M/S Sansera Engg. Ltd.,, Bangalore vs Department Of Income Tax

Joint Commissioner of Income-tax(LTU) Bangalore. ... Appellant

Vs.

M/s.Sansera Engg. Pvt.Ltd. No.261/C, Bommasandra Industrial Area, Hebbagodi, Anekal taluk, Bangalore-560099/ ... Respondent PAN:AAECS 2440 M

Appellant by: Dr.K.Shankar Prasad, JCIT(DR). Respondent by: Shri Bharath, CA.

Date of hearing : 25/02/2015. Date of pronouncement: 04/03/2015.

Per Smt. P.MADHAVI DEVI, JM:

This is an appeal filed by the Revenue against the order of

the CIT(A),LTU, Bangalore, dated 10/04/2013 for the

assessment year 2010-11. The Revenue is aggrieved by the

order of the CIT(A) in deleting the disallowance made by the

Assessing Officer (AO) u/s 14A of the Income-tax Act, 1961

[hereinafter referred to as 'the Act' for short].

2. Brief facts of the case are that the assessee-company

which is in the business of manufacture of automobile

components, filed its return of income for the assessment year

2010-11 on 25/9/2010 declaring income of Rs.10,66,08,420/-. ITA No.468/Bang/2014

M/s.Sansera Engg.Pvt.Ltd.

Page 2 of 4 During the assessment proceedings u/s 143(3) of the Act, the

AO observed that the assessee had earned income of

Rs.88,800/- being dividend from mutual fund which is exempt

from taxation u/s 10(35) of the Act. As this income does not

form part of the total income, he asked the assessee to explain

as to why the provisions of section 14A should not be applied.

Since the assessee did not offer any explanation, the AO

proceeded to compute disallowance u/s 14A of the Act read with

rule 8D of the IT Rules at Rs.1,11,92,410/- and brought it to tax.

Aggrieved by the said addition, the assessee preferred an appeal

before the CIT(A) stating that the assessee had not claimed any

income as exempt and hence the application of sec.14A was not

warranted ab initio. After considering the assessee's contention

and perusing the records, the CIT(A) found the assessee's

contention to be correct. He accordingly deleted the addition.

Aggrieved by the relief given by the CIT(A), the revenue is in

appeal before us.

3. The learned Departmental Representative supported the

order of the AO while the learned counsel for the assessee

placed reliance upon the order of the CIT(A). The learned

Departmental Representative also placed reliance upon the

following decisions in support of his contention:

i. M/s Priya Ltd. vs. DCIT in ITA No.8725/Mum/2010 dt.2/8/2013 and ITA No.468/Bang/2014 M/s.Sansera Engg.Pvt.Ltd.

Page 3 of 4 ii. Binayak Tex Processors Ltd. vs. ACIT (2014) 44 taxman.com179(Mumbai-Trib.)

He submitted that in these cases, the assessee therein had not

earned any exempt income and hence it was held that the

provisions of sec.14A were not applicable, whereas in the case

before us, the assessee had earned exempt income though may

not have claimed it as exempt. Therefore, according to him,

since facts are distinguishable, reliance of the CIT(A) on the

decision of the Mumbai Tribunal in the case of Priya Ltd., is not

justified.

The learned counsel for the assessee, on the other hand,

placed reliance upon the decision of the Mumbai Tribunal in the

case of Priya Ltd.(supra)

4. Having heard both the parties and having regard to the

rival contentions and the material on record, we find that the

assessee had earned only a sum of Rs.88,880/- as dividend

income exempt from tax u/s 10(35) of the Act. On perusal of

the Profit & Loss Account as well as the return of income filed by

the assessee, we find that the assessee had not claimed any

income as exempt from taxation. In such circumstances, where

assessee has not claimed income as exempt and it is not forming

part of total income, the disallowance u/s 14A is not warranted

as held by the Mumbai Tribunal in the case of M/s.Priya Ltd.,

(cited supra). In view of the same, we see no reason to ITA No.468/Bang/2014 M/s.Sansera Engg.Pvt.Ltd.

Page 4 of 4 interfere with the order of the CIT(A) and the Revenue's appeal

is accordingly dismissed.

Pronounced in the open court on 04th March, 2015.

sd/- sd/- (Abraham P George) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu

Copy to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore