Income Tax Act – Section 14A, Rule 8D of IT Rules – During assessment proceedings AO had asked the assessee to show the disallowance in accordance with Rule 8D of the Rules -The assessee stated that it has not incurred any expenses for earning exempt income, however submitted a working wherein disallowance was offered for disallowance without prejudice. The AO made the disallowance submitted by the assessee u/s 14A of the Act and thereafter passed an assessment order u/s 143(3) of the Act determining the total income of the assessee - Similar disallowance was also made to the book profit u/s 115JB of the Act – CIT (A) confirmed the disallowance – Hence the instant appeal – HELD - assessee has earned exempt income during the year and disallowance under section 14A is required to be made - For the earlier years, the Co-ordinate Bench has set-aside this issue on the identical facts and circumstances to the file of the AO. Accordingly, in the present appeal as well, whole issue is remitted back to the file of the AO on the similar directions - AO should work out disallowance u/s 14A of The Act afresh. Appeal of the assessee is allowed.

 

2021-VIL-102-ITAT-MUM

 

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCH “C”, MUMBAI

 

ITA NO.1297/MUM/2020 (A.Y.2016-17)

 

DATE OF HEARING: 15.12.2021

DATE OF PRONOUNCEMENT: 23.12.2021

 

INDIA INFOLINE FINANCE LTD

 

VS

 

ACIT-12(2)(2)

 

APPELLANT BY: SH. PRITESH MEHTA, AR

RESPONDENT BY: SH. ASHISH KUMAR, SR.DR

 

BEFORE

MS. SUCHITRA RAGHUNATH KAMBLE, JUDICIAL MEMBER

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

 

ORDER

 

01. This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 04.11.2019 for Assessment Year (AY) 2016-17. The only grievance is with respect to the disallowance made under section 14A of the Income Tax Act, 1961 (for short ‘the Act’) r.w.r 8D of the Income Tax Rules (‘the Rules’) confirmed by the CIT(A).

 

02. The brief facts of the case shows that the assessee is a company engaged in the business of Finance and related activities. It filed its return of income on 29.11.2016 declaring total income of Rs. 452,54,25,540/-. During the year, the assessee has earned dividend income of Rs. 5,46,51,640/-. The assessee made a disallowance of Rs. 15,00,000/- under section 14A of the Act. The AO asked the assessee to show the disallowance in accordance with Rule 8D of the Rules. The assessee stated that it has not incurred any expenses for earning exempt income, however submitted a working wherein disallowance of Rs. 4,17,98,350/- was offered for disallowance without prejudice. The AO made the disallowance submitted by the assessee of Rs. 4,17,98,350/- under section 14A of the Act and thereafter passed an assessment order under section 143(3) of the Act on 17.12.2018 determining the total income of the assessee at Rs. 456,57,23,890/-. Similar disallowance was also made to the book profit under section 115JB of the Act.

 

03. Assessee is aggrieved and hence preferred an appeal before the ld. CIT(A) who dismissed the appeal of the assessee and confirmed the above disallowance. The assessee is therefore, in appeal before us.

 

04. The ld. Authorized Representative (AR) submitted that identical issue arose in the case of the assessee for AY 2013-14 and 2014-15 wherein Co-ordinate Bench passed an order dated 17.07.2020 in ITA No. 1697 & 1698/Mum/2019 remitting the issue back to the file of the AO for working out disallowance afresh. He also referred to the decision of the Co-ordinate Bench for earlier years also in assessee’s own case wherein also the issue remitted back to the file of AO. He, therefore, prayed that the issue may be remitted back to the file of the AO on similar lines for this year also.

 

05. The ld. Departmental Representative (DR) also stated that as the issue is required to be decided in the earlier years first the issue may also be remitted for this year on similar grounds.

 

06. We have carefully considered the rival contentions and perused the orders of the lower authorities. There is no dispute that assessee has earned exempt income during the year and disallowance under section 14A is required to be made. The assessee has earned exempt income of Rs. 5,46,51,640/- and offered a disallowance of only Rs. 15,00,000/-. For the earlier years, the Co-ordinate Bench has set-aside this issue on the identical facts and circumstances to the file of the AO. According to those years, the AO is required to work out the disallowance which cannot exceed the actual expenditure and exempt income earned. Such disallowance is also required to be worked out considering only those investments on which the exempt income is earned during the year. As there is no other grievance in this appeal, we set-aside the whole issue back to the file of the AO on the similar directions as were given in ITA No. 1697 & 1698/Mum/2019. Accordingly ld AO is directed to work out disallowance u/s 14A of The Act afresh.

 

07. Accordingly, appeal of the assessee is allowed with above directions.

 

Order pronounced in the court on 23.12.2021.

 

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