The Deputy Commissioner of Income Tax, Circle-1, Udupi., Udupi V. M/s Manipal Finance Corporation Limited., Udupi

ITA 333/PAN/2016

AI Insights

The case involves two appeals by the Revenue against M/s. Manipal Finance Corporation Limited concerning the assessment years 2012-13 and 2013-14. The primary issues in the appeals were the disallowance under section 14A of the Income Tax Act, 1961, related to exempt dividend income, and the treatment of capital expenditure concerning the settlement of deposits, debentures, and debts. For the assessment year 2012-13, the Tribunal upheld the Assessing Officer's application of Rule 8D for calculating disallowance related to exempt income. For the assessment year 2013-14, the Tribunal dismissed the appeal based on the monetary limit set by the CBDT for filing appeals, which was less than the tax effect involved in the case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136930 (ITAT-PANAJI)
• Duration Of Justice: 6 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 18-12-2016
• Other Referred Cases: Hon'ble Karnataka High Court case
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Tax effect; Capital expenditure; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI (AT e-Court, PUNE) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA Nos.332 & 333/PAN/2016 नधा रण वष / Assessment Years : 2012-13 & 2013-14 DCIT, Circle-1, Udipi Vs. M/s. Manipal Finance Corporation Limited, Manipal House, Manipal, Udipi 576104 Karnataka PAN : AABCM2209H Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP : These two appeals by the Revenue relate to the assessment years 2012-13 and 2013-14. Since a common issue is raised in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. 2. The appeals are time barred by 3 days. The appellant had submitted the reasons for the delay in presenting the appeals before the Tribunal. We are satisfied with the reason so stated. We, Assessee by Ms. Sheetal Revenue by Shri N. Shrikanth Date of hearing 03-07-2023 Date of pronouncement 04-07-2023 ITA Nos.332 & 333/PAN/2016 M/s. Manipal Finance Corporation Limited 2 therefore, condone the delay and admit the appeals for disposal on merits. A.Y. 2012-13 : 3. The first ground is against the deletion of addition made by the Assessing Officer (AO) under section 14A of the Act. 4. Briefly stated, the facts of this ground are that the assessee earned exempt dividend income of Rs.2,82,640/- and offered suo motu disallowance u/s.14A at Rs.7,075/-. On a specific query, the assessee failed to furnish the working of such disallowance. The AO computed the disallowance under Rule 8D(2)(iii) at 0.5% of the average value of investments towards such expenses at Rs.30,390/- (after allowing deduction for the amount suo motu offered by the assessee). The ld. CIT(A) deleted the addition on the ground that the AO failed to record any satisfaction. 5. Having heard the rival submissions and gone through the relevant material on record, it is seen that the assessee suo motu offered disallowance at Rs.7,075/-. On a specific query, the assessee failed to furnish any basis for working out the said disallowance. The question of recording satisfaction as to the inadequacy of the amount offered by the assessee towards disallowance can arise only when the assessee furnishes the basis of such disallowance. In the absence of any basis, the satisfaction as to ITA Nos.332 & 333/PAN/2016 M/s. Manipal Finance Corporation Limited 3 the inadequacy of the amount has to be inferred and the AO has to apply the mandate of Rule 8D, which he actually did in the instant case. Since the disallowance has been made under Rule 8D(2)(iii) at 0.5% of the average value of investments, which is in accordance with the mandate of the Rule, we hold that no exception can be taken to the view of the AO. The impugned order is, therefore, set- aside and the ground is allowed. 6. The other grounds are against the deletion of addition of the principal amount written back arising out of settlement of deposits, debentures and debts as capital expenditure. The facts apropos this issue are that the AO made disallowance of Rs.1,67,11,134/- towards principal portion of deposits surrendered. The ld. CIT(A), relying on the view taken in earlier years, allowed the assessee’s claim. 7. Having heard both the sides and gone through the relevant material on record, it is seen as an admitted position that the Hon’ble Karnataka High Court has decided this issue in favour of the assessee in its own case. The ld. DR submitted that the SLP filed by the Department is still pending. In view of this, the law laid down by the Hon’ble jurisdictional High Court in the case of the assessee has to be applied and the pendency of SLP before the ITA Nos.332 & 333/PAN/2016 M/s. Manipal Finance Corporation Limited 4 Hon’ble Supreme Court cannot change the situation. We, therefore, affirm the view taken by the ld. CIT(A) on this issue. 8. In the result, the appeal is partly allowed. A.Y. 2013-14 : 9. At the outset, the ld. AR submitted that the tax effect in this appeal is less than Rs.50.00 lakh, which could not be controverted by the Revenue. 10. The CBDT has issued circular No.17/2019 dated 08-08-2019 revising upward the monetary limits for filing of appeals by the Department in Income-tax Cases before various appellate forums. The earlier circular No.03/2018 dated 11-07-2018 fixed monetary limit for filing of appeals by the Revenue before the Tribunal at Rs.20.00 lakh. Such limit has now been enhanced in the recent Circular dated 08-08-2019 to Rs.50.00 lakh. Since tax effect in the appeal under consideration is stated to be Rs.19.06 lakh, which is less than the revised monetary limit of Rs.50.00 lakh, we are not inclined to entertain this appeal. However, later on, if it is found that the tax effect is more than the monetary limit of Rs.50.00 lakh, the Department is at liberty to move application for restoration of the appeal. ITA Nos.332 & 333/PAN/2016 M/s. Manipal Finance Corporation Limited 5 11. In the result, the appeal is dismissed. Order pronounced in the Open Court on 04 th July, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 04 th July, 2023 सतीश आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. थ / The respondent 3. The Pr.CIT concerned 4. DR, ITAT, Panaji Bench, Panaji 5. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA Nos.332 & 333/PAN/2016 M/s. Manipal Finance Corporation Limited 6 Date 1. Draft dictated on 03-07-2023 Sr.PS 2. Draft placed before author 04-07-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *