DCIT, 3(3)(2), MUMBAI V. SYNERGY APPLICANCES PVT LTD, MUMBAI

ITA 291/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8063 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 22-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAYANK CHAUHAN
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO.291/MUM/2019 (ASSESSMENT YEAR 2015-16) DCIT- 3(3)(2), ROOM NO.628, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S SYNERGY APPLICANCES PVT. LTD., 171-C, MITTAL COURT, NARIMAN POINT, MUMBAI 400021. P AN: AAACR1840E APPELLANT RESPONDENT APPELLANT BY : SHRI ANAND MOHAN (CIT-DR) REVENUE BY : SHRI MAYANK CHAUHAN (AR) DATE OF HEARING : 19.11.2020 DATE OF PRONOUNCEMEN T : 11.01.2021 ORDER PER MAHAVIR SINGH, VICE-PRESIDENT; 1. THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI [FOR SHORT THE LD. CIT(A)] IN APPEAL NO. CIT-8/IT-130/17-18 ORDER DATED 20.11.2018. ASSESSME NT WAS FRAMED BY DCIT-3(3)(2), MUMBAI UNDER SECTION 143(3) OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE THE ACT) VIDE ORD ER DATED 29.11.2017 FOR THE ASSESSMENT YEAR 2015-16. 2. THE ONLY ISSUE RAISED IN THIS APPEAL OF REVENUE AS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE INCOME TAX RULES, 1962. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWIN G GROUND: ITA NO. 291 MUM 2019-M/S SYNERGY APPLICANCES PVT. LTD. 2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN HOLDING THAT NO DISALLOWANCE U/ S 14A IS CALLED FOR IN RESPECT OF INVESTMENTS WHICH DO NOT EARN EXEMPT INC OME WHICH IS CONTRARY TO CBDT CIRCULAR NO.5/2014 WHICH CLARIFIES THAT THE RU LE 8D R.W.S. 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EV EN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME? 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES BUT DURING THE REL EVANT FINANCIAL YEAR 2014-15 RELEVANT TO THIS ASSESSMENT YEAR 2015-16 HA S NOT EARNED ANY EXEMPT INCOME. THE ASSESSING OFFICER NOTED THE SUBM ISSIONS OF THE ASSESSEE IN PARA-5.2 OF THE ASSESSMENT ORDER AND TH E RELEVANT PORTION READS AS UNDER: HERE, ARS SUBMISSION THAT THE ASSESSEE HAS NOT DERI VED ANY EXEMPT DIVIDEND INCOME DURING THE YEAR AND HENCE NO DISALL OWANCE U/S.14A IS CALLED FOR IS NOT ACCEPTABLE. A PERUSAL OF THE RETURN OF INCOME/COMPUTATION OF INCOME REVEALS THAT THE ASSESSEE, ITSELF, HAD DISAL LOWED AN AMOUNT OF RS. 1,63,798/- AS EXPENSES PERTAINING TO INVESTMENT ACT IVITY. THUS, THE ASSESSEES SUBMISSION IS CONTRADICTING ITS OWN ACTION OF OFFER ING DISALLOWANCE U/S.14A OF THE ACT. FURTHER, THE DISALLOWANCE OFFERED BY THE A SSESSEE IS FOUND TO BE NOT AS PER RULE 8D, WHICH IS MADE APPLICABLE W.E.F A.Y. 2008-09. 5. BUT, THE AO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R 8D OF THE RULES MADE DISALLOWANCE OF INTEREST AT RS. 11,7 5,02,647/- APART FROM THE SUO-MOTO DISALLOWANCE OFFERED BY ASSESSEE AT RS. 1, 63,798/- THEREBY EFFECTIVE DISALLOWANCE WAS MADE AT RS. 11,75,02,647 /-. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE ITA NO. 291 MUM 2019-M/S SYNERGY APPLICANCES PVT. LTD. 3 DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2018) 402 I TR 640 (SC). 6. WE NOTED THAT ONCE THERE IS NO EXEMPT INCOME, THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA), WHEREIN IT IS HE LD THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.R 8D OF THE RULES CANNOT EXCEED THE EXEMPT INCOME. SINCE, IN THE PRESENT CASE THERE IS NO EXEMPT INCOME, NO DISALLOWANCE IS WARRANTED. HENCE, THE ORDER OF CIT( A) IS CONFIRMED AND APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY 2021. SD/- SD/- M. BALAGANESH MAHAVIR SINGH ACCOUNTANT MEMBER VICE - PRESIDENT MUMBAI, DATE: 11.01.2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT, MUMBAI