M/S. PRIYA LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(2)(2), MUMBAI

ITA 5271/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1707 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 250; 20

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI C.N. PRASAD (JM) I.T.A. NO. 5271/MUM/2019 (ASSESSMENT YEAR 2016-17) M/S. PRIYA LIMITED 4 TH FLOOR, KIMATRAI BUILDING 77/79, MAHARSHI KARVE ROAD, MARINE LINES EAST MUMBAI-400 002. PAN : AAACP2210Q VS. ACIT,CC-2(2)(2) ROOM NO. 545 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI J.P. BAIRAGRA DEPARTMENT BY MS. SHREEKALA PARDESHI DATE OF HEARING 15 . 02 . 20 2 1 DATE OF PRONOUNCEMENT 16.02.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 27.6.2019 AND PERTAINS TO ASSESSMENT YEAR 2016-17. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D(2)(III) OF RS. 1,80,247/- BEING 0.5% OF THE AVER AGE VALUE OF INVESTMENTS. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FU RTHER ERRED IN NOT HOLDING THAT NO DISALLOWANCE UNDER SECTION 14A SHOULD BE MADE WHEN THERE IS NO EXEMPT INCOME. 3. SOLITARY ISSUE ARISES IN THIS APPEAL IS WHETHER LEARNED CIT(A) IS CORRECT IN UPHOLDING AN ADDITION OF RS. 1,80,247/- UNDER SECTI ON 8D(2)(III) BEING 0.5% OF THE AVERAGE VALUE OF INVESTMENT DESPITE THE ASSESSE E NOT CARRYING ANY EXEMPT INCOME. M/S. PRIYA LIMITED 2 4. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOUR AS UNDER :- WE ARE RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX (CENTRAL) 1 VS. CHETTINAD LOGISTICS, 95 TAXMANN.COM 250 (COPY ENCLOSED AT ANNEXURE-2), WHERE IN THE APEX COURT HELD AS UNDER: 'SECTION 14A, OF THE INCOME-TAX ACT, 1961, READ WITH RUL E 8D OF THE INCOME-TAX RULES, 1962 - EXPENDITURE INCURRED IN RE LATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME (GENERAL PRINCIPLE) - A SSESSMENT YEAR 2011-12 -HIGH COURT BY IMPUGNED ORDER HELD THAT SECTI ON 14A CAN ONLY BE TRIGGERED, IF, ASSESSEE SEEKS TO SQUARE OFF EXPENDITURE AGAINST INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER A CT, RULE 8D ONLY PROVIDES FOR A METHOD TO DETERMINE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME OF ASSESSEE AND IT CANNOT GO BEYOND WHAT IS PR OVIDED IN SECTION 14A - IT FURTHER HELD THAT WHERE NO EXEMPT INCO ME I.E., DIVIDEND, WAS EARNED IN RELEVANT ASSESSMENT YEAR BY ASSESSEE, SECTION 14A COULD NOT BE INVOKED - WHETHER SLP AGAINST SAID IM PUGNED ORDER WAS TO BE DISMISSED - HELD, YES (PARA 1) (IN FAVOUR OF ASSESSEE)' 2. FURTHER, IN ASSESSEE COMPANY'S OWN CASE FOR THE ASSESSMENT YEAR 2008- 09, 2009-10, THE DISALLOWANCE U/S 14A R.W.R 8D MADE BY THE ASSESSING OFFICER WAS RIGHTLY DELETED BY THE CIT(A) AND THE SA ID DECISION OF CIT(A) WAS UPHELD BY HON. ITAT. FURTHER APPEAL FILED BY DEPARTME NT BEFORE THE HON'BLE HIGH COURT OF BOMBAY HAS BEEN DISMISSED BY THE HONB LE HIGH COURT VIDE ORDER DATED 09-08-2016. FURTHER, HON. ITAT HAS DECID ED THE MATTER IN FAVOUR OF THE ASSESSEE FOR AY 2010-11 AND AY 2011-12 AND HE LD THAT PROVISIONS OF SECTION 14A CANNOT BE INVOKED WHEN THE ASSESSEE HAS N OT EARNED ANY EXEMPT INCOME DURING THE YEAR. COPY OF ORDER OF HON. ITAT FOR AY 2010-11 AND AY 2011-12 ARE ENCLOSED AS ANNEXURE - 3 AND 4 R ESPECTIVELY. 5. UPON CAREFUL CONSIDERATION AND HEARING BOTH THE PARTIES WE HOLD THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. HEN CE, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF TH E ASSESSEE. 6. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S BY PLACING THE RESULT ON NOTICE BOARD ON 16.2.2021. SD/- SD/- (C.N. PRASAD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER M/S. PRIYA LIMITED 3 MUMBAI; DATED : 16/02/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI