M/s Mantri Technlogy Constellations Pvt Ltd , Bangalore V. Assistant Commissioner of Income TAx Circle-4(1)(2), Bangalore

CO 50/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1859 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-08-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 24-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Assessee Lawyers: DR P V PRADEEP KUMAR
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B ENGALURU BEFORE S HRI N.V.VASUDEVAN , VICE PRESIDENT AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I TA NO. 708 / BANG/2 0 1 8 (ASSESSMENT YEAR: 2014 - 15 ) ASSISTANT COMMISSIONER OF INCOME - TAX , CIRCLE 4(1)(2), BEN GALURU. VS. APPELLANT M/S.MANTRI TECHNOLOGY CONSTELLATIONS PVT.LTD. MANTRI HOUSE, 41, VITTAL MALLYA ROAD, BENGALURU - 560001. PAN:AAFCM 1653 D RESPONDENT AND CROSS OBJN.NO.50/BANG/2018 (IN ITA NO. 708 /BANG/201 8) (ASSESSMENT YEAR: 2 014 - 15 ) **** ASSESSEE BY : DR. P.V.PRADEEP KUMAR, ADDL.CIT(DR) REVENUE BY : SHRI V.SRINIVASAN, ADVOCATE. DATE OF HEARING : 12/11/2018 DATE OF PRONOUNCEMENT : 16 /11/2018 O R D E R PER INTURI RAMA RAO, A M : THIS IS AN APPEAL FILED BY THE REVEN UE AND CROSS OBJECTION BY THE ASSESSEE COMPANY DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX(APPEALS) - 4, [CIT(A)], BANGALORE , DATED 2 1/11/2017 FOR THE ASSESSMENT YEAR 2014 - 15 . 2. B RIEFLY , THE FACTS OF THE CASE ARE THAT T HE RESPOND ENT - ASSESSEE IS A DULY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956 . I T IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT . T HE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014 - 15 WAS FILED ON 30 /09/ 2014 DECLARING TOTAL LOSS OF RS. 3 , 47 , 89 ,8 7 8 / - . A GAINST THE SAID RETURN OF INCOME, THE A SSESSING O FFICER COMPLETE D THE ASSESSMENT UNDER SECTION 143 (3) VIDE ORDER DATED 29 / 12 / 2016 ITA NO . 708 & CO 50 /BANG/20 18 PAGE 2 OF 4 AFTER MAKING THE DISALLOWANCE OF RS. 49 , 53 , 669 / - UNDER SECTION 14 A OF THE OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERR ED TO AS 'THE ACT' FOR SHORT]. D URING THE COURSE OF ASSESSMENT PROCEEDINGS , THE A SSESS ING O FFICER NOTICED THAT THE ASSESSEE - COMPANY MADE INVESTMENTS IN EQUITY SHARES OF CERTAIN COMPANIES AND MUTUAL FUNDS ET C. T HEREFORE INVOKING THE PROVISIONS OF SECTION 14 A OF THE ACT, THE ASSESSING O FFICER MADE DISALLOWANCE UNDER CLAUSE (III) OF SUB - RULE (2) OF RULE 8D OF RS.44,49,214/ - AND UNDER CLAUSE (II) OF SUB - RULE(2) OF RULE 8D OF RS.5,04,459/ - . 3. B EING AGGRIEVED, AN APP EAL WAS PREFERRED BEFORE THE LD. CIT (A) WHO , VIDE IMPUGNED ORDER, HELD THAT THE AMOUNT OF DISALLOWAN CE CANNOT EXCEED EXEMPT INCOME. D ISALLOWANCE UNDER CLAUSE (II) OF RULE 8D, I.E. INTEREST EXPENDITURE, LD.CIT(A), ACCEPTED THE CONT ENTION OF THE ASSESSEE THAT IN THE ABSENCE OF SPECIFIED EXEMPT INCOME , NO DISALLOWANCE CAN BE MADE AND A CCORDINGLY DELETED THE ADDITION , AS REGARDS DISALLOWANCE UNDER CLAUSE (III) OF SUB - RULE (2) OF RULE 8D , DISALLOWANCE UNDER CLAUSE (II) OF SUB - RULE (2) OF RULE 8D, LD.CIT(A) DIRECTED T HE A SSESSING O FFICER TO RESTRICT IT TO THE EXTENT OF EXEMPT INCOME I.E. RS.2,15,500/ - . 4. B EING AGGRIEVED BY THAT PART OF THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL. THE ASSESSEE HA D F ILED CROSS OBJECTIONS BEING AGGRIEVED BY THE DIRECTION OF THE LD.CIT(A) TO RESTRICT DISA L L O WANCE UNDER CLAUSE (III) OF SUB - RULE ( 2 ) OF RULE 8D TO THE EXTENT OF EXEMPT INCOME . 5. W E SH ALL TAKE UP THE REVENUE APPEAL. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 708 & CO 50 /BANG/20 18 PAGE 3 OF 4 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. T HE ORDER OF THE LD.CIT(A) IS IN CONSONANCE WITH THE SETTLED POSITION OF L AW THAT IN THE ABSENCE OF EXEMPT INCOME PROVISIONS OF 14 A CANNOT BE INVOKED . THIS ISSUE IS NOW COVERED BY THE DECISION OF THE SPECIAL BENCH OF TRIBUNAL (DELHI) IN THE CASE OF ACIT VS . VIREET INVESTMENT (P) LTD. 82 TAXMANN.COM 415. THE RELEVANT PARAGRAPH IS EXTRACTED HEREUNDER: 11.16. THEREFORE, IN OUR CONSIDERED OPINION, NO CONTRARY VIEW CAN BE TAKEN UNDER THESE CIRCUMSTANCES. WE, ACCORDINGLY, HOLD THAT ONLY THOSE INVESTMENTS AR E TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME DURING THE YEAR. THUS THE PROPOSITION THAT THE AMOUNT OF DISALLOWANCE CANNOT EXCEED EXEMPT INCOME IS SETTLED. T HEREFORE WE DON'T FIND ANY REASON TO INTER FERE WITH TH E ORDER OF THE LD.CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. THE ASSESSEE HAD FILED CROSS OBJECTIONS BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A) TO RESTRICT THE AMOUNT OF DISALLOWANCE UNDER CLAUSE (III) OF SUB - RULE(2) OF R ULE 8D TO THE EXTENT OF EXEMPT INCOME. FROM THE PERUSAL OF ANNUAL REPORT, IT IS CLEAR THAT THERE IS NO EXEMPTION INCOME FOR THE YEAR UNDER CONSIDERATION. S INCE IN THE REVENUE APPEAL, WE HAVE HELD THAT THE PROVISIONS OF SECTION 14 A ITA NO . 708 & CO 50 /BANG/20 18 PAGE 4 OF 4 CANNOT BE INVOKED IN T HE ABSENCE OF ANY EXEMPT INCOME , THE PRESENT CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN TH E OPEN COURT ON 16 TH NOVEMBER, 2018 S D/ - SD/ - (N.V.VASUDEVAN) ( INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT M EMBER PLACE : BENGALURU. D A T E D : 16 / 11 /2018 SRIN IVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSIST ANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE