DY CIT CEN.CIR 3(2), MUMBAI V. ARTI INDUSTRIES LTD., MUMBAI

MA 102/MUM/2023

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) as the appellant and M/s. Arti Industries Ltd. as the respondent. The dispute centered on the disallowance under section 14A read with Rule 8D of the Income Tax Act, 1961, concerning the assessment year 2014-15. The revenue sought rectification of the Tribunal's earlier order, claiming that the Tribunal had inadvertently not adjudicated the specific ground related to the disallowance under section 14A for the computation of book profits under section 115JB. Both parties agreed to the rectification, and the Tribunal proceeded to adjudicate the matter, ultimately upholding the Ld.CIT(A)'s decision and modifying the disallowance as per Rule 8D.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123113 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 26-01-2023
• Other Referred Cases: Reliance Utilities Ltd v. CIT [313 ITR 340 (Bom)], HDFC Bank Ltd. [366 ITR 505 (BOM)]
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.No. 102/MUM/2023 [ARISING OUT OF ITA NO. 3583/MUM/2018 (A.Y: 2014-15)] & ITA No. 3583/MUM/2018 (A.Y. 2014-15) DCIT – Central Circle – 3(2) Room No. 1913, 19 th Floor Air India Building, Nariman Point, Mumbai – 400 021 v. M/s. Arti Industries Ltd., 71, Udyog Kshetra, 2 nd Floor Mulund-Goregoaon Link Road Mulund(W), Mumbai -400080 PAN: AABCA2787L Appellant Respondent Assessee Represented by : Shri Vijay Mehta Department Represented by : Shri Manoj Kumar Date of Hearing : 21.04.2023 Date of Pronouncement : 08.05.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application revenue is seeking for rectification of certain mistakes crept in the order passed by the Tribunal in ITA.No. 3583/Mum/2018 dated 30.03.2022 for the A.Y. 2014-15. 2 MA.No. 102/MUM/2022 ITA No. 3583/MUM/2018 (A.Y. 2014-15) M/s. Arti Industries Ltd., 2. At the time of hearing, Ld. DR submitted that the ITAT decided the Ground No. 5 raised by the revenue in ITA.No. 3583/Mum/2018 by following the decision of Ground No. 1 raised by the assessee in ITA.No. 3695/Mum/2018 by observing that facts of ground raised by the assessee are mutatis-mutandis applicable to the ground raised by the revenue. However, he brought to our notice that Ground No. 5 raised by the revenue is on the issue of disallowance u/s. 14A r.w. Rule 8D and the issue raised by the assessee in Ground No. 1 is relating to disallowance of expenditure u/s. 14A in computing book profits u/s. 115JB of the Act. Since the issue involved in both the grounds are different and the bench has not adjudicated the issue raised by the revenue and accordingly, he prayed that the above said ground be recalled and adjudicated afresh. On the other hand, Ld. AR agreed with the submissions made by Ld.DR. 3. Considered the submissions of both the parties and we observe that the bench has not adjudicated the Ground No. 5 raised by the revenue, inadvertently. Accordingly, we deem it fit and proper to recall the order for limited purpose to adjudicate Ground No. 5 raised by the revenue. Since both the parties agreed to submit and make representation on the 3 MA.No. 102/MUM/2022 ITA No. 3583/MUM/2018 (A.Y. 2014-15) M/s. Arti Industries Ltd., merits on the issue raised by revenue in Ground No. 5, accordingly, we proceeded to decide the issue herein below. 4. At the time of hearing, Ld. DR brought to our notice findings of the Assessing Officer and brought to our notice Para No. 8.8 of the Assessment Order and submitted that Assessing Officer has considered the Rule 8D and accordingly, determined the disallowance of interest attributable to the investment which has earned exempt income to the extent of ₹.88,52,958/- and administrative expenses of 0.5% of average value of investments of ₹.10,58,637/- and he submitted that Assessing Officer has properly applied the Rule 8D and objected to the findings of the Ld.CIT(A) by relying on the earlier orders of assessee’s own case which is prior to the introduction of Rule 8D and prayed that the disallowance made by the Assessing Officer may be sustained. 5. On the other hand, Ld. AR brought to our notice Para No. 2.4.4 of the Ld.CIT(A) order and submitted that the Hon'ble ITAT as well as Ld.CIT(A) has considered the fact that assessee has sufficient own funds to finance the investments which has earned the exempt income and the ITAT has accepted the facts by relying on the decision in Reliance Utilities Ltd v. CIT [313 ITR 340 (Bom)] which are applicable to the facts of the 4 MA.No. 102/MUM/2022 ITA No. 3583/MUM/2018 (A.Y. 2014-15) M/s. Arti Industries Ltd., assessee’s own case and accordingly, he prayed that the disallowance made by the Assessing Officer as per Rule 8D(2)(ii) is not applicable in the case of the assessee. With regard to disallowance under Rule 8D(2)(iii) of I.T. Rules he supported the findings of the Ld.CIT(A) in turn who was relied on the findings of the ITAT in A.Y. 2008-09. 6. Considered the rival submissions and material placed on record, we observe from the record that Assessing Officer disallowed the expenditure relating to exempt income by applying under Rule 8D(2)(ii) and 8D(2)(iii) of I.T. Rules and however, the facts available on record which was similar to the facts submitted before ITAT and Ld.CIT(A) in the A.Y. 2008-09 that assessee has sufficient own funds to make the investment which has earned exempt income. Therefore, by relying on the ratio of Reliance Utilities Ltd., (supra) and HDFC Bank Ltd., [366 ITR 505 (BOM)] we are inclined to accept the findings of the Ld.CIT(A) and accordingly, we direct the Assessing Officer to delete the disallowance made under Rule 8D(2)(ii) of I.T. Rules. 7. With regard to disallowance made under Rule 8D(2)(iii) of I.T. Rules we direct the Assessing Officer to make the disallowance @0.5% of the average value of investments which has actually earned exempt income 5 MA.No. 102/MUM/2022 ITA No. 3583/MUM/2018 (A.Y. 2014-15) M/s. Arti Industries Ltd., and it is needless to say that the Assessing Officer has to eliminate those investments which has not earned any exempt income. Since Ld.CIT(A) has decided the issue on the above guidelines by following the decision of the ITAT in A.Y. 2008-09, we are inclined to dismiss the ground raised by the revenue. 8. In the result, Miscellaneous Application filed by the revenue is allowed and at the same time, Ground No.5 raised by the revenue is dismissed. Order pronounced in the open court on 08 th May, 2023. Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 08/05/2023 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum