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04-07-2019, Mahle Filter Systems, Section 37(1), 24, 80IC, Tribunal Delhi

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1 week 3 days ago #9985 by amit
Section - 37(1), 24, 80IC, 80IA(12), 14A, 8D, 10(33)
Order Date - 04-07-2019
Favouring - Partly allowed for statistical purposes
Court - Tribunal Delhi
Appellant - Mahle Filter Systems Pvt Ltd
Respondent - ACIT
Citation - 719Taxpundit74
Appeal No. - ITA No. 314/DEL/2015
Asstt. Year - 2009-10



The above two captioned cross appeals by the assessee and revenue are preferred against the order of the Commissioner of Income Tax [Appeals] - IX, New Delhi dated 29.09.2014 pertaining to assessment year 2009-10. Since both these appeals were heard together and involve common issues, these are being disposed of by this common order for the sake of convenience and brevity.

ITA No. 314/DEL/2015 [Assessee’s Appeal]

2. Ground No. 1 relates to the disallowance of Rs. 88,577/- made u/s 14A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] read with Rule 8D of the Income tax Rules, 1962 [hereinafter referred to as 'the Rules’].

2. At the very outset, the ld. AR stated that as per the ratio laid down by the Hon'ble Delhi High Court in 372 ITR 694, total disallowance u/s 14A of the Act cannot be more than the exempt income.

3. We find force in the contention of the ld. AR. Without going into the merits of the disallowance, we find that the assessee has disclosed exempt dividend income of Rs. 20,995/- u/s 10(33) of the Act. In the light of the decision of the Hon'ble Delhi High Court [supra], we direct the Assessing Officer to restrict the disallowance to the extent of exempt income of Rs. 20,995/-. Ground No. 1, with all its sub-grounds is partly allowed.

4. Ground No. 2 relates to the disallowance of expenses distributed by the assessee to its employees amounting to Rs. 1,57,074/-.

5. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has debited Rs. 3,14,148/- as gift. The Assessing Officer was of the opinion that the payment of gift cannot be said to be incurred wholly and exclusively for the purpose of business as per the provisions of section 37(1) of the Act. The Assessing Officer found that the assessee has disclosed 50% as Fringe Benefit and accordingly, disallowed the balance 50% of the expenditure.

6. The assessee carried the matter before the CIT(A) but without any success.

7. Before us, the ld. AR vehemently contended that since the assessee has paid Fringe Benefit Tax [FBT], therefore, expenditure cannot be disallowed. It is the say of the ld. AR that once a FBT has been paid, no disallowance can be made.

8. On the other hand, the ld. DR strongly supported the findings of the AO.

9. We have given a thoughtful consideration to the orders of the authorities below. The Assessing Officer, at para 11.1 of his order, has himself accepted hat 50% of the gift as eligible expenditure and, therefore, we fail to understand why balance 50% has been disallowed. Moreover, there is no dispute that the assessee has paid FBT @ 50%. Now it is a settled position of law that no disallowance can be made once expenses are exigble to FBT. Our view is supported by the decision of the co-ordinate bench in the case of BG Shirke Construction Technology [P] Ltd Vs. CIT ITA No. 1430/PROVISIONS /2010 vide order dated 17/07/2012 wherein it has been held as under:

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