RING PLUS AQUA LTD, MUMBAI V. DY CIT-CC-8(1), MUMBAI

ITA 1059/MUM/2021

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 07-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Tax effect; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S. RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No.1059/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2015-16) & आयकर अपील सं/ I.T.A. No.1062/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2013-14) & आयकर अपील सं/ I.T.A. No.1061/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2014-15) Ring Plus Aqua Ltd. D-3/4, Stice, Sinnar Shirdi Road, Musalgaon, Nashik- 422003, Maharashtra, India. बिधम/ Vs. DCIT, Central Circle-8(1) 6 th Floor, Aayakar Bhavan, Mumbai-400020. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AABCR3220M (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 12/09/2022 घोषणा की तारीख /Date of Pronouncement: 31/10/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-50, Mumbai dated 17.03.2021 for AY. 2013-14 to AY. 2015-16. 2. At the outset, both the parties agrees that there is only one (1) issues raised by the assessee in all the three (3) assessment years. And since the sole issue in all the three (3) appeals are the same except for the sum/figures, we take up the appeal of the assessee for AY. 2013-14 Assessee by: Shri Hitan Chande Revenue by: Smt. Mahita Nair (Sr. AR) ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 2 as the lead case and the decision of which will be followed in the other two (2) assessment years. 3. The grounds of appeal of the assessee for AY. 2013-14 is as under:- “1. On the facts and circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance made by Ld. AO u/s 14A of the Act amounting to Rs.23,40,879/-. The appellant prays that the said action of Hon’ble CIT(A) may please be held as bad-in- law and be deleted.” 4. Brief facts, the assessee has received exempt dividend income to the tune of Rs.53,50,483/- and the AO asked the assessee as to why the disallowance u/s 14A of the Income Tax Act, 1961 (hereinafter “the Act”) r.w. Rule 8D of the Income Tax Rule, 1962 (hereinafter “the Rules”) be not resorted to disallow the expenditure incurred for earning the exempt income. Even though, the assessee brought to the notice of the AO that it has suo-motto disallowed Rs.61,738/- u/s 14A of the Act and claimed that no other expenditure was incurred for earning the exempt income, but the AO did not accept the claim of the assessee. Therefore, he computed the disallowance under Rule 8D of the Rules. And the AO disallowed 0.5% of Rs.48,05,23,500/- (Rule 8D (2)(iii) of the Rules) i.e. Rs.24,02,617/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the same by holding as under: - ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 3 “6.4.4 The appellant has submitted that they have not incurred any direct expenditure in relation to earning dividend income and they have not incurred any interest expenditure which is attributable to exempt income. In this respect it is found that the Ld. AO has not made any disallowance on account of direct expenditure under Rule 8D(2)(i) and has not made any disallowance out of interest expenses under Rule 8D(2)(ii). So the appellant cannot have any grievance on these accounts 6.4.5 The appellant has also submitted that the Ld.CIT(A) in appellant's own case for AY. 2012-13 has allowed relief to the appellant on identical facts of the case and placed reliance on the same. From perusal of the said decision of the Ld.CIT(A) in appellant's own case for AY 2012-13, it is observed that therein he has not considered the above referred decisions of the Hon'ble Gujarat High Court in the case of Devarsons Industries P Ltd, reported in 84 taxmann.com 244 and that of the Hon'ble Punjab & Haryana High Court in the case of Punjab Tractors Ltd reported in 78 taxmann.com 65. Further, the Ld CIT(A) in AY. 2012-13 had given considerable emphasis on the issue that the provisions of sec 14A rw Rule 8D cannot be invoked in respect of investments which are strategic in nature. However, the Hon'ble Supreme Court in above referred case of Maxopp Investment Ltd vs CIT reported in 402 ITR 640 has held that the dominant purpose of investment is of no consequence for applicability of provisions of section 14A r.w. Rule 8D. In view of the above discussions, with due respect to my Ld Predecessor, it is held that the decision ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 4 rendered by him in A.Y. 2012-13 in appellant's own case cannot be followed. 6.4.6 Further, the appellant has submitted that only such investments should be considered which have yielded exempt income during the year, while computing disallowance u/s 14A of the Act and has placed reliance on the above referred decision of the Hon'ble ITAT, Mumbai in the case of DCIT vs Anand Rathi Capital Advisors P Ltd. In this respect, it is pertinent to note that neither before the Ld. AO nor before the undersigned has the appellant submitted scrip/security wise details of exempt income earned during the year and investment made in such scrips/security. Further, the Hon'ble ITAT, Mumbai has rendered the said decision in the case of DCIT vs Anand Rathi Capital Advisors P Ltd in ITA No. 7472/Mum/2016 on 03.01.2018 and hence had no occasion to consider the above referred decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd, which was rendered on 12.02.2018, i.e. subsequent to said decision of the Hon'ble Mumbai Tribunal. In view of above discussions, the various contentions raised by the appellant in this respect are herewith rejected. Therefore, the disallowance computed by the Ld. AO u/s 14A of the Act Rs.7,25,580/- is CONFIRMED. Accordingly, the Ground No.1 raised in appeal is DISMISSED.” 5. Aggrieved by the aforesaid action of Ld CIT(A), the assessee is before us. ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 5 6. We have heard both the parties and perused the records. We note that the assessee had earned exempt income to the tune of Rs.53,50,483/- and disallowed suo-motto Rs.61,738/- for earning the exempt income. The AO applying the Rule 8D(2)(iii) of the Rules has disallowed Rs.24,02,617/-. On appeal, the Ld. CIT(A) dismissed the appeal of the assessee. Aggrieved, by the action of the Ld. CIT(A), the assessee is before us. 7. Before us, the assessee contention was based on the decision/ratio of this Tribunal in the case of DCIT Vs. Anand Rathi Capital Advisor Pvt. Ltd. (ITA. No.7472/Mum/2016 dated 03.01.2018) wherein the Tribunal held that while applying Rule 8D(2)(iii) of the Rule, 0.5% of the investment which have yielded exempt income during the year should only be considered. However, it is noted that the Ld. CIT(A) refused to deal with this preposition on the ground that the assessee failed to submit the details of the scrips/security wise investment which yielded the exempt income during the year. Further, according to the Ld. CIT(A), the decision of the Tribunal (Anand Rathi Capital Advisor Pvt. Ltd.) (supra) was rendered before the decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. (order dated 12.02.2018). Therefore, the Ld. CIT(A) refused to look into the validly of the claim made by the assessee on the strength of decision of this Tribunal in Anand Rathi Capital Advisor Pvt. Ltd. (supra). ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 6 8. However, before us, the assessee has spelled out the details of the scrips/securities and the amount invested by it from which the assessee has earned the exempt income. From the details submitted we note that the assessee has received exempt income only from two (2) scripts i.e. M/s. Ring Plus Aqua Ltd. and M/s. Birla Sunlife Income Fund and brought to our notice the following relevant facts in respect of investment from these scrips which are as under: - AY Suo-moto disallowance u/s 14A (3% of CTC of finance dept) Further u/s 14A r.w.r 8D(2)(iii) vide AO Tax effect Exempt income Average value of investment Further disallowance actual Further disallowance u/s 14A Relief in 14A disallowance Tax effect 2013-14 61.738 2,340,879 759,498 5,350,483 480,523,500 96,339,369 419,959 1,920,920 614,691 2014-15 61.738 1,578,610 512,180 5,256,511 328,069,500 77,932,993 327,927 1,250,683 400,219 2015-16 61.738 663,842 215,384 3,729,010 145,916.00 38,380,624 130,165 533,677 170,777 Total 4,583,331 1,487,062 878,051 3,705,280 1,185,690 No disallowance made u/s 14A r.w.s 8D(2)(iii) Value of Investments deriving exempt income Particular As on 1.4.2012 As on 31.3.2013 As on 31.3.2014 As on 31.3.2015 Birla Sunlife Income Fund (Daily Dividend plan) Exempt income record as AY. 2013-14 AY. 2014-15 AY. 2015-16 - Saraswat Co-op Bank Ltd. Exempt Income record in AY. 2014- 15 - Total 113,664,000 79,034,738 76,831,248 - 9. The Ld. AR also brought to our notice that the aforesaid details were brought to the notice of the AO and Ld. CIT(A) during the proceedings before them. Any way the aforesaid fact can be verified ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 7 by AO, while computing the disallowance under Rule 8D(2)(iii) of the Rules. 10. Coming to the contention of the Ld. CIT(A) that the decision of the Tribunal in the case of (Anand Rathi Capital Advisor Pvt. Ltd. (supra) was rendered before the decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. (supra), we are of the opinion that the Ld. CIT(A)’s contention is misplaced. Rather than discarding the decision of the Tribunal in Anand Rathi Capital Pvt. Ltd. after the decision of the Hon’ble Supreme Court Maxopp Investment Ltd. (supra), the Ld. CIT(A) ought to have stated the reason for saying so. Unfortunately, Ld. CIT(A) has not made any attempt to do so and has whimsically discarded the case law, which action of Ld CIT(A) cannot be countenenced. The Ld. DR before us, could not point out any observation/discussion of the Hon’ble Supreme Court in Maxopp Investment Ltd. (supra), (be it obitor or ratio) which could upset the ratio of the decision of this Tribunal in Anand Rathi Capital Pvt. Ltd. Therefore, we direct the AO to consider only the investment from which assessee yielded exempt income while computing disallowance under Rule 8D(2)(iii) of the Rules. 11. Therefore, in the light of the aforesaid discussion, we set aside the impugned order of the Ld. CIT(A) and restore the issue back to the file of the AO with the limited direction to verify whether the assessee’s working of investments yielding exempt income is correct ITA Nos. 1059, 1061 & 1062/Mum/2021 A.Ys. 2013-14 to 2015-16 Ring Plus Aqua Ltd. 8 or not i.e. 0.5% of the investment from which assessee yielded exempt income. And if it is found to be correct then no more disallowance is required as per Rule 8D(2)(iii) of the Rules. In the light of the aforesaid action for AY. 2013-14, the same action would be applicable mutatis mutandis to other two appeals i.e. for AY. 2014-15 & AY. 2015-16. 12. In the result, all the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on this 31/10/2022. Sd/- Sd/- (S. RIFAUR RAHMAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 31/10/2022. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai