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TMI Blog2021 (10) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... t the share of profit received from a partnership concern is income exempt from tax for the purposes of computing the disallowance under section 14A of the Act read with Rule 8D(ii) of the Rules. (c) The appellant submits that it has received a sum of Rs,45,8Q,GQO/- as share of profit from partnership concerns which retains the same character of income of the firm which is already subjected to tax and hence share of profit as such is not exempt from tax. Hence, the provisions of section I4A of the Act ought not to apply and no disallowance is called for. 2. The learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing a sum of Rs. 1,00,000/- out of Rs. 2,50,000/- disallowed by Assessing Officer under the head Staff Welfare expenses on the ground that they were not incurred wholly and exclusively for the business. 3. The learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing a sum of Rs. 25,000/- out of Rs. 50,000/-disallowed by Assessing Officer under the head Entertainment Expenses on the ground that they were not incurred wholly and exclusively for the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntent? 4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in giving a finding that disallowance u/s14A read with Rule 8D is not applicable to the instant case as there is no exempt income earned during the year which is contrary to the fact that during the year the assessee had earned share of profit of Rs. 45,80,000/- from partnership firm which is claimed exempt u/s 10(2A) of the Income Tax Act, 1961. 5. On the facts and in the circumstances of the case and in law, the Id. CTT(A) has erred in restricting the disallowance u/s. 14A to the extent of exempt income of Rs. 45,80,000/- as against the disallowance made by the Assessing Officer at Rs. 2,42,74,978/- in accordance with the provisions of Rule 8D(2) of the Income-tax Rules, 1962, 6. On The facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in misplacing reliance upon the judgement of the Hon'ble Special Bench. ITAT, Mumbai in the case of ITO vs. Daga Global Chemical Private Limited - ITA No.5592/Mum/2012 and Shri Sandeep Bharat Singh Kothari vs. ACIT - ITA No.8706/Mum/2011 as the facts and circumstances of that case are totally distinct from those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the order of the CIT(A) have carried the matter in appeal before us. At the very outset of the hearing of the appeal, it was submitted by the ld. Authorized Representative (for short "A.R") for the assessee that as per instructions the grounds of appeal nos. 2 to 4 are not being pressed. In the backdrop of the aforesaid concession of the ld. A.R the Grounds of appeal No. 2 to 4 are dismissed as not pressed. 6. Our indulgence in the present appeal has been sought by both the parties for adjudicating the sustainability of the view taken by the CIT(A) qua the disallowance worked out by the A.O u/s 14A r.w Rule 8D. On the one hand, it was, inter alia, the claim of the assessee that the CIT(A) has lost sight of the fact that as the share of profit of Rs. 45.80 lacs received by the assessee from the partnership firm retained the character of the income of the firm that had already suffered taxes, therefore, the same could not have been held as income which was exempt from tax within the meaning of Sec.14A of the Act, while for on the other hand the revenue is aggrieved with the scaling down of the disallowance worked out by the A.O u/s 14A r.w rule 8D up to the amount of the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludible in the total income, the deduction of incurred in relation to such an income must be allowed, such deduction would not be permissible merely on the ground that the tax on the dividend received by the assessee has been paid by the dividend paying company and not by the recipient assessee, when under section 10(33) of the Act such income by way of dividend is not a part of the total income recipient assessee. A plain reading of section 14A would go to show that the income must not be includible in the total income of the assessee. Once the said condition is satisfied, the expenditure incurred in earning the said income cannot be allowed to be deducted. The section does not template a situation where even though the income is taxable in the hands of the dividend paying company the same to be treated as not includible in earn that income must be allowed on the basis that no tax on such income has been paid by the assessee. Such a meaning, if ascribed to section 14A, would be plainly beyond what the language of section 14A can be understood to reasonably convey." Accordingly, on the basis of an analogy that can be drawn from the aforesaid judicial pronouncement, it can safely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 10. We shall now take up the claim of the ld. A.R that the 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. 11. We have heard the rival contentions. After giving a thoughtful consideration to the aforesaid issue in hand, we concur with the contention advanced by the ld. A.R that the disallowance u/s 14A r.w Rule 8D(2)(iii) could only be made qua the investments which had yielded exempt income to the assessee during the year under consideration. Our aforesaid view is fortified by the judgment of the Hon"ble High Court of Madras in the case of CIT Vs. Shriram Ownership Trust [TCA 242 of 2018; dated 08.12.2020]; and the order of the "Special bench" of the ITAT, Delhi in the case of ACIT Vs. Vireet Investments (2017) 82 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements: (i) Joint Investments Vs. ACIT (2015) 372 ITR 694 (Del) (ii) DCIT Vs. Craft Builders and Constructions (2019) 414 ITR 122 (Del) [SLP filed by the revenue was thereafter dismissed by the Hon"ble Supreme Court in 112 taxman.com 322 (SC)] (iii) Nirved Traders Pvt. Ltd. Vs. DCIT [ITA 149 of 2017, dated 23.04.2019 (Bom) (iv) M/s Holcim India Pvt. Ltd. Vs. CIT-IV (2015) 57 taxmann.com 28 (Delhi) (v) CIT Vs. M/s Lakhani Marketing Inc.(2014) 226 Taxman 45 (P&H) (vi) CIT Vs.Hero Cycle Ltd. (2010) 323 ITR 518 (P&H) (vii) CIT Vs. Winsome Textiles Industries Ltd. (2009) 319 ITR 204 (P & H) (viii) CIT Vs. Corrtech Energy (P) Ltd. (2014) 223 taxman.com 130 (Guj) (ix) CIT Vs. Shivam Motors (P) Ltd. (2015) 230 Taxman 63 (All) (x). Pr. Commissioner of Income-tax-10 Vs. HSBC Invest Direct (India) Ltd., ITA No. 1672 of 2016; dated 04.02.2019 (Bom) Accordingly, in the backdrop of the aforesaid settled position of law, 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 the year under consideration. The Ground of appeal No. 1(a) & Ground of appeal No. 5(i) ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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