ITO 8(3)(3), MUMBAI V. VARAD VENTURES LTD., MUMBAI

ITA 2974/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4309 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 09-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SINGH
• Assessee Lawyers: KISAN MUKADAM
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 2974 / MUM . /2018 ( ASSESSMENT YEAR : 20 13 14 ) INCOME TAX OFFICER WARD 8(3)(3), MUMBAI8 . APPELLANT V/S VARAD VENTURES LTD. 6, LALWANI INDUSTRIAL ESTATE 14, DR. G.D. AMBEKAR ROAD MUMBAI 400 031 PAN AAACK1553H . RESPONDENT ASSESSEE BY : SHRI KISAN MUKADAM REVENUE BY : SHRI PRADEEP SINGH DATE OF HEARING 26 . 02 .201 9 DATE OF ORDER 13.03.2019 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE REVENUE CHALLENGING THE ORDER DATED 2 3 RD JANUARY 2018, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 14 , MUMBAI , FOR THE ASSESSMENT YEAR 20 13 14 . 2 . T HE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER: I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE U/S 14A TO THE 2 VARAD VENTURES LTD. INVESTMENT THAT GENERATES EXEMPT INCOME WITHOUT APPRECIATING THE FACT THAT THE CBDT C IRCULAR NO.5/2014, DATED 11.02.2014, CLARIFIES THE APPLICABILITY OF RULE 8D R/W SECTION 14A OF THE ACT FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 3 . BRIEF FACTS RELATING TO THE DISPUTED IS SUE ARE, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30 TH SEPTEMBER 2013, DECLARING TOTAL INCOME OF ` 6,20,330. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO ` 2,000. WHEREAS, THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE UNDER SECTION 14A R/W RULE 8D TOWARDS EARNING THE EXEMPT INCOME. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISA LLOWANCE UNDER SECTION 14A R/W RULE 8D SHOULD NOT BE MADE. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE NO EXPENDITURE WAS INCURRED TOWARDS EARNING EXEMPT INCOME , DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD NOT BE MADE. HOWEVER, REJECTING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE OF ` 14,36,475, UNDER RULE 8D(2)(III) R/W SECTION 14A OF THE ACT. BEING AGGRIEVED WITH THE AFORESAID DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUT HORITY. 3 VARAD VENTURES LTD. 4 . L EARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING CERTAIN JUDICIAL PRECEDENTS HELD THAT DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CANNOT EXCEED THE QUANTUM OF EXEMPT INCOME EARNED BY THE ASSESSEE DURIN G THE YEAR. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT TO ` 2,000. 5 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE EXEMPT INCOME EARNED DURING THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE IS ` 2,000. WHEREAS, THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF ` 14,36,475, UNDER SECTION 14A R/W RULE 8D. AS HELD BY THE HONBLE DELHI HIGH COURT IN JOINT INVESTMENTS PVT. LTD. V/S CIT, [2015] 372 ITR 694 (DEL.) AS WELL AS MANY OTHER DECISIONS, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT EXCEED THE QUANTUM OF EXEMPT INCOME EARNED DURING THE YEAR. THEREFORE, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) BEING IN CONSONANCE WITH THE RATIO LAID DOWN IN THE JUDICIAL PRECEDENTS REFERRED TO BY HIM, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, UPHOLDING THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), I DISMISS THE GROUND RAISED BY THE REVENU E. 4 VARAD VENTURES LTD. 6 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI