TMI Blog2017 (10) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal passed in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, which as on date had been affirmed by the Hon’ble High Court, therefore, no infirmity arises from his order in respect of the issue under consideration. We thus, in light of the aforesaid facts uphold the order of the CIT(A) in respect of the issue under consideration. The Ground of appeal No. 1 raised by the revenue before us is dismissed. Disallowance u/s 14A r.w Rule 8D - Held that:- The scope of disallowance of expenses incurred for earning of exempt incomes was required to be read and applied in context of Sec. 14A, which requires that the expenditure actually incurred in earning of such exempt income, and nothing more than such expenditure could be disallowed. We find ourselves to be in agreement with the contention of the ld. A.R that the very purpose sought to be achieved by the legislature by making available the machinery proviso, i.e Rule 8D, cannot be lost sight of while computing the disallowance under Sec. 14A. Disallowance under Sec. 14A cannot exceed the expenditure actually claimed by the assessee. We find ourselves to be in agreement with the aforesaid view taken by the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solidate order. We first take up the appeal for A.Y. 2010-11 in I. T. A.No. 4015/Mum/201 4. The revenue assailing the order passed by the Commissioner of Income tax (Appeals)-5, Mumbai, had raised before us the following grounds of appeal:- On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:- 1. i). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred following the earlier years order directed the AO to compute the income from House Property on the basis of municipal value without appreciating that the department has not accepted the decision in the AY 2009-10 and an appeal to the Hon‟ble ITAT has been filed. ii). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O to compute the Income from House Property on the basis of municipal value even though the prevailing market value in that area was much higher. 2. i). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance u/s 14A r.w.s 8D igno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of ₹ 268,14,28,982/-. 3. Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). The CIT(A) after deliberating on the contentions of the assessee in the backdrop of the facts of the case, therein partly allowed the appeal. 4. The revenue being aggrieved with the order of the CIT(A), to the extent the latter had set aside the disallowances and allowed relief to the assessee, had therein carried the matter in appeal before us. 5. The ld. Departmental representative (for short D.R ) at the very outset submitted that the CIT(A) had erred in following the earlier years orders and directing the A.O to compute the income from house property on the basis of Municipal Valuation , failing to appreciate that the revenue being aggrieved with the orders passed by his predecessor in the case of the assessee for the preceding years, had assailed the same by way of appeals before the Tribunal. Alternatively, it was averred by the ld. D.R that as the prevailing market value in the area was much higher than the municipal value, therefore, for the said reason also the municipal value could not be adopted. Per contra, the ld. Authorised representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt while disposing of the appeal of the revenue for A.Y. 2006-07 A.Y. 2007-08, viz. ITA No. 1238 of 2012 and ITA No. 1239 of 2012, dated. 09.10.2014. We further find that the coordinate bench of the Tribunal, viz. ITAT A bench, Mumbai while disposing of the appeal of the revenue in the assesses own case, viz. DCIT-2(3), Mumbai Vs. M/s Tata Steel (successor to M/s Kalimati Investment Co. Ltd.), marked as ITA No. 6854/Mum/2012, had observed as under: 3. The issue raised in this ground no. 1 of appeal is that the annual value of the property was determined by the A.O on the basis of rent received and notional interest on the interest free security received from the tenant. The ld. A.O determined the ALV of the said property at ₹ 1,50,000/- per month. The municipal rateable value of the said flat was ₹ 12,26,300/-. The CIT(A) while relying upon the decision of the Tribunal in the own case of the assessee for earlier assessment year deleted the addition by observing as under:- I have considered the facts of the case. The assesses owns property being flat no. 4C at 23, Prithviraj Road, New Delhi. The said flat was given on lease to parent company, Tata Steel Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal passed in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, which as on date had been affirmed by the Hon ble High Court, therefore, no infirmity arises from his order in respect of the issue under consideration. We thus, in light of the aforesaid facts uphold the order of the CIT(A) in respect of the issue under consideration. The Ground of appeal No. 1 raised by the revenue before us is dismissed. 