VADILAL INTERNATIONAL PRIVATE LIMITED,AHMEDABAD V. THE DY.CIT, CIRCLE-4(1)(2), AHMEDABAD

ITA 1982/AHD/2024

AI Insights

M/s. Vadilal International Pvt. Ltd. appealed against the order of the Additional Commissioner of Income Tax (Appeals)-13, Mumbai, which confirmed the disallowance made under section 14A read with Rule 8D of the Income Tax Act, 1961, amounting to Rs. 15,00,327. The disallowance was related to expenses claimed in earning exempt income from investments. The Tribunal found that the Assessing Officer had not recorded dissatisfaction with the appellant's computation of expenses as required before invoking Rule 8D, leading to a reduction of the disallowance to Rs. 30,000. The addition made under section 115JB was deleted by the CIT(A), and this decision was not contested in the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705245 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member M/s. Vadilal International Private Limited “Vadilal House”, Shrimali Society, Nr. Nav Rangpura Railway Crossing, Navrangpura, Ahmedabad-380009 Gujarat PAN: AABCV3843N (Appellant) Vs The DCIT, Circle-4(1)(2), Ahmedabad (Respondent) Assessee Represented: Shri Parin Shah, A.R. Revenue Represented: Smt. Trupti Patel, Sr.D.R. Date of hearing : 25-06-2025 Date of pronouncement : 30-06-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 25.09.2024 passed by the Additional Commissioner of Income Tax (Appeals)-13, Mumbai arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. ITA No: 1982/Ahd/2024 Assessment Year: 2017-18 I.T.A No. 1982/Ahd/2024 A.Y. 2017-18 Page No M/s. Vadilal International Pvt. Ltd. vs. DCIT 2 2. Brief facts of the case is that the assessee is a Company engaged in the business of providing of Trademark and Copyright of brand “Vadilal”. The assessee is the owner of the brand name “Vadilal”. For the Asst. Year 2017-18, assessee filed its Return of Income on 31-10-2017 declaring total income of Rs. 3,29,13,300/-. The return was taken for scrutiny assessment. The assessee made investments of Rs.15,12,07,885/- and earned dividend income of Rs.35,14,380/- which is claimed as exempt income. The assessee suo motu disallowed Rs. 11,571/- u/s. 14A of the Act. As the disallowance made by the assessee was not as per the rule laid down under Rule 8D of the Rules, the Assessing Officer calculated the disallowance and made addition of Rs.15,00,327/- u/s. 14A read with Rule 8D and also made disallowance of Rs.15,12,078/- u/s. 115JB of the Act. 3. Aggrieved Against the assessment order, assessee filed an appeal before Addl. CIT(A) who has confirmed the addition made u/s. 14A read with Rule 8D however deleted the addition made u/s. 115JB of the Act. 4. Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal: 1. On the facts and circumstances of the case, and in law, the Ld. Commissioner of Income-tax (Appeal) ['the CIT(A)'] erred in confirming the disallowance amounting to Rs. 15,00,327 made under section 14A of the Act by the Deputy Commissioner of Income-Tax, Circle 4(1)(2)- Ahmedabad ('Ld.AO') without considering the submission filed. 2. In doing so, the CIT(A) further erred in upholding the disallowance under section 14A read with Rule 8D without addressing the fundamental requirement that the AO must record dissatisfaction with the appellant's I.T.A No. 1982/Ahd/2024 A.Y. 2017-18 Page No M/s. Vadilal International Pvt. Ltd. vs. DCIT 3 computation of expenses relating to exempt income having regard to the books of account of the Appellant before invoking Rule 8D for disallowance. 5. We have heard rival submissions and perused the materials available on record. It is seen from the assessment order, the assessing officer after looking into the suo motu disallowance made by the assessee and the profit and loss account wherein exempt income as per Schedule BP is significantly lower as compared to the investments made to earn exempt income and called for explanation from the assessee. Thus the Ground No. 2 raised by the assessee, the assessing officer has not recorded the dissatisfaction does not arise, so ground no. 2 raised by the assessee is hereby dismissed. 5.1. Further perusal of the assessment order, the assessee replied that the dividend income of Rs. 35,14,380/- was received from Vadilal Industrial Ltd. only, all other investments, no dividend was received by the assessee company. However the assessee has not made new investments from which exempted income is received, which can be verified from the balance sheet. Further the interest received Rs. 1,89,61,848/- by the assessee is more than the interest paid Rs. 30,00,260/-, therefore no disallowance was made by the assessee. As no administrative expenses claimed in relation to the exempted dividend income, so no portion of administrative expenses is disallowed u/s. 14A of the Act. Further, as. As the dividend income earned on total income which works out to 8.73%, the same percentage is used for the apportionment of common expenses at Rs. 1,32,587/- and the assessee suo motu disallowed Rs. I.T.A No. 1982/Ahd/2024 A.Y. 2017-18 Page No M/s. Vadilal International Pvt. Ltd. vs. DCIT 4 11,571/-. In our considered view, this disallowance made by the assessee is also not found to be appropriate. Therefore we direct the Assessing Officer to make a disallowance of Rs.30,000/- u/s. 14A of the I.T. Act. 6. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the open court on 30-06-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 30/06/2025 True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "