Prime Centre and Developers Private Limited, Pune V. Assistant Commissioner of Income Tax, Central Circle-1(1), Pune, Pune

ITA 784/PUN/2023

AI Insights

The case involves Prime Centre and Developers Private Limited, which appealed against the orders of the CIT(A), Pune-11, concerning disallowances made under section 14A read with Rule 8D(2)(iii) of the Income-tax Act, 1961 for the assessment years 2013-14 and 2014-15. The primary issue was the confirmation of a disallowance of Rs.7,00,050 by the CIT(A), which was calculated as 0.5% of the average value of investments, despite the assessee earning tax-free dividend income. The Tribunal examined the applicability of the Cheminvest Ltd. vs. CIT ruling, which stated that no disallowance under section 14A can be made if there is no exempt income, and noted that the amendment to section 14A by the Finance Act, 2022, which allows disallowance irrespective of exempt income, is not retrospective.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137838 (ITAT-PUNE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 03-07-2023
• Other Referred Cases: Cheminvest Ltd. vs. CIT, CIT vs. Holcim India P. Ltd., Pr.CIT Vs. Era Infrastructure (India) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, ‘B’ PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA Nos.784 & 785/PUN/2023 Assessment Years : 2013-14 & 2014-15 Prime Centre and Developers Private Limited, 504, Corporate Plaza, Senapati Bapat Road, Pune 411 016 Maharashtra PAN : AABCP4332Q Vs. The ACIT, Central Circle-1(1), Pune Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP : These two appeals by the assessee are directed against the separate orders dt. 10-05-2023 passed by the CIT(A), Pune-11 u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘The Act’) in relation to the assessment years 2013-14 and 2014-15. Since a common issue is raised in these appeals, we are, therefore, proceeding to dispose them off by a consolidated order for the sake of convenience. Assessee by Shri Suhas Bora Revenue by Shri Uma Shankar Prasad Date of hearing 03-08-2023 Date of pronouncement 04-08-2023 ITA Nos.784 & 785/PUN/2023 Prime Centre and Developers Pvt. Ltd. 2 A.Y. 2013-14 : 2. The only issue raised in this appeal is against the confirmation of disallowance of Rs.7,00,050/- made by the Assessing Officer (AO) u/s.14A read with Rule 8D(2)(iii) of the Act. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of development of real estate as Developers. Investment in shares were made to the tune of Rs.13.95 crore. Invoking the provisions of section 14A read with Rule 8D(2), the AO made total disallowance of Rs.36,38,957/-. The ld. CIT(A) deleted the disallowance to the tune of Rs.29,28,907/- on the ground that the assessee’s capital and Reserves and Surplus were more than the investment in shares. He, however, sustained the addition under Rule 8D(2)(iii) amounting to Rs.7,00,050/- made by the AO at 0.5% of the average value of investments. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 4. Having heard the rival submissions and gone through the relevant material on record, it is seen from the impugned order that the assessee earned tax free dividend income of Rs.1,25,000/-. This fact has been recorded in para 6 of the order. Against that, the ITA Nos.784 & 785/PUN/2023 Prime Centre and Developers Pvt. Ltd. 3 disallowance under Rule 8D(2)(iii) has been made and sustained to the tune of Rs.7,00,050/-. 5. The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. 6. It is seen that an amendment has been carried out to section 14A by the Finance Act, 2022 providing that the disallowance u/s 14A would be called for notwithstanding no receipt of exempt income during the year. The Hon’ble Delhi High Court in Pr.CIT Vs. Era Infrastructure (India) Ltd. (2022) 448 ITR 674 (Delhi) has held such amendment to be not retrospective. In that view of the matter, the case pertaining to the A.Y. 2014-15 under consideration, having earned tax free dividend of Rs.1,25,000/-, will be governed by the ruling in Cheminvest (supra). Respectfully following the precedent, we order to restrict the disallowance to Rs.1,25,000/-. A.Y. 2014-15: 7. The facts and circumstances for the A.Y. 2014-15 are mutatis mutandis similar. For this year, the assessee earned exempt income of Rs.92,378/-, whereas the AO made the disallowance ITA Nos.784 & 785/PUN/2023 Prime Centre and Developers Pvt. Ltd. 4 u/s.8D(2)(iii) at Rs.5,56,531/-, which came to be sustained in the first appeal. Following the view taken herein above, we restrict the disallowance to Rs.92,378/-, being, the amount of tax free dividend income. 8. In the result, both the appeals are partly allowed. Order pronounced in the Open Court on 4 th August, 2023. Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; ददन ांक Dated : 4 th August, 2023 सतीश आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील थी / The Appellant; 2. 3. प्रत्यथी / The respondent The Pr.CIT(Central), Pune 4. DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अदधकरण ,पुणे / ITAT, Pune ITA Nos.784 & 785/PUN/2023 Prime Centre and Developers Pvt. Ltd. 5 Date 1. Draft dictated on 03-08-2023 Sr.PS 2. Draft placed before author 04-08-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *