2015 (6) TMI 1097 - AT - Income Tax

Appeals Dismissed for Low Tax Effect, Assessee's Appeals Partially Allowed.

The Revenue's appeals were dismissed as they had a tax effect below Rs. 4 lakhs, in accordance with CBDT Circular No. 5/2014. The assessee's appeals were ... Computation of disallowance u/s.14A r.w.r.8D. - exclusion of investment made in the group concerns seeked - Held that:- As per the audited balance-sheet, the assessee has made substantial investment in group concern as a strategic investment. As per the decision of coordinate bench in M/s Smart Chip Ltd. [2014 (11) TMI 1068 - ITAT MUMBAI ] , strategic investment are required to be excluded from total investment while working out disallowance under Rule 8D. Thus ground taken by the assessee in all the years for computing disallowance under rule 8D is restored back to the file of AO with a direction to recompute the same by excluding strategic investment made in the group concerns which is ₹ 11.30 crores in the A.Y.2009-10, ₹ 26.44 crores for A.Y.2008-09 and ₹ 11.30 crores in A.Y.2010-11, respectively. We direct accordingly. Issues Involved:1. Maintainability of Revenue Appeals based on the CBDT Circular No. 5/2014.2. Computation of disallowance under section 14A read with Rule 8D.Issue-wise Detailed Analysis:1. Maintainability of Revenue Appeals based on the CBDT Circular No. 5/2014:The primary issue was whether the appeals filed by the Revenue, where the tax effect was less than Rs. 4 lakhs, were maintainable in light of the CBDT Circular No. 5/2014 issued on 10-7-2014. The Ld. AR argued that these appeals were not maintainable as per the CBDT Circular, which was agreed upon by the Ld. DR. The Tribunal referenced the Hon'ble Delhi High Court's judgment in CIT v. P.S. Jain & Co. (2011) 335 ITR 591, which highlighted that the monetary limits set by the CBDT should apply to old references to reduce the burden on the courts and the Department. Similarly, the Hon'ble Gujarat High Court in CIT v. Sureshchandra Durgaprasad Khatod (HUF) (2014) 363 ITR 556 held that the instructions apply to pending cases as well. The Tribunal concluded that the appeals with tax effects below Rs. 4 lakhs were not maintainable and dismissed them accordingly.2. Computation of disallowance under section 14A read with Rule 8D:The assessee's appeals for the assessment years 2008-09 to 2010-11 pertained to the computation of disallowance under section 14A read with Rule 8D. The AO had computed disallowance by including the entire investment made by the assessee without excluding strategic investments in group companies. The Ld. AR contended that these investments were made for strategic business purposes and should be excluded from the total investment for disallowance computation. The Tribunal referenced its consistent view in similar cases, such as M/s Smart Chip Ltd., Garware Wall Ropes Ltd., and M/s JM Financial Limited, where strategic investments were excluded from total investments for disallowance purposes. The Tribunal directed the AO to recompute the disallowance by excluding strategic investments made in the group concerns, which were Rs. 11.30 crores for A.Y. 2009-10, Rs. 26.44 crores for A.Y. 2008-09, and Rs. 11.30 crores for A.Y. 2010-11.Conclusion:The appeals of the Revenue were dismissed due to the tax effect being below Rs. 4 lakhs, as per the CBDT Circular No. 5/2014. The appeals of the assessee were allowed in part for statistical purposes, with directions to the AO to recompute the disallowance under Rule 8D by excluding strategic investments in group concerns. The order was pronounced in the open court on 15/06/2015.