Income Tax Appellate Tribunal - Hyderabad
Tgv Projects & Investments (P) Ltd., ... vs Acit, Circle-2(3), Hyd, Hyderabad on 28 February, 2017
1
ITA.No.846/Hyd/2016 M/s. TGV Projects & Investments
(P.) Ltd., Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" (SMC) : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
ITA.No.846/Hyd/2016
Assessment Year 2009-2010
M/s. TGV Projects &
Investments (P) Ltd., vs. The ACIT, Circle-2(3)
Hyderabad. Hyderabad.
PAN AAACT8340H
(Appellant) (Respondent)
For Assessee : Shri K.K. Gupta
For Revenue : Shri A. Sitarama Rao
Date of Hearing : 11.01.2017
Date of Pronouncement : 28.02.2017
ORDER
This appeal by the assessee is directed against the order passed by CIT(A)-2, Hyderabad and it pertains to the A.Y. 2009-2010. The following grounds were urged before the Tribunal.
1. "The CIT(A) erred in confirming the addition of Rs.14,90,799 u/s14A of the Income Act,1961 read with Rule 8D (2) i.e., 0.5 % of the average investment. The assessee made investment in Group Companies and most of the same are brought forward from earlier years. No activity for the same is required. Hence, no expenses can be attributable to the same. As such, addition confirmed by CIT(A) need to be deleted.
(ITAT, Kolkata Bench in the case of M/s Forum projects (p) Ltd., vs DCIT, C.C-II)
2. The disallowance of expenditure should not exceed the exempted income. In the appellant's case the exempted income i.e., dividend is Rs.2,86,655/- and the disallowance is Rs.14,90,799/-.
2ITA.No.846/Hyd/2016 M/s. TGV Projects & Investments (P.) Ltd., Hyderabad.
(ITAT, Mumbai Bench in the case of Daga Global Chemicals Ltd., vs. ITO)
3. On the above and other grounds that may arise during the course of appeal, the appellant prefers this appeal."
2. Facts of the case are stated in brief. The assessee is engaged in the business of hotel, leasing-out property and franchise of idea cellular. For the year under consideration, it declared total income of Rs.1.04 crores. During the course of assessment proceedings, the A.O. noticed that the assessee made some investments in quoted and unquoted shares and earned dividend income. According to him, provisions of section 14A would be applicable and some expenditure has to be disallowed under Rule 8D of I.T. Rules read with section 14A of the I.T. Act. In response thereto, the assessee submitted that investments were made out of assessee's own funds (reserves). In the absence of details, the A.O. invoked Rule 8D and determined the amount disallowable at Rs.14,90,799 (under Rule 8D (2)(iii) and Rs.1,70,205 (under Rule 8D (2)(ii).
3. Aggrieved, assessee contended before the CIT(A) that own funds were utilised for investment in shares and therefore, no disallowance can be made. Ld. CIT(A) accepted the contention of the assessee and observed that the assessee had own funds of Rs.39,75,46,901 which is more than the investments of Rs.29,52,35,776 in shares. Therefore, disallowance under Rule 8D(2)(ii) was deleted. However, he assumed that the assessee would have incurred administrative expenditure for earning exempt income and therefore, disallowance of Rs.14,90,799 as per Rule 8D(2)(iii) is in accordance with law.
3ITA.No.846/Hyd/2016 M/s. TGV Projects & Investments (P.) Ltd., Hyderabad.
4. Aggrieved, assessee is in appeal before the Tribunal. Learned Counsel for the Assessee submitted that the investments in group companies was made in earlier years and most of such investments were brought forward from earlier years and no activity was involved in this year and hence no expenditure is attributable to the same. He further contended that the disallowance can at best be equivalent to the dividend income since the activity, if any, for earning dividend cannot be more than the income; in this year the dividend is Rs.2,86,655 and therefore the disallowance of Rs.14,90,799 is not in accordance with law. In this regard, he relied upon the decision of ITAT, Mumbai Bench in the case of M/s. Daga Global Chemicals Pvt. Ltd., Mumbai vs. ACIT- 9(1), Mumbai (ITA.No.5592/Mum/2012 dated 01.01.2015).
5. On the other hand, the Ld. D.R. strongly relied upon the order passed by the CIT(A).
6. I have carefully considered the rival submissions and perused the record. Ld. CIT(A) verified the books before giving a finding that investments were made in the earlier years out of own funds. No material was placed by Revenue to contradict the findings of CIT(A). Therefore, we hold that disallowance on that count is not warranted. This leaves us with the subsidiary issue i.e., administrative expenditure. In the case of M/s. Daga Global Chemicals Pvt. Ltd., (supra), the ITAT, Mumbai Bench observed that disallowance under section 14A read with Rule 8D cannot exceed the exempt income. No other case law was placed before me wherein a different view was taken. Even if there is a different view, the one which is in favour of the assessee deserves to be accepted. I, therefore, follow the decision of the ITAT, Mumbai Bench in the case of M/s. Daga Global Chemicals Pvt. Ltd., (supra) and hold that the disallowance if any, should not exceed Rs.2,86,655. Learned Counsel for the Assessee, fairly admitted that if 4 ITA.No.846/Hyd/2016 M/s. TGV Projects & Investments (P.) Ltd., Hyderabad.
the disallowance is restricted to the exempt income he would not seriously press other grounds. The appeal is accordingly disposed of by restricting the disallowance to Rs.2,86,655.
7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 28.02.2017.
Sd/-
(D.MANMOHAN) VICE PRESIDENT Hyderabad, Dated 28th February, 2017.
VBP/-
Copy to
1. M/s. TGV Projects & Investments (P.) Ltd., Hyderabad. C/o. Sri K.K. Gupta, Chartered Accountant, 3464, Dundoo Vihar, R.P. Road, Secunderabad - 500 003.
2. The ACIT, Circle-2(3), Hyderabad.
3. CIT(A)-2, Hyderabad.
4. Pr. CIT-2, Hyderabad.
5. D.R. ITAT "A" (SMC) Bench, Hyderabad.
6. Guard File