RADHA MADHAV INVESTMENT P.LTD, MUMBAI V. DCIT 3(3)(1), MUMBAI

CO 88/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0329 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD DR
• Assessee Lawyers: VIJAY MEHTALD
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A; 115JB

Judgement Text

ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO. 108/MUM/2017 ( ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME TAX-3(3)(1) ROOM NO.609,6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD MUMBAI 400 020 VS. RADHA MADHAV INVESTMENTS PVT. LTD. 11-A, MITTAL CHAMBERS DR. RAJNI PATEL MARG NARIMAN POINT MUMBAI 400 021 ! ' PAN/GIR NO. AAACR-4063-M ( !# APPELLANT ) : ( $%!# RESPONDENT ) & CROSS OBJECTION NO.88/MUM/2018 ( ASSESSMENT YEAR: 2012-13) RADHA MADHAV INVESTMENTS PVT LTD 122, MAKER CHAMBERS-III NARIMAN POINT MUMBAI MUMBAI 400 021 VS. DEPUTY COMMISSIONER OF INCOME TAX-3(3)(1) ROOM NO.609,6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD MUMBAI 400 020 ! ' PAN/GIR NO. AAACR-4063-M ( !# APPELLANT ) : ( $%!# RESPONDENT ) ASSESSEE BY : VIJAY MEHTA, LD. AR REVENUE BY : RAM TIWARI, LD. DR & DATE OF HEARING : 19/07/2018 '() / DATE OF PRONOUNCEMENT : 12/09/2018 ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 2 O R D E R PER BENCH 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-8 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-8/IT-117/15-16 DATED 27/10/2016 BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEA L:- 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,70,1 3,192/- WHICH WAS OVER & ABOVE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WI THOUT APPRECIATING THE FACT THAT THE AMOUNT OF DISALLOWANCE U/S.14A OF THE I.T.ACT, 1961 HAS TO BE COMPUTED AS PER RULE 8D OF I.T.RULES, 1962 AS HELD IN THE ORDER OF THE HONBLE HIGH COURT IN THE CASE OF M/S. GODREJ & BOY CE MANUFACTURING CO. LTD. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S.1 4A TO THE BOOK PROFIT U/S.115JB OF THE I.T.ACT, 1961 IGNORING THE DECISIO NS OF THE HONBLE ITAT, MUMBAI IN THE CASE OF M/S. VIRAJ PROFILES LTD. IN I TA NO.4439/MUM/2013 DATED 21/10/2015 46 ITR(T) 626 (MUMBAI TRIB.)/[ 2016] AND IN FERANI HOTELS PVT.LTD.IN ITA NO.857/MUM/2013 DATED 17/11/2 014. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S.1 4A OF THE I.T.ACT, 1961 RELYING ON THE DECISION OF HONBLE ITAT, MUMBAI IN ASSESSEES OWN CASE FOR AY:2008-09 WITHOUT APPRECIATING THAT THE FACTS INVO LVED THEREIN ARE DISTINGUISHABLE FROM THE FACTS INVOLVED IN THE INST ANT CASE. THE ASSESSEE HAS FILED CROSS-OBJECTION AGAINST THE SAME. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-CIRCLE 3(3)(1), MUMBAI [AO] U/S 143(3 ) OF THE INCOME TAX ACT,1961 ON 18/03/2015 WHEREIN THE INCOME OF THE ASSESSEE HA S BEEN ASSESSED AT RS.7071.92 LACS UNDER NORMAL PROVISIONS & RS.4951.14 LACS FOR THE PURPOSE OF MINIMUM ALTERNATIVE TAX [MAT] U/S 115JB AFTER CERTAIN ADDITIONS / DISALLOWANCES. AS EVIDENT FROM THE GROUNDS OF APPEAL, THE ONLY DISPUTE BEFORE US IS DISALLOWANCE U/S 14A. DURING THE IMPUGNED ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 3 AY, THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT & FINANCING. 2. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT TH E ASSESSEE EARNED EXEMPT INCOME BY WAY OF DIVIDEND, LONG TERM CAPITAL GAINS & SHARE OF PROFITS FROM PARTNERSHIP FIRMS AGGREGATING TO RS.69.11 CRORES AGAINST WHICH IT HAD MADE SUO-MOTO EXPENSE DISALLOWANCE U/S 14A FOR RS.76.84 LACS, THE COMPUTATION OF WHICH HAS BEEN EX TRACTED AT PARA-5.1 OF THE QUANTUM ASSESSMENT ORDER. IT WAS NOTED THAT THE ASSESSEE DID NOT INCLUDE THE INVESTMENTS IN PARTNERSHIP FIRMS AGGREGATING TO RS.294 CRORES WHILE ARRIVING AT THE AFORESAID DISALLOWANCE . THE ASSESSEE DEFENDED THE SAME, INTER-ALIA, ON THE PREMISES THAT NO EXPENDITURE WAS INCURRED AND NO EFFORTS WERE MADE BY THE ASSESSEE T O EARN ANY INCOME FROM THE PARTNERSHIP FIRM. HOWEVER, IT WAS NOTED TH AT PURSUANT TO TERMS OF RESPECTIVE PARTNERSHIP DEEDS, THE DIRECTOR OF TH E ASSESSEE COMPANY, BEING PARTNER IN THOSE FIRMS, WAS REQUIRED TO DEVOT E THEIR FULL TIME AND ATTENTION TO THE PARTNERSHIP BUSINESS AND ALL THE F IRMS WERE OPERATING FROM THE ADDRESS OF THE ASSESSEE. THEREFORE, NOT CO NVINCED, LD. AO APPLYING RULE 8D, WORKED OUT EXPENSES DISALLOWANCE OF RS.246.97 LACS AS AGAINST RS.76.84 LACS COMPUTED BY THE ASSESSEE A ND ADDED THE DIFFERENCE OF RS.170.13 LACS IN THE HANDS OF THE AS SESSEE. THE AFORESAID ADJUSTMENT WAS MADE WHILE ARRIVING AT INC OME UNDER NORMAL PROVISIONS AS WELL AS U/S 115JB. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 27/10/2016 WHE REIN VARIOUS SUBMISSIONS WERE MADE BY THE ASSESSEE WHICH HAVE BE EN EXTRACTED IN ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 4 THE IMPUGNED ORDER. THE LD. CIT(A) RELYING UPON THE DECISION OF THIS TRIBUNAL FOR AY 2008-09, DELETED THE ADDITIONAL DIS ALLOWANCE. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI RAM TIWARI CONTENDED THAT THE COMPUTATIONS WERE TO BE MADE ONL Y AS PER STATUTORY MANDATE AS CONTAINED IN RULE 8D AND THEREFORE, THE ACTION OF THE LD. AO WAS JUSTIFIED. THE LD. AUTHORIZED REPRESENTATIVE FO R ASSESSEE [AR], SHRI VIJAY MEHTA PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL F OR AYS 2009-10 TO 2011-12 AND SUBMITTED THAT IMPUGNED ADDI TIONS MAY BE RESTRICTED TO 0.22% OF AVERAGE INVESTMENTS AS DONE IN EARLIER AYS. THE RATE OF 0.22% IS NOTHING BUT AVERAGE OF SUO-MOTO DISALLOWANCE MADE BY ASSESSEE FOR AYS 2009-10 TO 2011-12, WHICH HAS ALSO BEEN ACCEPTED BY THE TRIBUNAL. 5. THE ASSESSEE, VIDE LETTER DATED 30/07/2018 HAS D RAWN ATTENTION TO THE FACT THAT THE NAME OF THE ASSESSEE HAS BEEN CHA NGED FROM RADHA MADHAV INVESTMENTS LIMITED TO RADHA MADHAV INVESTMENTS PRIVATE LIMITED W.E.F. 21/05/2016 VIDE FRESH CERTIFICATE OF INCORPORATION ISSUED BY REGISTRAR OF COMPANIES, MUMBAI, A COPY OF WHICH HAS BEEN PLACED ON RECORD. THE SAME IS NOTED AND WE PROCEED TO ADJUDIC ATE THE ISSUE ON MERITS. 6. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE DECISION OF TRIBUN AL IN ASSESSEES OWN CASE FOR EARLIER YEARS. WE FIND THAT IDENTICAL ISSU E IN REVENUES APPEAL FOR AY 2013-14 HAS BEEN REMITTED BACK TO THE FILE OF LD . AO, BY THIS VERY ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 5 BENCH VIDE ITA NO. 1028/MUM/2017 DATED 27/07/2018 W ITH THE FOLLOWING OBSERVATIONS:- 5.2 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS A ND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE DECISION OF TRIBUNAL IN ASS ESSEES OWN CASE FOR EARLIER YEARS. THE LD. AR HAS PRIMARILY PLACED RELIANCE ON THE STA ND OF THIS TRIBUNAL FOR AYS 2009- 10 TO 2011-12, THE COPIES OF WHICH HAVE BEEN PLACED ON RECORD. WE HAVE GONE THROUGH THE SAME AS WELL AS FINANCIAL STATEMENTS FO R IMPUGNED AY AS PLACED ON RECORD. 5.3 THE PERUSAL OF TRIBUNALS ORDER FOR AY 2009-10, ITA NO. 6972/MUM/2012 DATED 17/04/2015 REVEAL THAT THE DECISION FOR THAT AY HAS BEEN RENDERED AFTER DUE CONSIDERATION OF FACTUAL MATRIX AND PERUSAL OF EXPE NDITURE AS CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. FROM THE ORD ER, IT IS EVIDENT THAT IN THAT YEAR, THE ASSESSEE HAD MADE SUO-MOTO DISALLOWANCE OF RS.1 65.43 LACS AGAINST COMMON EXPENDITURE OF RS.471 LACS WHICH TRANSLATED INTO DI SALLOWANCE RATE OF 35%, WHICH LED THE TRIBUNAL TO DELETE THE ADDITIONAL DISALLOWA NCE MADE BY LD. AO. 5.4 SIMILARLY, THE TRIBUNALS ORDER FOR AY 2010-11, ITA NO. 309/MUM/2014 DATED 12/04/2017 RECORDS A FINDING THAT THE SUO-MOTO DISA LLOWANCE MADE BY THE ASSESSEE FOR RS.151.54 LACS TRANSLATED INTO APPROX. 44% OF C OMMON EXPENDITURE. THIS RATE WAS 35.45% IN AY 2011-12. HOWEVER, NO SUCH TABULATI ON HAS BEEN PLACED BEFORE US FOR THE IMPUGNED AY. IN VIEW OF THE STATED FACTS, T HE DISALLOWANCE AS OFFERED BY LD. AR @0.22% OF AVERAGE INVESTMENT COULD NOT BE ACCEPT ED. 5.5 SO FAR AS THE DECISION OF TRIBUNAL FOR AY 2008- 09 AS EXTRACTED IN THE IMPUGNED ORDER AND AS RELIED UPON BY LD. CIT(A) IS CONCERNED, THE SAME IS CLEARLY DISTINGUISHABLE SINCE IT HAS BEEN OBSERVED THEREIN THAT THE LD. AO FAILED TO FULFILL THE REQUIREMENTS OF SECTION 14(2) QUA SATISFACTION, WHI CH IS NOT THE CASE HERE SINCE LD. AO, WITH DUE APPLICATION OF MIND HAS REJECTED THE C OMPUTATIONS OFFERED BY THE ASSESSEE. 5.6 ANOTHER ASPECT OF THE ISSUE IS QUANTUM OF INVES TMENTS. THE PERUSAL OF BALANCE SHEET, PRIMA-FACIE, REVEAL THAT THE ASSESSE ES YEAR END CURRENT INVESTMENTS AND NON-CURRENT INVESTMENTS AGGREGATE TO RS.787.43 CRORES WHICH IS APPROX. 76% OF TOTAL ASSETS I.E. RS.1037.69 CRORES AS REFLECTED IN THE BALANCE SHEET. THE SAME REVEAL THAT THE ASSESSEE IS PRE-DOMINANTLY AN INVES TMENT COMPANY. AT THIS JUNCTURE, WE FIND THAT WE STOOD BENEFITTED BY THE RECENT JUDG MENT OF HONBLE APEX COURT RENDERED IN MAXOPP INVESTMENT LTD. VS. CIT [12/02/2 018 91 TAXMANN.COM 154] WHEREIN IT HAS CATEGORICALLY BEEN HELD THAT THE OBJ ECTIVE OF HOLDING THE INVESTMENTS WAS IMMATERIAL AND THE DISALLOWANCE WAS TO BE APPLI ED IN ALL CASES IRRESPECTIVE OF THE FACT WHETHER THE SAME ARE HELD AS STOCK-IN-TRAD E OR AS AN INVESTMENTS. 