DCIT 5(2)(1), MUMBAI V. K. GIRDHARILAL INTERNATIONAL LTD., MUMBAI

ITA 4039/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9447 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 06-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Keywords: Earning of tax free income; Rule 8D

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI . , , BEFORE : SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM ./ ITA NO. 4039/MUM/2018 ( / ASSESSMENT YEAR : 2014 - 15 ) DY. COMMISSIONER OF INCOME TAX - 5(2)(1), ROOM NO.571, 5 TH FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI - 400020 VS. M/S.K.GIRDHARLAL INTERNATIONAL PVT. LTD., 1011, PRASAD CHAMBERS, OPERA H OUSE, MUMBAI 400 004 ./ ./ PAN/GIR NO. : AACCK6101F ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY SHRI B.YADAGIRI /ASSESSEE BY : : SHRI MADHUR AGARWAL / DATE OF HEARING : 19/06/2019 / DATE OF PRONOUNCEMENT : 26 / 06 / 2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 4039/MUM/2018 FOR A.Y. 2014 - 15 ARISES OUT OF THE ORDER BY THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) - 10, MUMBAI IN APPEAL NO. CIT(A) - 10/DC - 5(2)(1)/240/15 - 16, CIT(A) - 10/DC - 5(2)(1)/196/16 - 17, CIT(A) - 10/DC - 5(2)(1)/384/16 - 17 & CIT(A) - 10/DC - 5(2)(1)/385/16 - 17 DATED 21/03/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASS ED U/S.143(3) OF THE INCOME TAX ACT, 1961 ITA NO.4039/MUM/2018 M/S.K.GIRIDHARILAL INTERNATIONAL 2 (HEREINAFTER REFERRED TO AS ACT) DATED 20/12/2016 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 5(2)(1), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE U/S.14A OF THE ACT R.W.R. 8D OF THE RULES TO THE EXTENT OF THE EXEMPT INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD EARNED EXEMP T INCOME IN THE FORM OF DIVIDEND TO THE EXTENT OF RS.76,77,552/ - AND CLAIMED THE SAME AS EXEMPT. IT IS NOT IN DISPUTE THAT TH E PROVISIONS OF RULE 8D OF THE R ULES ARE APPLICABLE FOR COMPUTING THE DISALLOWANCE U/S.14A OF THE ACT IN THE INSTANT CASE. THE ASSE SSEE HOWEVER, RESTRICTED THE SAID DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME I.E. RS.76,77,552/ - AND MADE SUOMOTO DISALLOWANCE OF THE SAME IN THE RETURN OF INCOME. THE LD. AO HOWEVER, IGNORED THE SAME AND MADE DISALLOWANCE AS PER RULE 8D OF THE DIFFERENTI AL SUM OF RS.38,30,535/ - . THE LD. CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. WE FIND THAT THIS ISSUE IS NOW WELL SETTLED BY THE DECISI ON OF HONBLE APEX COURT IN THE CASE OF MAXOPP INVESTMENTS REPORTED IN 402 ITR 640 (SC) WHEREIN IT WAS HELD THAT THE DISALLOWANCE U/S.14A SHOULD BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME AND HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CI T(A) . A CCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 5. THE GROUND NO.2 RAISED BY THE REVENUE IS WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT VIS - - VIS COMPUTATION OF BOOK PROFIT U/S.115JB OF THE ACT. WE HAVE HEARD THE RIVAL SUBMISSIONS . WE FIND THAT ITA NO.4039/MUM/2018 M/S.K.GIRIDHARILAL INTERNATIONAL 3 THE LD. AO HAS DISALLOWED THE S UM OF RS.1,15,08,087/ - U/S.1 4A OF THE ACT R.W.R. 8D OF THE RULES W HILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT. WE FIND THAT THE SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENTS PVT. LTD., VS. ACIT REPORTED IN 165 ITD 27 HAD HELD THAT THE COMPUTATION PROVISIONS PROVIDED IN RULE 8D OF THE RULES CANNOT BE IMPORTED IN CLAUSE F OF EXPLANATION TO SECTION 115JB(2) OF THE ACT AND THAT THE DISALLOWANCE IN TERMS OF CLAUSE - F THEREON HAD TO BE MADE BASED ON ACTUAL AMOUNT S DEBITED TO THE PROFIT AND LOSS ACCOUNT. THIS FACT REQUIRES TO BE VERIFIED BY THE LD. AO VIS - - VIS THE ANNUAL AMOUNTS DEBITED IN THE PROFIT AND LOSS ACCOUNT (BOTH DIRECT AND INDIRECT EXPENSES) AND DISALLOWANCE IN TERMS OF CLAUSE F IS TO BE MADE BASED ON THE OUTCOME OF SAID VERIFICATION, WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF THE ACT. WE DIRECT THE LD. AO A CCORDINGLY . T HE GROUND NO.2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE RE VENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 / 06 /201 9 SD/ - SD/ - ( ) ( AMARJIT SINGH ) ( . ) ( M.BALAGANESH ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 26 /06 /2019 KARUNA , . . / SR.PS ITA NO.4039/MUM/2018 M/S.K.GIRIDHARILAL INTERNATIONAL 4 / COPY OF THE ORDER FORWARDED TO : / BY O RDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE R ESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//