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

ITA 1336/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2439 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Assessee Lawyers: MRS HIRVA SHAH
• Keywords: Earning of tax free income
• Section: 143(3); 153A; 14A; 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER. ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRLE 8(3), ROOM NO.659, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ... APPELLANT VS. M/S. JSW ENERGY LIMITED, JSW CENTRE, BANDRA KURLA COMPLEX, BANDRA(E),MUMBAI 400 051. PAN: AAACJ 8109N .... RESPONDENT APPELLANT BY : SHRI B.C.S. NAIK RESPONDENT BY : MRS. HIRVA SHAH DATE OF HEARING : 19/07/2016 DATE OF PRONOUNCEMENT : 22/07/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAININ G TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 47, MUMBAI DATED 24/12/2014, WHICH IN TURN ARISES OUT OF AN ORDER DATED 28/03/2013 PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 2 ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESS ING OFFICER TO RESTRUCT THE DISALLOWANCE U/S. 14A R.W. RULE 8D AT RS. 6,93, 26,005/- INSTEAD OF RS. 105,83,54,495/-.' 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITION WORKED OUT U/S.14A R.W. RULE 8D OF THE ACT WHILE CO MPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT RELYING ON THE DECISION OF HON'BLE ITAT IN THE ASSESSEE'S OWN BASE FOR AY 2006 -07 IGNORING THE FACT THAT THE DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN FILED IN HON'BLE HIGH COURT WHICH I S PENDING. ' 3. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT THE ISSUES RAISED IN THE AFORESTATED G ROUNDS HAVE BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FO R EARLIER ASSESSMENT YEARS. SO HOWEVER, IN ORDER TO IMPART COMPLETENES S TO THE ORDER, THE FOLLOWING DISCUSSION IS RELEVANT. THE FACTS IN BRIE F ARE THAT THE RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, AND IS, INTER-ALIA, ENGAGE D IN THE BUSINESS OF POWER GENERATION. IN THE IMPUGNED ASSESSMENT FINALI ZED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT, THE ASSESSING OFFICE R HAS MADE SEVERAL ADDITIONS/DISALLOWANCES, WHICH WERE SUBJECT MATTER OF DISPUTE BEFORE THE CIT(A). ONE OF THE ISSUES RELATED TO DISALLOWA NCE OF RS.105,83, 54,495/- MADE BY INVOKING THE PROVISIONS OF SECTIO N 14A OF THE ACT. THE ASSESSING OFFICER NOTED THAT ASSESSEE COMPANY H AD MADE INVESTMENT, WHICH WOULD YIELD EXEMPT INCOME. IT WA S FURTHER NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SUO-MOTU DISALLOWED A SUM OF RS.6,93,26,005/- U/S.14A OF THE ACT, WHICH A CCORDING TO HIM WAS NOT IN COMPLIANCE WITH THE DISALLOWANCE COMPUTABLE IN TERMS OF RULE 8D OF THE INCOME TAX RULES, 1962 ( IN SHORT THE RU LES). AS A CONSEQUENCE, THE ASSESSING OFFICER DETERMINED THE D ISALLOWANCE UNDER 3 ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) SECTION 14A OF THE ACT BY APPLYING RULE 8D(2) OF TH E RULES OF RS.105,83, 54,495/-. 4. BEFORE THE CIT(A), ASSESSEE MADE VARIED SUBMISSI ONS ON FACTS AND IN LAW. ULTIMATELY, THE CIT(A) NOTICED THAT IN THE PRESENT YEAR, ASSESSEE HAD NOT RECEIVED DIVIDEND OR ANY OTHER INCOME WHICH WAS EXEMPT FROM TAX AND, THEREFORE, NO DISALLOWANCE COULD BE M ADE IN THE INSTANT YEAR BY INVOKING SECTION 14A OF THE ACT. SO HOWEVE R, THE CIT(A) ALSO NOTICED THAT SINCE ASSESSEE HAD MADE SUO-MOTU DISAL LOWANCE OF RS.6,93,26,005/- UNDER SECTION 14A OF THE ACT IN TH E RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF T HE ACT, HE DIRECTED THE ASSESSING OFFICER TO RETAIN SUCH DISALLOWANCE O N THE GROUND THAT THE CORRESPONDING EXPENDITURE COULD NOT BE SAID TO BE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. AGAINST THE DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US CONTENDING T HAT THERE IS NO JUSTIFICATION TO REDUCE THE DISALLOWANCE TO RS.6,9 3,26005/- INSTEAD OF RS.105,83,54,495/- WHICH WAS DETERMINED BY THE ASSE SSING OFFICER UNDER SECTION 14A OF THE ACT BY APPLYING RULE 8D OF THE RULES . 6. AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR T HE ASSESSEE POINTED OUT THAT SO FAR AS ASSESSMENT YEAR 2008-09 IS CONCERNED, THE TRIBUNAL VIDE ITA NO. 463/MUM/2014 & 982/MUM/2013 D ATED 31/7/2015, OBSERVED THAT THE DISALLOWANCE UNDER SEC TION 14A OF THE ACT IS OF NO SIGNIFICANCE, INASMUCH AS, IT WOULD ONLY L EAD TO ENHANCEMENT OF THE PROFITS OF ASSESSEES ELIGIBLE BUSINESS OF GEN ERATION OF POWER AND SUCH ENHANCED PROFITS WOULD BE ELIGIBLE FOR THE BE NEFITS UNDER SECTION 80IA OF THE ACT. ACCORDING TO THE LD. REPRESENTATI VE FOR THE ASSESSEE, 4 ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) SIMILAR SITUATION IS VERY MUCH APPLICABLE IN THE IN STANT YEAR ALSO AND, THEREFORE, THE ULTIMATE CONCLUSION OF THE CIT(A) DE SERVES TO BE UPHELD. 6. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT CONT ESTED THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIV E FOR THE ASSESSEE. APART THEREFROM, IN OUR VIEW, THE DECISION OF THE CIT(A) THAT IN THE ABSENCE OF ANY DIVIDEND OR ANY OTHER EXEMPT INCOM E RECEIVED IN THE INSTANT YEAR, NO DISALLOWANCE UNDER SECTION 14A O F THE ACT IS MERITED, IS VERY MUCH APT, AS IT IS IN LINE WITH THE JUDGME NT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. C IT, 378 ITR 33 (DEL). THUS, WE HAVE NO HESITATION IN APPROVING THE STAN D OF THE CIT(A) ON THIS ASPECT. IN ANY CASE, SO FAR AS THE DECISION OF THE CIT(A) IN RETAINING THE SUO-MOTU DISALLOWANCE MADE BY THE ASSESSEE IS CONCERNED, TH E SAME IS NOT AN ISSUE BEFORE US. THUS, WE HEREBY A FFIRM THE ORDER OF THE CIT(A) ON THE ASPECT AGITATED BY THE REVENUE. AS A CONSEQUENCE, REVENUE FAILS IN GROUND OF APPEAL NO.1. 7. IN SO FAR AS THE SECOND GROUND IS CONCERNED, T HE SAME RELATES TO COMPUTATION OF BOOK PROFIT IN TERMS OF SECTION 11 5JB OF THE ACT. THE ASSESSING OFFICER, WHILE COMPUTING BOOK PROFIT UNDE R SECTION 115JB, ADDED THE AMOUNT OF DISALLOWANCE COMPUTED UNDER SEC TION 14A OF THE ACT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING O FFICER THAT THERE WAS NO JUSTIFICATION FOR TAKING INTO CONSIDERATION THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE CIT(A) HAS DISAGREED WITH TH E STAND OF THE ASSESSING OFFICER ON TWO COUNTS FIRSTLY, ACCORDING TO THE CIT(A), IN ASSESSMENT YEAR 2006-07, THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.244/BANGA/2010 DATED 22/2/2013 HAS CONSIDERED A SIMILAR ISSUE 5 ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) AND UPHELD THE STAND OF THE ASSESSEE FOLLOWING AN E ARLIER DECISION OF THE TRIBUNAL IN THE CASE OF ESSAR TELEHOLDINGS LTD. VS. DCIT, ITA NO.3850/MUM/2010 DATED 27/07/2011. SECONDLY, THE C IT(A) NOTICED THAT IN THIS YEAR, ASSESSEE HAS NOT EARNED ANY EXE MPT INCOME AND, THEREFORE, NO SUCH INCOME WAS CREDITED TO THE P&L A CCOUNT. AS A CONSEQUENCE, NO CORRESPONDING EXPENDITURE CAN BE ID ENTIFIED AND, THUS, THE PROVISIONS WERE UNWORKABLE. IN THIS MA NNER, THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN DELETED. 8. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 DATED 22/2/2013(SUPRA) WHICH HAS RELIED UPO N BY THE CIT(A), CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTE RED BY ANY HIGHER AUTHORITY. AS A CONSEQUENCE, WE FIND NO ERROR ON T HE PART OF THE CIT(A) IN RELYING UPON THE PRECEDENT AND DELETING THE IMPU GNED ADDITION. MOREOVER, EVEN THE FACTUAL ASPECT BROUGHT OUT BY TH E CIT(A) IS UNEXCEPTIONAL AND DESERVES TO BE UPHELD. WE HOLD S O. THUS, ON GROUND OF APPEAL NO.2 ALSO, THE DECISION OF THE CIT (A) IS AFFIRMED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22/07/2016 SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI, DATED 22/07/2016 VM , SR. PS 6 ITA NO. 1336 /MUM/2015 (ASSESSMENT YEAR : 2010-11) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI