DCIT, Central Circle-13, New Delhi V. Minda Industries Ltd, New Delhi

ITA 684/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9436 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2016-2017
• Appeal Filed On: 09-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 101

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA No. 684/Del/2021 (Assessment Year : 2016-17) DCIT Central Circle – 13, New Delhi PAN No. AAACM 1152 C Vs. Minda Industries Ltd. B-64/1, Wazirpur Industrial Area, New Delhi-110 052 (APPELLANT) (RESPONDENT) Assessee by Shri Shailesh Gupta, Adv. Revenue by Shri Jeetendra Chand, Sr. D.R. Date of hearing: 30.08.2022 Date of Pronouncement: 07.09.2022 ORDER PER ANIL CHATURVEDI, AM: This appeal filed by the Revenue is directed against the order dated 17.06.2020 passed by the Commissioner of Income Tax (Appeals)-26, New Delhi relating to Assessment Year 2016-17. 2. Brief facts of the case as culled out from the material on record are as under :- 2 3. Assessee is a company stated to be engaged in the business of manufacturing of automobile and auto parts. Assessee electronically filed its return of income for A.Y. 2016-17 on 29.11.2016 declaring total income of Rs.58,28,32,260/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 30.12.2019 and the total income was determined at Rs.60,19,58,590/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 17.06.2020 in Appeal No.10354/19-20 granted partial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: 1. “The Ld. CIT(A) erred in law in capping the quantum of disallowance of deduction u/ s 14A of the I.T. Act at the quantum of exempt income, ignoring that expenditure often exceeds income and, if such excess is allowed as deduction while computing taxable income (resulting in loss), the same principle has to apply in respect of exempt income and the excess has to be disallowed as deduction. 2. The Ld. CIT(A) committed perversity in not considering the ratio of the decision of Hon. Supreme Court in the case of CIT v Rajendra P Moody (115 ITR 519) (that, if expenditure had been incurred for purposes of earning of income, the same had to be allowed irrespective of whether income had actually been earned or not) which had been relied on by the AO in the assessment 3 order in support of his contention that, by applying the same principle, the entire amount of expenditure incurred for earning exempt income had to be disallowed irrespective of whether any exempt income had been earned or not and, consequently, there was no justification for capping the disallowance at any figure below the amount of such expenditure. 3. (a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.” 5. Though revenue has raised various ground but the sole controversy is with respect to the disallowance of deduction u/s 14A of the Act which has been deleted by CIT(A). 6. During the course of assessment proceedings, AO noticed that assessee had shown investment of Rs.194,64,78,517/- and exempt income of Rs.7,46,29,402/-. AO was of the view that the provision of section 14A of the Act were applicable. He noted that no exempt was shown by assessee. He thereafter computed that disallowance u/s 14A r.w.r 8D of the Income Tax Rules at Rs.1,94,64,785/- and disallowed the same. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) at para 5.6.7 of the order has held that AO was justified in making 4 the disallowance u/s 14A of the Act but however he noted that disallowance needs to be worked out considering the investments which has yielded the exempted income. He thereafter on the basis of the investments in shares which yielded exempt income worked out the total disallowance u/s 14A r.w.r 8D at Rs.16,15,360/- and after considering the suo moto disallowance made by the assessee of Rs.3,38,450/- upheld the disallowance to the extent of Rs.12,76,910/-. 7. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 8. Before us, Learned DR supported the order of AO. 9. Learned AR on the other hand reiterated the submissions made by lower authorities and further submitted that only those investments which yielded exempt income should be considered for working out disallowance u/s 14A r.w.r 8D as also held by Hon’ble Delhi High Court in the case of Caraf Builders & Constructions (P.) Ltd. [2019] 101 taxmann.com 167 (Delhi). He therefore submitted that no interference to the order of CIT(A) 5 is called for. He further submitted that to the extent, the disallowance has been upheld by CIT(A) assessee is not in appeal. 10. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance u/s 14A r.w.r 8D. We find that CIT(A) after following the decision cited in his order has held that the disallowance u/s 14A r.w.r 8D of the Act is to be worked out only by considering those investments which have yielded exempt income. Before us, Revenue has neither pointed to any fallacy in the findings of CIT(A) nor has placed any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. 11. In the result, appeal of Revenue is dismissed. Order pronounced in the open court on 07.09.2022 Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 07.09.2022 6 PY* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI