TMI Blog2021 (10) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid observations, we herein conclude that the claim of the ld. A.R that no disallowance u/s 14A could be made qua the profit earned by an assessee from a partnership concern cannot be accepted and is accordingly rejected. AO without recoding his objective satisfaction had wrongly assumed jurisdiction and dislodged the disallowance that was on a suo motto basis offered by the assessee u/s 14A - A.O had given cogent reason as to why the disallowance offered by the assessee u/s 14A was not to be accepted, therefore, we do not find any merit in the claim of the ld. A.R that there was a failure on the part of the A.O to record an objective satisfaction that as to why the disallowance offered by the assessee was not to be accepted. Accordingly, not finding favour with the aforesaid contention of the assessee, we reject the same. Disallowance u/s 14A r.w.Rule 8D(2)(iii) was liable to be restricted only qua the investments that had yielded exempt income to the assessee during the year under consideration - HELD THAT:- We find no infirmity in the view taken by the CIT(A) that the disallowance u/s 14A cannot exceed the amount of the exempt income received by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 50,000/- out of ₹ 1,00,000/-disallowed by Assessing Officer tinder the head Miscellaneous Expenditure on the ground that they were not incurred wholly and exclusively for the business. 5. The appellant submits that the learned Assessing Officer be directed: (i) to delete the disallowance under section 14A of the Act of a sum of ₹ 45,80,000/-. (ii) to delete the disallowance of staff welfare expenses of a sum of ₹ 1,00,000/-. (iii) to delete the disallowance of entertainment expenses of a sum of ₹ 25,000/-. (iv) to delete the disallowance of miscellaneous expenses of a sum of ₹ 50,000/- and to modify the assessment in accordance with the provisions of the Act. 6. Each of the above grounds of appeal are independent and without prejudice to each other. 7. The Appellant craves leave to add to alter or modify any of the above grounds of Appeal. On the other hand, the department has challenged the order passed by the CIT(A) on the following grounds before us: 1. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in holding that the provisions of section 14A is not applicable where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Id. CIT(A) has erred in not appreciating the fact that the A.O. in the case of State Bank of Patiala had himself restricted the disallowance to the extent of exempt income considering the facts and circumstances of that particular case. The appellant prays that the order of Commissioner of Income Tax (Appeal) on the above ground be set aside and the order of the Deputy Commissioner of Income-tax, Central Circle 6(4), Mumbai, be restored. The appellant craves, leave to amend or alter any grounds or add a new ground, which may be necessary. Last date for filing second appeal is 12.11.2019. 2. Briefly stated, the assessee company had e-filed its return of income for A.Y. 2016-17 on 07.10.2016, declaring a total income of ₹ 39,96,61,530/-. The return of income filed by the assessee company was initially processed as such u/s 143(1) of the Act. Subsequently, the case the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee despite having made substantial investments in exempt income yielding assets, had however disallowed only an amount of ₹ 4.6 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration. 7. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record, and also considered the judicial pronouncements relied upon by them in support of their respective contentions. As regards the claim of the ld. A.R that as the share of profit received by the assessee company from the partnership firm had already suffered taxes in the hands of the firm, therefore, the same could not be treated as an income which was exempt from tax within the meaning of Sec.14A of the Act, we are afraid that the same does not find favour with us. In this regard, it would be relevant to point out that a principally similar contention was raised by the assessee before the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Company Ltd. Vs. Dy. CIT (2017) 394 ITR 449 (SC), which however was turned down by the Hon ble Apex Court. In the said case, it was the claim of the assessee that as tax was already paid on the dividend , though by the payee company, therefore, Sec. 14A could not be triggered for disallowing the expenditure incurred to earn such dividend income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred for earning of share of profit in a partnership firm, being exempt u/s 10(2A) of the Act, would be liable for disallowance u/s 14A of the Act. In fact, we find that a similar view had been taken by the Special bench of the ITAT, Ahmedabad in the case of Shri Vishnu Anant Mahajan Vs. ACIT, ITA No. 3002/Ahd/2009, dated 25.05.2012. In its aforesaid order, it was observed by the Tribunal that the provisions of Sec. 14A applies to the share of profit earned by an assessee from the partnership firm. Also, the ITAT, Mumbai in the case of Minal Industries Ltd. Vs. DCIT, Mumbai, ITA No. 7419/Mum/2019, dated 31.07.2019 following the view taken by the Special bench of the ITAT, Ahmedabad in the case of Shri. Vishnu Anant Mahajan (supra), had concluded, that the claim of the assessee that the provisions of Sec. 14A would not be applicable to the share of profit earned by the assessee from a partnership firm does not merit acceptance. Accordingly, in the backdrop of our aforesaid observations, we herein conclude that the claim of the ld. A.R that no disallowance u/s 14A could be made qua the profit earned by an assessee from a partnership concern cannot be accepted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the ld. A.R that in case if the disallowance u/s 14A r.w Rule 8D(2)(iii) is restricted qua the investments which had yielded exempt income to the assessee during the year under consideration, then, the same would be confined to an amount of ₹ 1,89,250/- i.e after considering the average value of the investments made by the assessee in the partnership firm, as under: 0.5% of [₹ 7.56 crore (+) 0.01 crore]/ 2 = 0.5% of ₹ 3.785 crores = ₹ 1,89,250/-. Although, we are principally in agreement with the aforesaid claim of the ld. A.R, however, the same cannot be accepted on the very face of it and would require to be factually verified by the A.O. Accordingly, we herein restore the matter to the file of the A.O for the purpose of verifying the veracity of the aforesaid quantification of the disallowance worked out by the assessee u/s 14A r.w Rule 8D i.e after considering the average value of only those investments which had yielded exempt income to the assessee during the year under consideration. Accordingly, the aforesaid claim of the assessee is accepted in terms of our observations recorded hereinabove. 12. Although, we had accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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