M/s Manipal Prakashan Limited , Manipal V. The Income Tax Officer Ward-3 , Udupi

ITA 791/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4750 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 15-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR NARENDRA REBELLY BENGALURU
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO. 791/BANG/2018 ASSESSMENT YEAR : 2014 - 15 M/S. MANIPAL PRAKASHAN LTD., UDAYAVANI BUILDING, PRESS CORNER, MANIPAL 576 104. PA N: AABCM 2207K VS. THE INCOME TAX OFFICER, WARD 3, UDUPI. APP ELLANT RESPONDENT APP ELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : DR. NARENDRA REBELLY, ADDL.CIT(DR)(ITAT), BENGALURU . DATE OF HEARING : 30 .05.2018 DATE OF PRONOU NCEMENT : 01.06. 2018 O R D E R THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 27.12.2017 OF THE CIT(APPEALS)-X, BENGALURU RELATING TO ASSESS MENT YEAR 2014-15. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL IS WITH REGARD TO THE DISALLOWANCE OF EXPENSES INCURRED IN EARNING THE EXEMPT INCOME. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF MANUFACTURE OF CORRUGATED BOXES. IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE INCOME-TAX ACT, 1961 [THE ACT], THE AO NOTICED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOM E OF RS.28,445 WHICH WAS EXEMPT U/S. 10(34) OF THE ACT. IN TERMS OF SEC TION 14A OF THE ACT, THE AO WANTED TO DISALLOW EXPENSES INCURRED IN EARNING EXEMPT INCOME. THE ITA NO. 791/BANG/2018 PAGE 2 OF 3 DISPUTE BEFORE THE AO WAS ONLY WITH REGARD TO DISAL LOWANCE OF OTHER EXPENSES IN TERMS OF RULE 8D(2)(III) OF THE INCOME- TAX RULES, 1962 [THE RULES] R.W.S. 14A OF THE ACT. ACCORDING TO THE AS SESSEE, NO EXPENSES WERE INCURRED FOR EARNING THE EXEMPT INCOME. THE A SSESSEE PLEADED THAT THE INVESTMENTS ARE NOT MADE FREQUENTLY AND IN FACT NO INVESTMENT WAS MADE DURING THE RELEVANT PREVIOUS YEAR. THE INVEST MENTS WERE HELD FOR A LONG TIME AND THERE CAN BE COST ATTRIBUTABLE TO EAR NING THE EXEMPT INCOME. THE AO, HOWEVER, WAS OF THE VIEW THAT OTHER EXPENSE S HAD TO BE DISALLOWED IN TERMS OF RULE 8D(2)(III) OF THE RULES . ACCORDINGLY, THE AO COMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(III) AS FOLLOWS:- RULE 8D(2)(III) : % OF AVERAGE VALUE OF INVESTM ENT RS.20,82,12,575 X 0.5% = RS.10,41,062. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) WAS OF T HE VIEW THAT DISALLOWANCE OF EXPENSES U/S. 14A OF THE ACT IS MAN DATORY AND THEREFORE DISALLOWANCE OF EXPENSES MADE BY THE AO WAS PROPER. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE HAS PREFERRED T HE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HONBL E DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS (P) LTD. V. CIT, 372 ITR 694 HAS TAKEN THE VIEW THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT E XCEED THE EXEMPT INCOME. SIMILAR VIEW WAS EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. HOLCIM INDIA PVT. LTD., 272 CTR 282 (DEL) . THESE DECISIONS WERE CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FUTURE CORPORATE RESOURCES LTD V. ACIT, ITA NO.4658/MUM/20 15 DATED 26.07.2017 RELATING TO AY 2011-12 AND IT WAS HELD BY THE TRIB UNAL MUMBAI BENCH THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT DISALLOWANCE U/S. ITA NO. 791/BANG/2018 PAGE 3 OF 3 14A OF THE ACT IN THE PRESENT CASE SHOULD BE RESTRI CTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- ( N.V. VASUDEVAN ) JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.