TMI Blog2017 (11) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the disallowance of expenditure u/s 14A to the tune of admitted expenditure of ₹ 5 lacs claimed to have been incurred by the assessee for earning exempt income as conceded by the assessee. - Decided partly in favour of assessee. - I.T.A. No. 6971/Mum/2016 - - - Dated:- 13-11-2017 - SHRI D.T GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri. Jay Bhansali For The Revenue : Shri. V. Jenardhanan ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 6971/Mum/2016 for assessment year 2007-08, is directed against the appellate order dated 16.08.2016 passed by learned Commissioner of Income Tax (Appeals)-4, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 30.01.2015 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by the Assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses Rs.33,93,39,990/- iii) Financial Charges Rs.11,78,23,547/- Total Rs.60,58,84,125/- The AO made disallowance @3% of the above expenses which led to the disallowance of ₹ 1,81,76,524/- u/s 14A relying upon judgment of Hon ble Bombay High Court in the case of Godrej and Boyce Manufacturing Company Limited v. DCIT (I.T. Appeal No. 626 of 2010 and Writ Petition no. 758 of 2010). The assessee carried the matter in appeal before the learned CIT-A in second round of litigation who restricted the addition/disallowance of expenditure to 1% of the said expenses by holding as under: 3.3. I have circumspected the facts circumstances of the case and have carefully considered the findings of the Assessing Officer as well as rival submission of the Appellant . I find that in order dated 25.01.2010, my Ld. predecessor, CIT(A) has restricted the disallowance of expenditure to the extent of ₹ 5 lacs. However, department has filed appeal against this order and Hon'ble ITAT has set aside the order of the CIT(A) and restored the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itigation, learned CIT-A restricted disallowance u/s 14A to ₹ 5 lacs while in second round the CIT-A has upheld the disallowance to the tune of 1% of the total expenditure and disallowance u/s 14A as confirmed by learned CIT(A) comes to ₹ 48.8 lakh, while A.O upheld the disallowance u/s 14A in the second round of litigation to 3% of the expense which come to 1.82 crore. At the outset Ld. Counsel for the assessee submitted that there is no exempt income earned by the assessee and ratio of decision of Hon ble Delhi High Court in the case of Cheminvest Limited v CIT in ITA no.749/2014 ((2015)(9) TMI 238-Delhi High Court) is directly applicable and hence no disallowance of expenditure can be made u/s 14A It was further submitted that Hon ble Bombay High Court has also taken similar view while following the decision of Cheminvest Ltd. v. CIT[ (2015)(9) TMI 238 Delhi High Court ] in the case of Principal CIT v. Ballarpur Industries Ltd. in ITA no. 51 of 2016 reported in [2016 (10) TMI 1039 Bombay High Court]. Thus, it was submitted that no disallowance u/s 14A can be made . It was submitted that assessee has voluntarily disallowed ₹ 5 Lacs u/s 14A which is reasonable d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. It is an undisputed fact that the assessee has not received any exempt income in these two assessment years. In such circumstances it has been held by the Hon ble Delhi High Court that no disallowance under section 14A can be made. Following this decision, the co-ordinate bench of the Tribunal in the case of Vakrangee Ltd. vs. ACIT in ITA No.6988/Mum/2014 dated 10.08.16 held as under: 3.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance on in support of propositions put forth by the assessee for deletion of the disallowance of ₹ 74,31,010/- under section 14A r.w. Rule 8D. Admittedly, the assessee has not earned any exempt income in the year under consideration and this fact has not been controverted by the learned CIT(A). The applicability of the provisions of section 14A of the Act is in respect of expenditure incurred is in relation to the earning of income not includible in total income. A plain reading of the provisions of section 14A of the Act envisages that there should be actual receipt of income not includible in the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 9. The co-ordinate bench further held that if the investment was made as a strategic investment in group companies for controlling interest no disallowance is attracted under section 14A of the Act observing as under: 3.5.1 Further the learned A.R. for the assessee has submitted that, even otherwise, the said disallowance under section 14A w.r. Rule 8D ought not to have been made as the entire investment in shares made by the assessee of ₹ 52,15,95,000/- was strategic investment in group companies for control over these companies and not for investment purpose with the intention of earning of tax exempt dividend income. On a perusal of the details on record, i.e. the impugned order of the learned CIT(A) and the order of assessment we find that the averments of the learned A.R. that the entire shares held by the assessee are in respect of its strategic investments in subsidiary/group concerns is factually correct. We find that a Coordinate Bench of this Tribunal in the case of Fiduciary Euromax Global Markets Ltd. in ITA No. 1349/Mum/2012 and others dated 29.06.2016, relied on by the assessee, at para 14 thereof on similar factual circumstances has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
