M/s Base Educational Services Pvt ltd , Bangalore V. Income tax Officer Ward-1(1)(1), Bangalore

ITA 339/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7356 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-04-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 05-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER IT A NO . 339 / BANG/ 2018 ASSESSMENT YEAR : 2013 - 14 BASE EDUCATIONAL SERVICES PVT. LTD., NO.27, BULL TEMPLE ROAD, BASAVANGUDI, BANGALORE 560 004. PAN: AA DCB 3089Q VS. THE INCOME TAX OFFICER, WARD 1(1)(1), BANGALORE. APPELLANT RESPONDENT APP E LLANT B Y : SHRI B.S. BALACHANDRAN, ADVOCATE RESPONDENT BY : SHRI C.H. SUNDAR RAO, CIT(DR-I) SHRI VIMAL ANAND, ADDL. CIT(DR), ITAT, BANGALORE. DATE OF HE ARING : 01.05.2019 DATE OF PRONOUNCEMENT : 01 .05.2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING T HE ORDER DATED 01.12.2017 OF THE CIT(APPEALS)-3, BENGALURU AND IT RELATES TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(APPEALS) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S. 14A OF THE INCOME-TAX ACT, 1961 [THE ACT]. ITA NO.339/BANG/2018 PAGE 2 OF 3 3. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING ED UCATIONAL SERVICES. HE SUBMITTED THAT THE ASSESSEE HAD INVESTED ITS SURPLU S FUNDS IN VARIOUS SEGMENTS OF MUTUAL FUNDS AND EARNED A DIVIDEND INCO ME OF RS.18.15 LAKHS. THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S. 14A OF THE ACT. HOWEVER, THE AO COMPUTED THE DISALLOWANCE OUT OF AD MINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) OF THE I.T. RULES A T RS.10.38 LAKHS. 4. THE LD. AR SUBMITTED THAT THE AO HAS COMPUTED TH E DISALLOWANCE BY CONSIDERING THE CLOSING AND OPENING VALUE OF INVEST MENTS BY PLACING RELIANCE ON THE SPECIAL BENCH DECISION IN THE CASE OF VIREET INVESTMENT P. LTD., 165 ITD 27. THE LD. AR SUBMITTED THAT THE AO SHOULD HAVE CONSIDERED ONLY THOSE INVESTMENTS WHICH HAVE YIELDE D EXEMPT INCOME. THE LD. AR FURNISHED A STATEMENT ACCORDING TO WHICH THE OPENING AND CLOSING VALUE OF INVESTMENTS WHICH HAVE YIELDED EXE MPT INCOME WAS ONLY RS.525.00 LAKHS & RS.169.66 LAKHS RESPECTIVELY. AC CORDINGLY, THE LD. AR PRAYED THAT THE AO MAY BE DIRECTED TO FOLLOW THE DE CISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT P. LTD (SUPRA) . 5. ON THE CONTRARY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE AO. 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF TH E VIEW THAT THERE IS NO MERIT IN THE PRAYER OF THE LD. AR AS THE SAME IS IN ACCORDANCE WITH THE DECISION RENDERED BY THE DELHI SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT P. LTD (SUPRA) . ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE CIT(APPEALS) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO WITH A DIRECTION TO COMPUTE THE DISALLOWANCE BY CONSIDERIN G ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME AS HEL D BY THE SPECIAL BENCH IN THE CASE REFERRED ABOVE. ITA NO.339/BANG/2018 PAGE 3 OF 3 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF MAY, 2019. SD/- SD/- (PAVAN KUMAR GADALE) ( B.R. BASKARAN ) JUDI CIAL M EMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 1 ST MAY, 2019. / D ESAI S MURTHY / COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.