5.7 THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACT S AND KEEPING IN VIEW THE RECENT JUDGMENT OF HONBLE APEX COURT AS CITED ABOVE, WE D EEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF LD. AO FOR RE-ADJUDICATION IN T HE LIGHT OF STATUTORY PROVISIONS AS WELL AS IN THE LIGHT OF RATIO OF CITED JUDGMENT OF HONBLE SUPREME COURT. THE ASSESSEE, IN TURN, IS DIRECTED TO SUBSTANTIATE HIS CLAIM WITH SUPPORTING EVIDENCES IN THIS REGARD FAILING WHICH LD. AO SHALL BE AT LIBERT Y TO DECIDE THE ISSUE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 6 THE FACTS ARE IDENTICAL IN THIS AY. THEREFORE, TAKI NG THE SAME VIEW, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. AO ON SIMILAR LINES. GROUND NUMBERS 1 & 3 STAND ALLOWED FOR STATISTICAL PURPOSE S. IN THE RESULT, ASSESSEES CROSS-OBJECTIONS BECOME INFRUCTUOUS. 7. SO FAR AS ADJUSTMENT OF DISALLOWANCE U/S 14A IN COMPUTATION OF BOOK PROFIT U/S 115JB IS CONCERNED, WE FIND THAT TH E MATTER STOOD SQUARELY IN ASSESSEES FAVOUR BY THE CITED JUDGMENT OF DELHI TRIBUNAL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.COM 415]. UPON PERUSAL OF THE SAME, WE FIND THAT SPECIAL BENCH, AFTER CONSIDERING TWO CONTRARY DECISION OF H ONBLE DELHI HIGH COURT TITLED AS CIT VS. GOETZE (INDIA) LTD. [2014 361 ITR 505] & PCIT VS. BHUSHAN STEEL LTD. [ITA 593/2015 DATED 29/09/20 15], TOOK THE VIEW FAVORABLE TO THE ASSESSEE IN TERMS OF RATIO OF DECI SION OF HONBLE SUPREME COURT RENDERED IN CIT VS. VEGETABLE PRODUCTS LIMITED [1973 88 ITR 192]. THE DECISION IN PCIT VS. BHUSHAN STEEL LTD. , IN TURN, PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN APOLLO TYRES LTD. VS. CIT [255 ITR 273] WHICH HELD THAT THE ASSESSING OFFICER DID NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT EXCEPT TO THE EXTENT PROV IDED IN EXPLANATION TO SECTION 115J. SIMILAR VIEW HAS BEEN EXPRESSED BY OU R JURISDICTIONAL BOMBAY HIGH COURT RENDERED IN CIT VS. JSW ENERGY LIMITED [2015 60 TAXMANN.COM 303], CIT V. ESSAR TELEHOLDINGS LTD. [ITA NO. 438 OF 2012, DATED 07/08/2014] & CIT VS. BENGAL FINANCE & INVESTMENTS PVT. LIMITED [ITA NO. 337 OF 2013 DATED 10/02/2015]. THEREFORE, RESPECTFULLY FOLLOWING THE CATENA OF JUDGMENT IN ASSESSEES FAVOUR, WE HOL D THAT ADJUSTMENT OF ITA.NO.108/MUM/2017 & CO.NO.88/MUM/2018 RADHA MADHAV INVESTMENTS LIMITED ASSESSMENT YEAR 2012-13 7 DISALLOWANCE U/S 14A WAS NOT REQUIRED TO BE MADE IN BOOK PROFITS FOR THE PURPOSE OF SECTION 115JB. GROUND NUMBER 2 OF REVENU ES APPEAL STANDS DISMISSED. 8. IN NUTSHELL, THE REVENUES APPEAL STAND PARTLY A LLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS-OBJECTION STAND DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2018. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 12.09.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI