DCIT CEN CIR 8(3) ERSTWHILE DCIT CC 46, MUMBAI V. JSW ENERGY LTD, MUMBAI

ITA 1335/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9107 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Keywords: Search and seizure; Earning of tax free income; Capital expenditure
• Section: 153A; 14A; 132

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -IBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./1335/MUM/2015, / ASSESSMENT YEAR: 2009-10 DY. CIT-CENTRAL CIRCLE-8(3) ROOM NO.659, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. JSW ENERGY LIMITED JSW CENTRE, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400051. PAN:AAACJ 8109 N ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI B.C.S NAIK-CIT-DR /ASSESSEE BY: SHRI RAKESH JOSHI / DATE OF HEARING: 10/11/2016 / DATE OF PRONOUNCEMENT: 06/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 17/03/2015,OF THE CIT ( A)-47,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-C OMPANY, ENGAGED IN THE BUSINESS OF GENERATION OF POWER AND OPERATION AND MAINTENANCE O F POWER PLANTS,FILED ITS RETURN OF INCOME ON 30/09/2009, DECLAR -ING INCOME OF RS. 3.17 CRORE S.TAXABLE INCOME WAS RELATED U/S.115 JB AT RS.6,66,76, 27,404/-.A SEARCH AND SEIZURE ACTION WAS CARRIED OUT UNDER SECTION 132 OF THE ACT IN JSW GROUP OF CASES ON 16/03/2011.DURING THE COURSE OF SEARCH BOOKS OF ACCOUNTS AND DOCUMENTS BELONGING TO THE ASSESSEE WERE SEIZED.THE REFORE NOTICE UNDER SECTION 153A WAS ISSUE TO IT ON 24/10/2011.IN RESPONSE TO THE SAID N OTICE, IT FILED RETURN OF INCOME ON 29/01/2011 DECLARING TOTAL INCOME OF RS.3.17 CRORES AND OF RS. 666.76 CRORES U/S.115JB. 2. FIRST GROUND OF APPEAL IS ABOUT DELETING THE ADDITI ON MADE ON ACCOUNT OF CAPITALISATION OF RS. 68.15 LAKHS IN RESPECT OF CONTRACT AWARDED TO G REMACH INFRASTRUCTURE EQUIPMENTS AND PROJECTS LTD.(GIEPL).THE AO OBSERVED THAT DURING TH E AY.2008-09,THE ASSESSEE HAD CLAIMED TO HAVE ENGAGED THE SERVICES OF GEIPL FOR EXHIBITIN G PART OF ITS PROJECTS, THAT IT HAD BEEN HELD DURING THAT YEAR THAT NO WORK HAD BEEN DONE BY GEIP L IN RESPECT OF THE CONTRACT AWARDED,THAT NO WORK COULD BE EXECUTED,THAT THE PAYMENT MADE BY THE ASSESSEE COULD NOT BE CONSIDERED FOR PURPOSE OF BUSINESS,THAT CAPITAL EXPENDITURE OF RS. 68.15 LAKHS CLAIMED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION COULD NOT BE ALLOWED. 1335/M/15 JSW ENERGY LTD. 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED T HAT IT HAD NEITHER INCURRED NOT CLAIM ANY EXPENDITURE FOR THE YEAR UNDER CONSIDERATION,THAT T HE AO WAS NOT JUSTIFIED IN DISALLOWING THE SAME,THAT EXPEN -DITURE WAS INCURRED BY A SUBSIDIAR Y COMPANY OF THE ASSESSEE WHICH AMALGAMATED WITH IT WITH EFFECT FROM 01/04/2010. HE REFERRED TO HIS ORDER FOR THE AY. 2008- 09 AND STATED THAT THE MATTER PERTAINED TO CAPITALI SATION OF AN EXPENDITURE WITH REGARD TO PAYMENT MADE TO GEIPL BY JSW ENERGY(RATNAGIRI)LTD.