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TMI Blog2018 (8) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... are directed against separate appellate order(s) both dated 27.03.2018 passed by learned Commissioner of Income Tax (Appeals)-17, Mumbai (hereinafter called the CIT(A) ), for assessment year 2013-14 and 2014-15 respectively , the appellate proceedings had arisen before learned CIT(A) from separate assessment order(s) dated 28.03.2016 and 29.12.2016 respectively passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ) for AY 2013-14 and 2014-15 respectively. 2. These two appeals filed by Revenue were fixed on board as low tax effect appeals purportedly considered to be covered by CBDT circular no. 3/2018 dated 11.07.2018. When the appeal was called for hearing before the Bench, the learned counsel for the assessee at the outset fairly submitted that these two appeals are not low tax effect appeal as these appeals are not covered by aforesaid CBDT circular dated 11.07.2018. It was also submitted by learned counsel for the assessee that these two appeals are otherwise covered by Mumbai-tribunal decision in assessee s own case for earlier years as well several decisions of Hon ble Superior Courts . Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) of the 1961 Act. It is an undisputed fact between rival parties that the assessee received an exempt income by way of dividend income of ₹ 97,314/- which was claimed as an exempt income u/s 10(34) of the 1961 Act. The assessee being aggrieved by the aforesaid assessment order passed by the AO u/s 143(3) , filed first appeal before learned CIT(A) . The learned CIT(A) by following several judicial precedents of Superior Courts restricted disallowance u/s 14A of the 1961 Act of expenditure incurred in relation to an exempt income to the tune of exempt income of ₹ 97,314/- earned by the assessee vide appellate order dated 27.03.2018, wherein learned CITA(A) relied on the ratio of judgment of following cases : a) Shivam Motors Private Limited (2015) 55 taxmann.com 262(All. HC) b) CIT v. Corrtech Energy Private Limited (2014) 45 taxmann.com 116( Guj. HC) c) Delite Enterprises (2010) 8 taxmann.com 10 (Bom. HC) d) CIT v. Winsome Textiles Industries Limited 319 ITR 204(P H) e)Joint Investments Private Limited v. CIT (2015) 372 ITR 694 (Del. HC) f) Pr. CIT v. Empire Package Private Limited (2017) 81 taxmann.com 108 (P H HC) 4. That s ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of 0.5% of salary of GM(Finance) and it is claimed by the assessee that this is the only expenses incurred by the assessee. The A.O invoked Rule 8D r.w.s.14A and made disallowance of ₹ 16,67,098/- . We have observed that learned CIT(A) considered various heads of expenses incurred by the assessee which are in the nature of personnel expenses to the tune of ₹ 92.25 crores, other/administrative expenses by the way of rent of ₹ 7.8 crores , rates and taxes to the tune of ₹ 4.44 crores and miscellaneous/administrative expenses to the tune of ₹ 30.85 crore which included professional fee of ₹ 3.20 crores, Printing and stationary expenses of ₹ 1.21 crore, tax-audit fee of ₹ 4 lacs , auditors remuneration of ₹ 4.68 lacs, internal audit fee of ₹ 22.2 lakhs, sitting fee of ₹ 1.25 lakh etc to uphold the disallowance based on Rule 8D(2)(iii) r.w.s. 14A after arriving at the conclusion that the claim of the assessee of applying 05% to salary of GM(Finance) to arrive at disallowance u/s 14A is not correct. We have observed that during the year under consideration, investments held by the assessee at the beginning of the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discipline , end of justice will be met in the instant case if further disallowance of expenditure u/s 14A is kept at an additional amount of ₹ 1,00,000/- towards administrative/misc. expenses to be added to the income of the assessee . This is in view of the non recording of proper satisfaction by the authorities below as to the incorrectness of the claim of the assessee s claim and also this disallowance u/s 14A so upheld by us is in consonance with the decision of Hon ble Supreme Court in the case of Godrej and Boyce Manufacturing Company Ltd. v. DCIT (2017) 394 ITR 449(SC). We order accordingly. We have observed that tribunal in the aforesaid order for AY 2011-12 upheld further additional disallowance to ₹ 1,00,000/- u/s 14A of the 1961 Act in addition to an amount of ₹ 34,692/- suo motu disallowed by the assessee , mainly on account of non recording of proper satisfaction by the authorities below as is mandated u/s 14A of the 1961 Act before invoking Rule 8D of the 1962 Rules and also with a view to maintain consistency and judicial discipline by following decision of the tribunal for earlier year in assessee s own case.The tribunal while passing orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Principal CIT v. Ballarpur Industries Ltd. in ITA no. 51 of 2016 reported in {2016 (10) TMI 1039 Bombay High Court}. We have also observed that Hon ble Supreme Court in the case of CIT v. Chettinad Logistics P. Ltd. vide decision in SLP (Civil) Diary no. 15631 of 2018 reported in (2018) 95 taxmann.com 250(SC), vide orders dated 02.07.2018 has dismissed SLP filed by Revenue on the ground of delay as well on merits . The said SLP filed by Revenue arose from the decision of Hon ble Madras High Court in the case of CIT v. Chettinad Logistics P Ltd. reported in (2017) 80 taxmann.com 221(Mad). The relevant extract of the decision of Hon ble Madras High Court in the case of CIT v. Chettinad Logistics Private Limited reported in (2017) 80 taxmann.com 221(Mad. HC) from which aforesaid SLP filed by Revenue arose, is reproduced hereunder:- 7. It is, in this background, that the Tribunal remanded the matter to the Assessing Officer, so as to reach a conclusion as to whether investments had been actually made, in sister concerns of the Assessee, out of interest free funds, albeit, for strategic purposes. 8. According to us, this exercise, in the given facts which emerge f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise argument. 12. The Division Bench, in our view, quiet correctly held that, the computation of total income, in terms of Section 5 of the Act, is made qua real income and not, vis-a-vis, notional income. 12.1 The Division Bench went on to hold that Section 4 of the Act brings to tax, that income, which is relatable to the assessment year in issue. The Division Bench, thus, held that where no exempt income is earned in the previous year, relevant to the assessment year in issue, provisions of Section 14 A of the Act, read with Rule 8 D could not be invoked. 12.2 While coming to this conclusion, the Division Bench also took note of the aforementioned Circular, issued by the Board. 12.3 The reasoning of the Division Bench is contained in the following part of the judgment: 4. The admitted position is that no exempt income has been earned by the assessee in the financial year relevant to the assessment year in issue. The order of assessment records a finding of fact to that effect. The issue to be decided thus lies within the short compass of whether a disallowance in terms of s.14A of the Act read with Rule 8D of the Rules can be contemplated even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come.' 10. The provision this is clearly relatable to the earning of actual income and not notional or anticipated income. The submission of the Department to the effect that s.14A would be attracted even to exempt income 'includable' in total income would entail the assessment of notional income, assumed to be exempt in the future, in the present assessment year. The computation of total income in terms of s.5 of the Act is on real income and there is no sanction in law for the assessment of admittedly notional income, particularly in the context of effecting a disallowance in connection therewith. 11. The computation of disallowance in terms of Rule 8D is by way of a determination involving direct as well as indirect attribution. Thus, accepting the submission of the Revenue would result in the imposition of an artificial method of computation on notional and assumed income. We believe this would be carrying the artifice too far. (emphasis is ours) 13. Mr.Senthil Kumar, seeks to distinguish the judgment in Redington (India) Ltd. case (supra) based on the fact that Rule 8D had not kicked-in by AY 2007-08, which was the AY being considered in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) on the proposition that disallowance of expenditure incurred in relation to an exempt income earned by the assessee u/s 14A of the 1961 Act cannot exceed exempt income earned by the assessee during relevant period. Thus, we dismiss the appeal of Revenue on this short ground only. Thus, Revenue fails on this ground. We order accordingly. 6. The second issue which is raised by Revenue in this appeal in ITA no. 3845/Mum/2018 for AY 2013-14 relates to allowability of depreciation @30% on moulds(plastic) used for manufacturing of electronic goods by learned CIT(A) as against depreciation @ 15% allowed by the AO on such moulds(plastics). The tribunal in assessee s own case for AY 2006-07, 2007-08, 2008-09 and 2011-12 has consistently taken and view and held that the assessee is entitled for depreciation @30% on moulds(plastic) used by the assessee for manufacturing of electronic goods. The Accountant Member was part of the Division Bench of Mumbai-tribunal in ITA no. 4050/Mum/2016 for AY 2011-12 wherein vide orders dated 31.01.2018 , the tribunal allowed the claim of the assessee for depreciation @30% on moulds(plastic) used by the assessee for manufacturing of electronic goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer without appreciating the fact that the assessee is not manufacturing plastic goods and therefore, the depreciation is allowable only 15% and not @30% which is applicable in the manufacturing of plastic goods. 3. Brief facts are that the assessee claimed depreciation of plastic moulds at 30% but AO restricted the depreciation at 15%. The CIT(A) deleted the disallowance by following the tribunals decision in assessee s own case by observing in Para 5.3 as under: - 5.3 I have considered the submissions of the appellant and perused the materials available on record. The question for adjudication is whether the A.O. was justified in restricting the claim of depreciation on plastic moulds at 15% as against 30% claimed by the appellant. It is found that the issue under appeal stands covered in favour of the appellant by the aforesaid orders of Hon ble ITAT. Mumbai Bench in its own case. The relevant extract of the order of Hon ble Tribunal dated 13.03.2013 is reproduced below: - We have carefully considered the rival submissions La the light of the material placed before us. It is a question of allowance of depredation 30% vis- -vis 25%. The contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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