Income Tax Appellate Tribunal - Mumbai
Daga Global Chemicals Ltd, Mumbai vs Asst Cit 9(1), Mumbai on 9 December, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "D", MUMBAI
BEFORE SHRI D.KARUNAKARA RAO (AM) AND SHRI RAM LAL NEGI (JM)
ITA No.5658/MUM/2013
Assessment Year: 2010-11
M/s. Daga Global Chemicals Pvt. The ACIT, -9(1),
Ltd. (Formerly known as Daga Room No. 223, Ayakar Bhavan,
Global Chemicals Ltd.), Marine Lines, Mumbai- 400 020.
101, Mahek Plaza, Vs.
Maharashtra Nagar Lane,
Off. L.T.Road, Borivali (W),
Mumbai- 400 092.
PAN:- AAACD2233M
(Appellant) (Respondent)
Appellant by : Shri. Rahul K. Hakani
Respondent by : Shri. Maurya Pratap
Date of Hearing: 18/11/2016
Date of Pronouncement: 09/12/2016
ORDER
PER RAM LAL NEGI, JM
This appeal has been preferred by the assessee against order dated 13/06/2013 passed by the Ld. CIT(Appeals)-19, Mumbai for the assessment year 2010-11, whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against assessment order dated 18/12/2012 passed u/s 143(3) of the Income Tax Act, 1961(in short 'the Act').
2. Brief facts of the case which require necessary mention for the purpose of adjudicating the issues involves, emanating from the record and the contentions of the parties are that the assessee filed its return of income for the 2 ITA No.5658/MUM/2013 Assessment Year: 2010-11 relevant assessment year declaring the total income of Rs. 6,22,36,210/-. The return of income was processed and assessment order u/s 143(3) was passed determining the total income at Rs. 6,30,45,710/- after making disallowance of Rs. 8,09,496/- u/s 14A read with Rule 8D of the Income Tax Rules. The assessee challenged the assessment order before the Ld. CIT(A). The assessee's appeal was dismissed by the Ld. CIT(A) following the findings of the then CIT(A) in assessee's own case for the assessment year 2009-10.
3. The assessee is in appeal before the Tribunal against the impugned order passed by the Ld. CIT(A) on the following effective grounds:-
1. The learned CIT (A) erred in confirming disallowance of Rs.
8,09,496/- u/s 14A. r.w. Rule 8D without appreciating that no expenditure directly or indirectly was incurred during this year for earning exempt income and investments in shares were made in earlier years out of own funds and not out of borrowed funds and hence disallowance u/s 14A. r.w. Rule 8D may be deleted.
2. The learned CIT(A) failed to appreciate that dividend income is directly credited to Bank Account and Appellant does not have to incur any expenditure for earning exempt income and hence disallowance u/s 14A. r.w. Rule 8D may be deleted.
3. The learned CIT(A) failed to appreciate that interest expenditure of Rs. 1,44,66,763/- has no nenus with earning of exempt income as the investments on which exempt income is earned is out of own funds and hence disallowance u/s 14A. r.w. Rule 8D may be deleted.
4. The learned CIT(A) failed to appreciate the A.O has not duly recorded satisfaction before invoking 14A. r.w.Rule8D as assessee had submitted bifurcation of Financial expenses to 3 ITA No.5658/MUM/2013 Assessment Year: 2010-11 A.O. to show that interest expense was not incurred for investment in shares or for earning exempt dividend income and A.O did not reject the same and still A.O applied Rule 8D in an automatic fashion and hence, no satisfaction was recorded by A.O as required u/s 14A before invoking Rule 8D.
5. The learned CIT(A) failed to appreciate that disallowance u/s 14A read with Rule 8D cannot exceed exempt income.
6. Without prejudice to above, dividend received during this year is only Rs. 13,687/- and demat charges are Rs. 827/-, hence the disallowance may be restricted to maximum Rs. 827/-.
4. Before us, the Ld. Counsel for the Appellant (assessee) submitted that the present appeal is covered by the decision of the ITAT in assessee's own case (ITA No 5592/Mum/2012) for the assessment year 2009-10 and the Tribunal has decided the identical issue in favour of the assessee. Hence, the impugned order passed by the Ld. CIT(A) is contrary to the findings of the Tribunal, therefore, the same is liable to be set aside.
5. The Ld. departmental representative (DR) did not dispute the fact that the Tribunal has decided the identical issue in favour of the assessee in assessee's appeal against the CIT(A) order for the assessment year 2009-10.
6. We have gone through the material placed before us in the light of the submissions of the Ld Counsel for the assessee. The sole grievance of the assessee is that the Ld. CIT(A) has wrongly confirmed the disallowance of Rs. 8,09,496/- made by the AO under section 14A read with Rule 8D of the Income Tax Rules, without appreciating the 4 ITA No.5658/MUM/2013 Assessment Year: 2010-11 facts that no expenditure directly or indirectly was incurred by the assessee for earning exempt income and that investments in shares were made in earlier years out of own funds. We notice that the coordinate Bench vide order dated 01.01.2015 has decided the identical issue in favour of the assessee in assessee's own case ITA No 5592/Mum/2012 for the assessment year 2009-10 by holding as under:-
"The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further dividend were directly credited in the bank account of the assessee and no expenditure was claimed. What it may be, we find that the assessee only received Rs.1,82,362/-as dividend income, therefore, there is no question of disallowance of Rs. 14,58,412/-by invoking section 14A r. w. Rule 8D under the facts available on record. It was also explained by the ld. Counsel for the assessee that on identical facts in earlier years, no disallowance was made. In the present assessment year also, no borrowed funds were invested by the assessee for making investment in shares or for earning dividend income. At best, if any disallowance could be made that can be restricted to Rs. 1,485/-which were claimed as demat charges. Disallowance u/s 14A r. w. Rule 8D cannot exceed the exempt income. In view of this fact, we find merit in the claim of assessee. The appeal of the assessee is therefore, allowed."
7. The facts of the present case and the issues involved are identical to the facts of the case and issues involved in the assessee's own case for the assessment year 2009-10 except the amount of disallowance. Hence, respectfully following the decision rendered by the coordinate Bench in assessee's own case for the assessment year 2009-10, we direct the AO to apply the principles laid down by the 5 ITA No.5658/MUM/2013 Assessment Year: 2010-11 Tribunal for the A.Y 2009-10. AO shall quantify the disallowance as per the judicial decision in force.
8. In the result, the appeal of the assessee for the assessment year 2010-11 is allowed protanto.
Order pronounced in the open court on 9th December, 2016 Sd/- Sd/-
(D.KARUNAKARA RAO) (RAM LAL NEGI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई Mumbai; दनांक Dated : 09/12/2016
आदे श त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आय ु त(अपील) / The CIT(A)-
4. आयकर आय ु त / CIT
5. वभागीय त न!ध, आयकर अपील$य अ!धकरण, मब ंु ई / DR, ITAT, Mumbai
6. गाड' फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai Pramila