( JSWERL),THAT IT WAS A SUBSIDIARY OF THE ASSESSEE AND THE AMOUNT IN QUESTION WAS INCLUDE D IN THE CAPITAL WORK IN PROGRESS,THAT JS GOT MERGED WITH THE ASSESSEE WITH EFFECT FROM 01/04 /2010 VIDE AN SCHEME OF ARRANGEMENT APPROVED BY HONORABLE BOMBAY HIGH COURT ORDER DATED 24/09/2010 THAT DURING THE SEARCH AND SEIZURE PROCEEDINGS CARRIED OUT IN THE CASE OF ASSESSEE GROUP CERTAIN PAPERS WERE FOUND ABOUT THE CONTRACT GIVEN TO GEIPL, THAT THE AO OF T HAT COMPANY HAD DISALLOWED A SUM OF RS. 33.84 LAKHS FOR THE AY. 2008-09 AND BALANCE AMOUNT OF RS. 68.15 LAKHS FOR THE AY. 2009-10 CLAIM UNDER THE HEAD CAPITAL EXPENDITURE. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) SUPP ORTED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE (AR) STATED THAT ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN ITS BOOKS OF ACCOUNTS, THAT DISPUTED AMOUNT WAS DISALLO WED IN THE CASE OF JSWERL, THAT DURING NOT MADE BY AN ASSESSEE COULD NOT BE DISALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD NOT CLAIMED THE EXPENDITURE IN QUESTIO N IN ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER APPEAL.FOR DISALLOWING ANY EXPENSE,THE AO SHO ULD FIRST PROVE THE INCURRING AND CLAIMING OF OF THE SAID EXPENDITURE IN THE REGULAR BOOKS OF ACCOUNTS.BUT, WITHOUT ESTABLISHING THE BASIC FACT THAT THE ASSESSEE HAD CLAIMED THE EX PENDITURE,THE AO HAD MADE THE DISALLOWANCE.THE EXPENDITURE WAS INCURRED BY AN ERS TWHILE ENTITY NAMELY JSWERL AND CERTAIN DISCREPANCIES WERE NOTICED ABOUT THE TRANSA CTION.SO,IF ANY DISALLOWANCE WAS TO BE MADE,IT SHOULD HAVE BEEN IN THE HANDS OF THAT ASSE SSEE OR IT SHOULD HAVE BEEN IN THE CASE OF SUCCESSOR OF JSWERL.THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT BEFORE THE AMALGAMATION WITH JSWERL,THE ASSESSEE HAD NO CONNEC TION WITH THAT ENTITY,THAT EXPENDITURE WAS CLAIMED BY THAT COMPANY AND WAS DISALLOWED BY T HE AO OF THAT COMPANY WHILE COMPLETING THE ASSESSMENT FOR THE AY.S 2008-09 AND 2009-10,THAT THE AO HAD WRONGLY DISALLOWED THE EXPENDITURE IN THE HANDS OF THE ASSE SSEE.THUS, THERE WAS NO JUSTIFICATION FOR MAKING ANY ADDITION IN THE CASE OF THE ASSESSEE.IN OUR OPINION,THERE IS NO LEGAL OR FACTUAL 1335/M/15 JSW ENERGY LTD. 3 INFIRMITY IN THE ORDER OF THE FAA.SO,CONFIRMING HIS ORDER,WE DECIDE FIRST GROUND OF APPEAL AGAINST THE AO. 6. SECOND GROUND PERTAINS TO RESTRICTING THE DISALLOWA NCE,MADE U/S.14A OF THE ACT,TO RS.13.59 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOU ND THAT THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE U/S.14A OF THE ACT IN THE ORIGINAL RET URN OF INCOME,THAT IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A,IT HAD DISALLOWED RS.13 .59 LAKHS WITHOUT APPLYING RULE 8D OF THE RULES.HOWEVER, THE AO ENHANCED THE DISALLOWANCE RS. 59,34,74, 860/. 7. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA,THE ASSESSEE ARGUED THAT NO ASSESSMENT WAS COMPLETED U/S.143 (3) FOR THE YEAR UNDER CONSID ERATION, THAT THE AO HAD NOT GIVEN ANY FINDING AS TO HOW THE AMOUNT DISALLOWED BY THE ASSE SSEE WAS NOT ACCEPTABLE TO HIM WHILE APPLYING PROVISIONS OF SECTION 14A READ WITH RULE 8 D, THAT IT HAD SUBMITTED THE COMPLETE WORKING OF THE BASIS OF AMOUNT DISALLOWED UNDER SEC TION 14A ALONG WITH SUPPORTING DOCUMENTS/EVIDENCES, THAT THE AO WITHOUT REFERRING TO THE DETAILS APPLIED RULE 8D THAT SATISFACTION OF THE AO IS TO THE INCORRECT CLAIM MA DE BY THE ASSESSEE IN THIS REGARD WAS PRECONDITION FOR INVOKING THE APPLICA -BILITY OF RU LE 8D.THE ASSESSEE MADE A REFERENCE TO CERTAIN CASE-LAWS AND ARGUED THAT THE DIRECT INTERE ST EXPENSES INCURRED BY THE ASSESSEE HAD ALREADY BEEN DISALLOWED BY THE ASSESSEE IN ITS RETU RN OF INCOME, THAT NO FURTHER INTEREST DISALLOWANCE COULD BE MADE ON ACCOUNT OF ANY OTHER INDIRECT INTEREST EXPENDITURE. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE, THE FAA HELD THAT THE ARGUMENTS ADVANCED BY IT REGARDING TO NON- APPLICABILITY OF SECTION 14 A READ WITH RULE 8D ON THE GROUND OF STRATEGIC INVESTMENT IN SU BSIDIARIES WERE ADVANCED IN APPEAL PROCEEDINGS IN AY. 2008-09 UNDER IDENTICAL FACTS AN D CIRCUMSTANCES AND WERE FOUND TO BE NOT ACCEPTABLE, THAT IF THE DIRECT INTEREST EXPENDITURE WITH REGARD TO INVESTMENT WAS IDENTIFIABLE THERE WAS NO REASON TO INVOKE RULE 8D(II) FOR PROPO RTIONATE DISALLOWANCE IF THERE WAS NO EVIDENCE THAT MIX FUNDS HAD BEEN UTILISED FOR INVES TMENTS,THAT THE SUBMISSION OF THE ASSESSEE WAS CONSIDERED FOR THE AY. 2008-09 AND A FINDING WA S GIVEN THAT THE INVESTMENTS HAD NOT BEEN MADE FROM MIXED FUNDS AND THAT THERE WAS NO IN DIRECT INTEREST ATTRIBUTABLE TO INVESTMENTS,THAT NO DISALLOWANCE U/S.14 A COULD BE MADE IN THE FACTS OF A CASE WHERE NO EXEMPT INCOME WAS RECEIVED AND CLAIMED BY AN ASSESS EE, THAT FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE YEAR ENDING ON 31/03/2009 T HE ASSESSEE HAD NOT RECEIVED ANY DIVIDEND FOR OTHER INCOME WHICH COULD BE CLAIMED AS EXEMPT U NDER ANY PROVISION OF THE ACT, THAT NO DISALLOWANCE WAS REQUIRED TO BE MADE DURING THE YEA R UNDER APPEAL, THAT THE ASSESSEE ITSELF 1335/M/15 JSW ENERGY LTD. 4 HAD MADE A DISALLOWANCE OF RS. 13.59 LAKHS IN THE R ETURN FILED BY IT. HE DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO THE SUM IDENTIFIED AND DISALLOWED BY THE ASSESSEE ITSELF. 8. THE DR RELIED UPON ORDER OF THE VIEW AND THE AR SUP PORTED THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE AVAILAB LE MATERIAL. WE FIND THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME FOR THE YEAR UNDER CON SIDERATION, THAT IT HAD MADE THE DISALLOWANCE OF RS.13.59 LAKHS ON ITS OWN,WHILE FIL ING THE RETURN OF INCOME,THAT THE AO HAD MADE FOR THE DISALLOWANCE UNDER THE HEADS INTEREST EXPENDITURE AND ADMINISTRATIVE EXPENDITURE,THAT THE AO HAD NOT GIVEN ANY REASON FO R REJECTING THE CLAIM MADE BY THE ASSESSEE.IT IS A SETTLED PRINCIPLE THAT DISALLOWANC E U/S.14 A COULD BE MADE,ONLY IF THE ASSESSEE CLAIMS EXPENDITURE AGAINST THE EXEMPT INCOME.THEREF ORE,WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE FAA.CONFIRMING THE SAME,WE DECIDE SECO ND GROUND AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2017. 06 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.