Deputy Commissioner of Income-Tax, Circle- 8, Pune V. Mahale Holding (I) P Ltd, Pune

ITA 95/PUN/2022

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The case involves an appeal by the Revenue against the order of the NFAC, which pertained to the assessment year 2017-18. The respondent, Mahale Holding (I) P. Ltd., had filed a return declaring nil income, which was subsequently assessed at a total income of Rs.1,99,11,205 due to disallowance under section 14A of the Income Tax Act, 1961. The NFAC's decision, which the Revenue contested, focused on the correct interpretation of Rule 8D(2)(iii) concerning the computation of disallowances related to investments yielding exempt income. The Tribunal's decision reaffirmed the NFAC's approach, emphasizing that only those investments which yielded exempt income should be considered in the computation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137173 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 03-02-2022
• Other Referred Cases: Joint Investments Pvt. Ltd. vs. CIT, ACB India Ltd. Vs. Assistant Commissioner of Income Tax, Marg Ltd. Vs. CIT, CIT Vs. Shriram Ownership Trust, Pragathi Krishna Gramin Bank Vs. Jt.CIT
• Laws Referred To: Income Tax Act, 1961, Companies Act, 1956, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.95/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 DCIT, Circle-8, Pune. Vs. Mahale Holding (I) P. Ltd., S. No.4270, 2 nd Floor, One Elpro Park, Chinchwad Gaon, Pune- 411033. PAN : AAGCM2208M Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of the National Faceless Appeal Centre, Delhi [‘the NFAC’] dated 20.12.2021 for the assessment year 2017-18. 2. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of investment, providing administrative services, managerial and technical services to its group companies. The Return of Income for the assessment year Revenue by : Shri Ramnath P. Murkunde Assessee by : Shri Nagendra Gurav Date of hearing : 11.01.2023 Date of pronouncement : 23.01.2023 ITA No.95/PUN/2022 2 2017-18 was filed on 30.11.2017 declaring total income of Rs.Nil. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-16(2), Delhi (‘the Assessing Officer’) vide order dated 12.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,99,11,205/-. The disparity between the returned income and the assessed income is on account of disallowance of Rs.1,99,11,205/- u/s 14A of the Act. 3. Being aggrieved by the above addition, an appeal was filed before the NFAC, who vide impugned order held that for the purpose of computation of disallowance under sub-clause (iii) of Rule 8D(2) of the Income Tax Rules, 1962, only the average value of those investments, which yielded the exempt income alone has to be considered. 4. Being aggrieved by the decision of the NFAC, the Revenue is in appeal before us. 5. We heard the rival submissions and perused the material on record. In the present case, the only issue relates to the computation of amount of disallowance made under sub-rule (iii) of Rule 8D(2) of the Rules. It is settled position of law for the purpose of computing the average value of investments as envisaged under ITA No.95/PUN/2022 3 Rule 8D(2)(iii), the value of only those investments which yielded the exempt income alone has to be considered in view of the decision of the Hon’ble Delhi High Court in the case of in the case of Joint Investments Pvt. Ltd. vs. CIT, 374 ITR 694 (Delhi), the decisions of Hon’ble Madras High Court in the cases of ACB India Ltd. Vs. Assistant Commissioner of Income Tax, Marg Ltd. Vs. CIT, 318 CTR (Mad.) 148 and CIT Vs. Shriram Ownership Trust 318 CTR (Mad.) 233 and also by the Hon’ble Karnataka High Court in the case of Pragathi Krishna Gramin Bank Vs. Jt.CIT, 95 Taxman.com 41 (Kar.). Therefore, we remand the issue of computation of disallowance under Rule 8D(2)(iii) to the file of the Assessing Officer with the direction to compute the value of those investments which yielded the exempt income alone for the purpose of computing the average value of investments. Thus, we find the order of the ld. CIT(A) is just, proper and reasonable on this score and does not warrant any interference by us. 6. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced on this 23 rd day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 23 rd January, 2023. Sujeet ITA No.95/PUN/2022 4 आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The NFAC, Delhi. 4. The Pr. CIT concerned. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.