Pearl Global Industries Ltd, New Delhi V. ACIT, Circle-19(2), New Delhi

ITA 7826/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2769 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Appeal Filed On: 25-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PALLAVI DINODIA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND DR. BRR KUMAR, ACCOUNTANT MEMBER ITA No.7826/Del/2019 Assessment Year: 2016-17 Pearl Global Industries Ltd., A-3, Naraina Ind. Area, Phase-II, New Delhi Vs. ACIT, Circle-19(2), New Delhi PAN :AAACM0175F (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: This is an appeal by the assessee against order dated 30.07.2019 of learned Commissioner of Income-Tax(Appeals)-22, New Delhi for the assessment year 2016-17. Appellant by Ms. Pallavi Dinodia & Shri Harish Dhamija, CAs Assessee by Ms. Indu Sen, SR. DR Date of hearing 27.06.2022 Date of pronouncement 27.06.2022 2 ITA No.7826/Del./2019 2. The solitary issue arising in the appeal relates to disallowance of Rs.7,59,997 made under Section 14A of the Income-Tax Act, 1961 read with Rule 8D(iii). 3. Briefly, the facts are, assessee is a resident company. For the assessment year under dispute, assessee filed its return of income on 30.11.2016 declaring total income of Rs.16,95,520. 4. Subsequently, assessee filed a revised return of income on 30.02.2018 declaring total income at Rs.17,18,96,120. 5. In course of assessment proceedings, Assessing Officer noticed that assessee, in the year under consideration, had earned exempt income by way of long term capital gain on sale of mutual fund etc. amounting to Rs.1,65,43,156. Whereas, assessee has not disallowed any expenditure attributable to such income. When called upon to explain the reasons for not doing so, assessee submitted, it had not earned any exempt income during the year. Assessing Officer did not accept the aforesaid explanation of the assessee, since, assessee did earn exempt income during the year. Therefore, he proceeded to compute disallowance under Rule 8D read with section 14A of the 3 ITA No.7826/Del./2019 Act. While doing so, he disallowed an amount of Rs.47,99,905 under Rule 8D(ii) of the Act towards interest expenditure. 6. Further, he disallowed an amount of Rs.7,59,987 under Rule 8D(ii) of the Act. Thus, in aggregate, he disallowed an amount of Rs.55,59,892. 7. Assessee contested the aforesaid disallowance by filing an appeal before learned Commissioner (Appeals). 8. While deciding assessee’s appeal, learned Commissioner (Appeals) deleted the disallowance of interest expenditure amounting to Rs.47,99,905. However, he sustained the disallowance of administrative expenditure of Rs.7,59,987 made under Rule 8D(iii) of the Act. 9. Before us, learned counsel appearing for the assessee submitted that disallowance under Rule 8D(iii) of the Act should be made considering only those investments which yielded exempt income during the year under consideration. In support of such contention, she relied upon the following decisions: i) ACB India Ltd. vs. ACIT – 215 374 ITR 108 (Del.); & ii) ACIT vs. Vireet Investments Pvt. Ltd. (2017) – 82 Taxmann.com 415 (Trib.) S.B. 4 ITA No.7826/Del./2019 10. Further, she submitted, while computing book profit under Section 115JB of the Act, no disallowance can be made with reference to Section 14A read with Rule 8D. 11. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 12. We have considered rival submissions in the light of the decisions relied upon and perused the material available on record. 13. As discussed earlier, assessee, per se, has not contested the disallowance made under Rule 8D(iii) read with section 14A of the Act. The only grievance of the assessee is, disallowance under Rule 8D(iii) read with section 14A of the Act has to be made by considering only those investments which have yielded exempt income during the year. 14. Keeping in view the ratio laid down in the decisions cited before us, in principle, we agree with the aforesaid submission of learned counsel for the assessee. Therefore, we direct the Assessing Officer to compute disallowance under Section 14A read with Rule 8D(iii), by 5 ITA No.7826/Del./2019 considering only those investments which yielded exempt income during the year under consideration. 15. Further, we hold, while computing book profit under Section 115JB of the Act, no adjustment can be made with reference to section 14A read with Rule 8D. 16. In the result, the appeal is allowed as indicated above. Order pronounced in the open court on 27 th June, 2022. Sd/- Sd/- ( DR. BRR KUMAR ) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27 th June, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 6 ITA No.7826/Del./2019 Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 27.06.2022 2. Date on which the draft of order is placed before the Dictating Member: 27.06.2022 3. Date on which the draft of order is placed before the other Member: 4. Date on which the approved draft of order comes to the Sr. PS/PS: 29 .06.2022 5. Date of which the fair order is placed before the Dictating Member for pronouncement: 30.06.2022 6. Date on which the final order received after having been singed/pronounced by the Members: 30 .06.2022 7. Date on which the final order is uploaded on the website of ITAT: 30.06.2022 8. Date on which the file goes to the Bench Clerk 30.06.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for signature on the order: 11. Date of dispatch of order: