SITI CABLE NETWORK LTD., MUMBAI V. DCIT 16(1), MUMBAI

CO 157/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0062 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-06-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 24-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR LD
• Assessee Lawyers: JAY BHANSALI LD
• Keywords: Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.3760/MUM/2018 ( / ASSESSMENT YEAR : 2013-14 ) D CIT - 16 (1) ROOM NO.439 AAYKAR BHAVAN, M.K. MARG MUMBAI-400 020. / VS. M/S. SITI CABLE NETWORK LTD. 135, CONTINENTAL BUILDING DR. ANNIE BESANT ROAD WORLI, MUMBAI-400 018. %& ./ ./PAN/GIR NO. AAACW-6349-M ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) & C.O. NO.157/MUM/2019 (ARISING OUT OF ITA NO. 3760/MUM/2018) ( / ASSESSMENT YEAR : 2013-14 ) M/S. SITI CABLE NETWORK LTD. 135, CONTINENTAL BUILDING DR. ANNIE BESANT ROAD WORLI, MUMBAI-400 018. / VS. D CIT - 16 (1) ROOM NO.439 AAYKAR BHAVAN, M.K. MARG MUMBAI-400 020. %& ./ ./PAN/GIR NO. AAACW-6349-M ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : SHRI JAY BHANSALI -LD. AR REVENUE BY : SHRI V. VINOD KUMAR -LD. DR / DATE OF HEARING : 25/06/2020 / DATE OF PRONOUNCEMENT : 25/06/2020 ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR (AY) 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-4/IT-128/ACIT-16 (1)/2016-17 DATED 22/03/2018 ON FOLLOWING GROUNDS OF APPEAL: - I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S, 14A OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THE CBDT CIRCULAR NO. 5 OF 2014 DATED 1 1.02.2014 WHEREIN IT WAS CLEARLY STATED THAT THE LEGISLATIVE INTENTION IS TO ALLOW ONLY THAT EXPENDITURE WHICH IS RELATABLE TO EARNING OF INCOME AND IT THEREFORE FOL LOWS THAT THE EXPENSES WHICH ARE RELATABLE TO EARNING OF EXEMPT INCOME HAVE TO BE CO NSIDERED FOR DISALLOWANCE IRRESPECTIVE OF THE FACT WHETHER SUCH INCOME HAS BE EN EARNED DURING THE FINANCIAL- YEAR OR NOT. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S. 14A OF THE I.T. ACT, 1961 BY IGNORING THE FACT THAT ONCE A PARTICULAR INCOME ITSELF IS NOT TO BE INCLUDED IN THE TOTAL INCOME IS EXEMPTED FROM TAX, THERE IS NO REASONABLE BASIS FO R GIVING BENEFIT OF DEDUCTION OF EXPENDITURE INCURRED TOWARDS EARNING SUCH INCOME. III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S. 14A OF THE I.T. ACT, 1961 AND THEREBY NOT APPRECIATING THAT SECTION 14A DOES NOT USE THE WORK 'INCOME OF THE YEAR' BUT 'INCOME UNDER THE ACT' WHICH CLEARLY INDICATES THAT FOR INVOKING PROVISIONS OF SECTION 14A, IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD H AVE EARNED EXEMPT INCOME DURING THE FINANCIAL YEAR UNDER CONSIDERATION. IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S. 14A OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THAT IN CASES INVOLVING DEDUCTION U/S. 57(III) OF THE I.T. ACT, IT WAS HELD BY THE COURTS THAT ACTUAL EARNING OF THE INCOME IS NOT SINE QUA NON FOR DECIDING THE DEDUCTION OF EXPENDITURE LAID OUT OR EXPENDED WHOLL Y OR EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME. THUS, TAKING THE SAME LOGIC FORWARD, WHERE INVESTMENT HAS BEEN MADE IN SHARES, WHICH DID NOT YIELD ANY DIVIDE ND IN THE YEAR UNDER CONSIDERATION, THE EXPENDITURE INCURRED FOR EARNING THE INCOME IS DEDUCTIBLE NOTWITHSTANDING THE FACT THAT NO SUCH INCOME HAS BE EN EARNED. V) THE APPELLANT PRAYS THAT THE ORDER OF CIT( A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. THE ASSESSEE, UPON RECEIPT OF NOTICE OF HEARING, HAS FILED CROSS- OBJECTION. THE GROUNDS TAKEN IN ITS CROSS-OBJECTION READ AS UNDER: - ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 3 1. THE ASSESSING OFFICER [HEREINAFTER REFERRED TO AS 'THE AO] ERRED IN MAKING DISALLOWANCE OF RS.1,78,44,3407- (I.E. RS. 1,69,00, 1907- OUT OF INTEREST AND RS. 9,44,1507- OUT OF EXPENSES) UNDER SECTION 14A OF TH E ACT WITHOUT GIVING ANY SPECIFIC FINDING OR RECORDING ANY DISSATISFACTION WITH THE C ORRECTNESS CLAIM MADE BY ASSESSEE IN THE RETURN OF INCOME. 2. THE AO ERRED IN DISALLOWING EXPENSES UNDER SEC TION 14A OF THE ACT WITHOUT ESTABLISHING ANY NEXUS BETWEEN EXPENSES AND EXEMPT INCOME; 3. THE AO 7 CIT(A) FAILED TO APPRECIATE THAT DISA LLOWANCE UNDER SECTION 14A READ WITH RULE 8D COULD NOT BE ADDED TO BOOK PROFIT U/S 115JB OF THE ACT. 4. THE ABOVE CROSS OBJECTIONS ARE WITHOUT PREJUDI CE TO EACH OTHER 3. THE LEARNED COUNSEL FOR ASSESSEE, SHRI JAY BHANS ALI, AT THE OUTSET, SUBMITTED THAT THE ONLY ISSUE INVOLVED IN THE APPEA L IS DISALLOWANCE U/S. 14A AND THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCO ME DURING THE YEAR. THEREFORE, NO SUCH DISALLOWANCE COULD BE MADE U/S 14A IN TERMS OF FOLLOWING BINDING JUDICIAL PRECEDENTS: - 1. PR.CIT VS. RIVIAN INTERNATIONAL (P) LTD. (ITA 693 OF 2015 DATED 21/11/2017) 2. PR. CIT VS. HUNTSMAN INTERNATIONAL (INDIA) PVT.L TD. (ITA 1619 OF 2016) 3. CHEMINVEST LTD. VS. CIT (378 ITR 33) 4. FINQUEST SECURITIES PVT.LTD. VS. ACIT [ITA 2540 /M/2017] AND 5. ACIT VS. VIREET INVESTMENTS (P.) LTD. [82 TAXMA NN.COM 415] THE LEARNED DR COULD NOT CONTROVERT THE SAID FACT B UT SUBMITTED THAT DISALLOWANCE U/S 14A HAS TO BE MADE IN TERMS OF CBD T CIRCULAR NO. 5 OF 2014 DATED 11/02/2014 WHICH MANDATE SUCH DISALLOWAN CE NOTWITHSTANDING THE QUANTUM OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. 4. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND WE HAVE ALSO PERUSED THE RELEVANT MATERIAL ON R ECORD INCLUDING JUDICIAL PRONOUNCEMENTS AS CITED BY LD. AR DURING T HE COURSE OF HEARING. 5. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE B EING RESIDENT CORPORATE ASSESSEE HAS BEEN ASSESSED FOR YEAR UNDER CONSIDERATION IN SCRUTINY ASSESSMENT U/S 143(3) VIDE ORDER DATED 17/ 03/2016 WHEREIN IT ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 4 HAS BEEN SADDLED WITH ADDITIONAL DISALLOWANCE U/S 1 4A FOR RS.178.44 LACS. THE SAID DISALLOWANCE HAS BEEN MADE WHILE COM PUTING THE INCOME UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB. 6. THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DU RING THE YEAR. HOWEVER, STILL IT OFFERED SUO-MOTO DISALLOWANCE OF RS.39.23 LACS U/S 14A WHILE FILING ITS RETURN OF INCOME. THE LD. AO, DISR EGARDING THE FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING TH E YEAR, APPLIED RULE 8D AND COMPUTED AGGREGATE DISALLOWANCE OF RS.2 17.67 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II ) FOR RS.206.16 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS11.51 LACS. AFTER ADJUSTING SUO-MOTO DISALLOWANCE OF RS.39.23 LACS AS OFFERED B Y THE ASSESSEE, THE ADDITIONAL DISALLOWANCE THUS WORKED OUT TO BE RS.17 8.44 LACS AND THE SAME IS THE SOLE SUBJECT MATTER OF APPEAL BEFORE US . 7. THE LEARNED CIT(A), INTER-ALIA, RELYING UPON THE BINDING DECISION OF HONBLE GUJARAT HIGH COURT IN CORTECH ENERGY (P.) L TD. (45 TAXMANN.COM 116) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT V/S DELITE ENTERPRISES (ITA NO.110 OF 2009 DATE D 26/02/2009) DELETED THE ADDITIONAL DISALLOWANCE AS MADE BY LD. AO. CONSEQUENTLY, IT WAS HELD THAT THE QUESTION OF ADJUSTMENT OF THE SAM E U/S 115JB WOULD NOT ARISE. AGGRIEVED, THE REVENUE IS IN FURTHER APP EAL BEFORE US. 8. WE FIND THAT IT IS UNDISPUTED FACT THAT THE ASSE SSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR AND THEREFORE, NO ADDITIONAL DISALLOWANCE U/S 14A COULD BE MADE BY REVENUE AUTHO RITIES. THE SAID POSITION IS WELL-SETTLED BY CATENA OF BINDING DECIS IONS OF HONBLE HIGH COURTS AS CITED BY LD. AR AND TABULATED BY US IN PR ECEDING PARAGRAPH ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 5 NO. 3. THE HONBLE BOMBAY HIGH COURT IN ITS RECENT DECISION OF PR. CIT VS. HUNTSMAN INTERNATIONAL (INDIA) PVT.LTD. (ITA 16 19 OF 2016 DATED 30/01/2019) REFUSED TO ADMIT THE QUESTION OF LAW RAISED BY THE REVENUE AGAINST THE DECISION OF TRIBUNAL WHICH RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT TITLED AS CIT V/S HOLCIM INDIA PVT. LTD. (272 CTR 282) TO HOLD THAT WHERE THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE, NO DISALLOWANCE U/S 14A COULD BE MADE. IT WAS ALSO NOTED BY HONBLE HIGH COURT THAT HONBLE SUPREME COURT IN CASE OF CI T VS. CHETTINAD LOGISTICS PVT. LTD. (95 TAXMANN.COM 250) DISMISSED THE REVENUES SLP AGAINST THE AFORESAID JUDGMENT OF HONBLE DELHI HIG H COURT IN HOLCIM INDIA P. LTD. (SUPRA). THEREFORE, NO FAULT COULD BE FOUND IN THE IMPUGNED ORDER, IN THIS REGARD. RESULTANTLY, THE RE VENUES APPEAL STANDS DISMISSED WHICH MAKES THE EXERCISE OF DELVING INTO ASSESSEES CROSS- OBJECTION MERELY ACADEMIC IN NATURE. 9. RESULTANTLY, THE APPEAL AS WELL AS CROSS-OBJECTI ON STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2020. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 25/06/2020 SR.PS, JAISY VARGHESE ITA NO.3760/MUM/2018 ASSESSMENT YEAR :2013-14 SITI CABLE NETWORK LTD. 6 / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. > ( ) / THE CIT(A) 4. > / CIT CONCERNED 5. ?@)9A , A , / DR, ITAT, MUMBAI 6. @BCD / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.