8. The ld. D.R adverted to the disallowance made by the A.O under Sec. 14A r.w Rule 8D, which on appeal had however been set aside by the CIT(A). It was submitted by the ld. D.R that the assessee who had earned dividend (exempt income) of ₹ 21,55,64,945/-, had suo motto offered a disallowance of ₹ 21,69,240/- under Sec. 14A in its return of income. The A.O observing that the disallowance was not properly computed by the assessee, therefore, worked out the same as per Rule 8D at ₹ 1,60,07,133/- [i.e (i). ₹ 15,41,787/- demat charges, as per clause 8D(i); and (ii). ₹ 1,44,65,346/- i.e 0.5% of the average investment as per clause 8D(2)(iii) ]. Thus, the A.O after reducing the suo motto disallowance of ₹ 21,69,240/-, added ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Auditors remuneration (Rs. 2,60,811/-); (iii). Directors fees (Rs. 48,000/-; and (iv). Professional fees (Rs. 2,67,276/-), in its return of income, therefore, concluded that the administrative expenses computed at 0.5% of the average investment was liable to be limited to ₹ 21,69,420/-, as against the amount of ₹ 1,44,65,347/- computed by the A.O as per Rule 8D(2)(iii). However, the CIT(A) being of the view that the assessee had failed to substantiate that the demat charges (Rs. 15,41,788/-) were included in the General Office Expense (Rs. 15,93,333/-), therefore, declined to accept the said contention of the assessee and made a separate disallowance in respect of the demat charges (Rs. 15,41,788/-) in the hands of the assessee. Thus, the CIT(A) on the basis of his aforesaid observations worked out the disallowance under Sec. 14A at ₹ 37,11,208/- (i.e ₹ 15,41.788/- + ₹ 21,69,420/-) as against the disallowance of ₹ 1,60,07,133/- made by the A.O. The revenue being aggrieved with the reducing of the further disallowance of ₹ 1,38,37,713/- made by the A.O u/s 14A to an amount of ₹ 15,41,788/- by the CIT(A), with a consequential relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 20,82,32,286/-. The assessee has debited the total expenditure of ₹ 4,77,399/- to P loss account which has been disallowed u/s 14A of the Act. However, the AO has increased this disallowance, which exceeded to the total expenditure debited in the P loss account. It has been held by the Hon‟ble Delhi ITAT in the case of Gillette Group India (P) Ltd. Vs. ACIT (2012) 22 Taxmann.co.61 (Delhi-Trib) that disallowance u/s 14A cannot exceed the expenditure actually claimed by the assessee.‟ 6. The revenue relied upon the order of the A.O whereas the assessee vehemently argued that the case is covered by the decision of the Delhi bench of the Tribunal in the case of Gillette Group India (P) Ltd. Vs. ACIT (2012) 22 Taxmann.co.61 (Del- Trib). We have considered the rival arguments and found that the CIT(A) has rightly restricted the disallowance to ₹ 4,77,399/- as the disallowance can not exceed the total expenses claimed in the Profit loss Account by the assessee and thus we find no infirmity in the order of CIT(A) and therefore the ground no. 2 is dismissed. 11. We have given a thoughtful consideration the issue before us, and find subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l component of such disallowance. The CIT(A) observed that as the disallowance under Sec. 14A was already restricted by him to the extent of the actual expenses debited in the Profit loss account, he therefore directed the A.O to increase the book profit only to the extent of disallowance of ₹ 37,11,208/- sustained by him in the hands of the assessee under Sec. 14A. We find that as the assessee in its appeal, viz. ITA No. 4361/Mum/2014 for A.Y. 2010-11 had assailed the direction of the CIT(A) that the book profit be enhanced by an amount of ₹ 37,11,208/-(supra), therefore, the adjudication of the present issue, emerging from Ground of appeal No. 2(iii) of the revenues appeal will be taken up while adjudicating the same in the course of disposing of the appeal of the assessee. 13. The appeal of the revenue is dismissed in terms of our aforesaid observations. ITA No. 4361/Mum/2014 A.Y. 2010-11 14. We shall now take up the appeal of the assessee for A.Y. 2010-11. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal : The Learned Commissioner of Income-tax (Appeals) [ Ld. CIT(A) ] erred in adopting the Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal again vide its order passed in ITA No. 7921/Mum/2011; dated. 08.11.2013 for A.Y. 2008-09, marked as Kalimati Investment Company Limited Vs. Dy. CIT (OSD), Circle 2(1), Mumbai, as well in the case of the assessee for the immediately preceding year, viz. A.Y. 2009-10, in ITA No. 6854/Mum/2012, dated. 31.07.2015, had held that the annual value of a property was to be ascertained on the basis of the municipal rateable vale of the property for the year under consideration. We have given a thoughtful consideration to the issue before us, and in the backdrop of the aforesaid concession of the ld. A.R and after perusing the aforesaid orders of the Hon ble High Court and the Tribunal in the assesses own case, are of the considered view that the issue stands squarely covered against the assessee. We thus find no infirmity in the order of the CIT(A) to the extent the same had been assailed by the assessee before us, and thus uphold the same to the said extent. The Ground of appeal No. 1 is dismissed. 16. The assessee had further assailed before us the order of the CIT(A), on the ground that he had failed to appreciate that as the demat charges of ₹ 15,41,788/- were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demat charges (Page 38 of APB ). We have perused the material to which our attention was drawn by the ld. A.R and are of the considered view that the amount of demat charges of ₹ 15,41,788/-(supra) was included in the General office expenses of ₹ 15,93,333/- (supra), and complete detail as regards the same were furnished by the assessee during the course of the assessment proceedings with the A.O. We thus, in the backdrop of the aforesaid facts are of the considered view that now when the demat charges of ₹ 15,41,788/- were already included in the General office expenses of ₹ 15,93,333/-(supra), which all the more was a fact borne from the records, therefore, the CIT(A) had erred in making a separate disallowance of the demat charges of ₹ 15,41,788/- in the hands of the assessee while computing the disallowance under Sec. 14A. We thus, are of the considered view that the separate disallowance of ₹ 15,41,788/- made by the CIT(A) while computing the disallowance under Sec. 14A cannot be sustained and is liable to be deleted. We thus direct the A.O to delete the disallowance of ₹ 15,41,788/-. The Ground of appeal No. 2 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Rules, 1962. We have perused the aforesaid order of the Special bench of the Tribunal and are of the considered view, that as held therein, the A.O while computing the book profit under Sec. 115JB cannot make any adjustment in respect of the disallowance made under Sec. 14A in the hands of the assessee. We thus, are of the considered view that the A.O while computing the book profit under Sec. 115JB cannot make any adjustment as regards the disallowance made in the hands of the assessee under Sec. 14A. We thus, in the backdrop of the aforesaid order of the Special bench of the tribunal, direct the A.O to modify the computing of the book profit under Sec. 115JB and delete the adjustment of ₹ 37,11,208/- as was directed by the CIT(A) to be made in respect of the disallowance made under Sec. 14A in the hands of the assessee. We thus set aside the order of the CIT(A), to the extent he had directed the A.O to increase the book profit by the amount of the disallowance of ₹ 37,11,208/- made by him under Sec. 14A. The Ground of appeal No. 3 raised by the assessee is allowed. 20. The appeal of the assessee is partly allowed in terms of our afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit under Sec. 115JB by the amount of further disallowance of ₹ 1,52,31,938/- made under Sec. 14A, and thus computed the book profit for Sec. 115JB at an amount of ₹ 2,03,43,873/-. 23. Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). 24. The revenue being aggrieved with the order of the CIT(A), to the extent the latter had set aside the disallowances/additions and allowed relief to the assessee, had therein carried the matter in appeal before us. The A.O while framing the assessment had increased the disallowance of ₹ 4,59,196/- that was suo motto offered by the assessee in its return of income, to an amount of ₹ 1,56,91,134/-, leading to a consequential adding up of the disallowance by an amount of ₹ 1,52,31,938/-. The assessee assailed the raising of the disallowance under Sec. 14A by the A.O before the CIT(A). It was submitted by the assessee that the disallowance under Sec. 14A was liable to be restricted to the amount of actual expenditure of ₹ 4,59,196/- as was debited in the Profit loss account of the assessee. The CIT(A) following the order passed in the case of the assessee for the imm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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