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TMI Blog2022 (8) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent : Nikhelesh Kataria, C.A. ORDER DR. S. SEETHALAKSHMI, MEMBER (J) 1. This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [(hereinafter referred to as 'NFAC')] dated 29.11.2021 for the Assessment year 2014-15. 2. The assessee raised the following grounds of appeal:- "1. Whether on the facts and circumstances of the cases, the learned CIT(A) NFAC, Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 9,53,227/- made by the AO disallowance u/s. 14A for expenditure relating to exempt income. 2. The appellant craves to add, amend, alter, delete or modify the above ground of appeal before or at the time of hearing." 3. Apropos sole ground no. 1, the assessee challenged confirmation of the disallowance of Rs. 9,53,227/- made by the AO disallowance U/s 14A for expenditure related to exempt income. 4. The brief facts of the case are that the assessee is proprietor of M/s. Agarwal Iron & Steel Industries engaged in the business of steel blades and has declared total income of Rs. 41,87,940/- on 10.09.2013. Later assessment order u/s. 143(3) of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of total assets as appearing in the balance sheet of the assessee, on first day and last day of the previous year; =4087961*18704852/88943152 =859703 (iii) an amount equal to one-hal percent of the average of the value of investment, income From which does not or shall not Form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year. =18704852*0.5% = 93524 Thus, a disallowance of Rs. 9,53,227/- was to be made u/s. 14A of the Act. The assessee was show caused vide notice dated 25.06.2019 as to why expenditure as calculated above should not be disallowed. The reply of the assessee to this show cause notice received on ITBA on 26.06.2019 has been examined but has not been found acceptable. 6. In the light of the above discussion after considering and circumstances of the case, a disallowance of Rs. 9,53,227/- is made as per the provisions of Rule 8D and Section 14A the Act. [Rs. 9,53,227/-] Moreover, penalty proceedings u/s. 271(1)(c) are initiated separately for furnishing inaccurate particulars of income. 5. Subject to the above, the total income of the assessee is computed as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely directed works out to nearly 110% of that sum, i.e., Rs. 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." 5.4. In the case of Brindavan Beverages Pvt. Ltd. Vs DCIT (ITAT Bangalore)/ITA No. 2001/Bang/2016/Dated: 20/10/2020/AY 2010-11, 2013-14, it has been held as under:- "... The recent order of the Bangalore Benches of the Tribunal in the case of M/s. Century Real Estate Holdings Pvt. Ltd. v. ACIT [ITA No. 284/Bang/2020 - order dated 24.06.2020] had held disallowance u/s. 14A of the I.T. Act cannot exceed the exempt income. The Bangalore Benches of the Tribunal had relied on the judgment of the Hon'ble Delhi High Court in the case of PCIT v. Caraf Builders & Constructions (P) Ltd. [(2019) 101 Taxmann.com 167 (Delhi)] and the order of the Mumbai Benches of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. We further notice that the Hon'ble Delhi High Court in the case of CIT v. Holcim India (P.) Ltd. (2014) 272 CTR 282 (Delhi) has held that there can be no dis allowance under section 14A in the absence of exempt income.... Therefore, considering the facts and circumstances of the case and also following the ratios of the case laws discussed above, we are of the view that dis allowance under section 14A cannot exceed the exempt income..." 5.5. Reliance is also placed on the following judicial pronouncements: 1. I.T.A. No. 245/AHD/2013 dated 27.03.2015 Chudgar Ranchodlal Jethalal vs. DCIT 2. ITA No. 5592/MUM/2012 dated 01.01.2015 M/s. Daga Global Chemicals Pvt. Ltd. vs. Asst. CIT 3. ITA No. 986/Del/2012 dated 18.03.2015 HT Media Ltd. vs. ACIT 4. 148 ITD 336 (Del) Sahara India Financial Corpn. Ltd. vs. DCIT 5. ITA No. 548/Chd/2011 dated 30.09.2011 ACIT vs. Punjab State Coop & Marketing Fed. Ltd. 6. ITA No. 4320/Del/2014 dated 21.10.2015 Asst. IT vs. M/s. Kajaria Ceramics Limited 7. ITA No. 1027/Del/2013 dated 23.10.2015 He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which was based on the audit objection. The Assessing Officer accepted the same however it was observed that the assessee has invested in shares and exempt income of Rs. 4,278/- was earned during the year. On the other hand the ld. AR for the assessee submitted that the AO has computed disallowance u/s. 14A read with rule 8D at Rs. 9,45,672/- where it is erroneous and unjustifiable on the part of the Assessing Officer. The AR for the assessee submitted that income investment was made for the period 01.04.2013 to 13.03.2014 and the exempt income was dividend income of Rs. 4,278/- only. The ld. AR for the assessee submitted that income expenditure was incurred during the relevant year earnings which is in the form of exempt income. The AR for the assessee submitted that AO has erroneously considered those investments on which the company had not earned to compute the disallowance and income expenditure as direct and indirect actual during the year dividend income earned. The disallowance u/s. 14A cannot be exceeding the amount of dividend income. The ld. CIT(A) has rightly allowed the provisions of section 14A of the Act to disallow expenditure attributable to the exempt income ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision is not of jurisdictional bench or high court. 4. Sh. Vipin Malik vs. ACIT, Circle 37(1), New Delhi 63-84 The facts of the case are narrated at para 17,18, & 19 of the order * The facts are entirely different and clearly distinguishable: It is to be noted that there the assessee has earned dividend income of Rs. 1802899/- (para 19) and the disallowance stood at Rs. 311043/- (para 18). Further the ground of challenge by the assessee in that case was that the AO has not recorded the satisfaction of incurring of expenditure in relation to earning of income and quantum of disallowance was not under challenge. However in the present case expenditure are higher than the exempt income and the ld. CIT(A) has allowed relief in respect of quantum of expenditure not on legal issue. 2.The decision is not of jurisdictional bench or high court. "1.1 Case laws submitted by the department are distinguishable: We are submitting herewith the table highlighting that the case laws as has been submitted by the department are distinguishable on the facts of the present case Thus all the decisions cited by the ld. DR are clearly distinguishable and not applicable on the facts of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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