THE ACT. THE APPELLANT HAD DISPUTED THE METHODOLOGY OF COMPUTATION OF DISALLOWANCE U/S 14A ON THE GROUND THAT WHILE COMPUTING THE VALUE OF THE AMOUNT OF INVESTMENT, THE INVESTMENTS WHICH YIELDED THE EXEMPT INCOME NET OF THE CREDIT BALANCES SHOULD BE CONSIDERED. THE LD. CIT(A) HAD NOT CONCURRED WITH THE ASSESSEE AND ACCORDINGLY DISMISSED THE APPEAL. 5. BEING AGGRIEVED BY THE ABOVE DECISION OF THE LD. CIT(A), THE APPELLANT IS BEFORE US IN THE PRESENT APPEAL. 6. BEFORE US, THE LD. AR CONTENDED THAT THE METHOD OF COMPUTATION OF AVERAGE VALUE OF INVESTMENT BY ASSESSING OFFICER IS INCORRECT. ALTERNATIVELY, HE SUBMITTED THAT THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT BE EXCEED THE EXEMPT INCOME AND IN SUPPORT OF THIS HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT, 372 ITR 694 (DELHI) AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICALS P. LTD. VS. ACIT, 46 ITR 70. 3 ITA NO.2246/PUN/2017 7. ON THE OTHER HAND, THE LD. DR HAD NO OBJECTION TO RESTRICT THE AMOUNT TO THE DISALLOWANCE U/S 14A TO THE EXTENT OF EXEMPT INCOME. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL RELATES TO THE QUANTUM OF DISALLOWANCE U/S 14A OF THE ACT. NOW, IT IS SETTLED POSITION OF LAW THAT THE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT CANNOT BE EXCEED THE EXEMPT INCOME AND IN THIS CONNECTION RELIANCE CAN BE PLACED ON THE FOLLOWING DECISIONS :- (I) PRINCIPAL COMMISSIONER OF INCOME-TAX-2 VS. CARAF BUILDERS & CONSTRUCTIONS (P.) LTD., [2019] 112 TAXMANN.COM 322 (SC) - (SLP DISMISSED AGAINST HIGH COURT RULING THAT DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED EXEMPT INCOME OF RELEVANT YEAR); (II) PRAGATHI KRISHNA GRAMIN BANK VS. JOINT COMMISSIONER OF INCOME-TAX, [2018] 95 TAXMANN.COM 41 (KARNATAKA); (III) PCIT VS. RELIANCE PORTS AND TERMINALS LTD., 114 TAXMANN.COM 529 (BOMBAY); AND, (IV) PCIT VS. STATE BANK OF PATIALA, 393 ITR 476. 9. HOWEVER, IN THE PRESENT CASE, THE AMOUNT OF EXEMPT INCOME IS NOT BORNE OUT OF THE RECORD. THEREFORE, WE SET-ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO RESTRICT THE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 10. SINCE WE REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO RESTRICT THE DISALLOWANCE U/S 14A OF THE ACT TO THE EXTENT OF 4 ITA NO.2246/PUN/2017 EXEMPT INCOME, IT IS NOT NECESSARY TO DEAL WITH THE OTHER CONTENTIONS RAISED BY THE ASSESSEE IN THE PRESENT APPEAL. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 08 TH DAY OF DECEMBER, 2020. SD/- SD/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 08 TH DECEMBER, 2020. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-3, PUNE. 4. THE PR. CIT-2, PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.