Assistant Commissioner of Income Tax Circle-4(1)(2), Bangalore V. M/s Manipal Intergrated Services Pvt Ltd , Bangalore

ITA 1365/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2397 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE S HRI JASON P BOAZ , ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER I.T . A. NO. 1365 /BANG/20 18 (ASSESSMENT YEAR : 20 14 - 15 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2), BAN GALORE. . APPELLANT. VS. M/S. MANIPAL INTEGRATED SERVICES PVT. LTD., NO.70, 3 RD FLOOR, GRACE TOWER, MILLER ROAD, BANGALORE - 560 052 . .. RESPONDENT. APPELLANT BY : DR. P. V. PRADEEP KUMAR, ADDL. CIT (D.R) R E SPONDENT BY : NONE. DATE OF H EARING : 27.08.2018. DATE OF P RONOUNCEMENT : 5 .9 .201 8 . O R D E R PER SHRI JASON P BOAZ , A .M . : THIS APPEAL BY THE REVENUE I S DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , BANGALORE DT.29.12.2017 FOR THE ASSESSMENT YEAR 20 14 - 15. SINCE NONE WAS PRESENT FO R THE ASSESSEE WHEN THE CASE WAS CALLED FOR HEARING, THIS APPEAL IS BEING DISPOSED OFF 2 IT A NO. 1365 /BANG/20 18 WITH THE ASSISTANCE OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR REVENUE AND THE MATERIAL ON RECORD. 2. BRIEFLY STATED, THE FACTS RELEVANT FOR DISPOSAL OF THESE AP PEALS ARE AS UNDER : - 2.1 THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROVIDING ENGINEERING, ASSET MANAGEMENT AND MAINTENANCE SERVICES TO HOSPITALS, THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2014 - 15 WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DT.5.8.2016, WHEREIN THE FOLLOWING ADDITIONS / DISALLOWANCES WERE MADE : - I) U/S.14A READ WITH RULE 8D RS.1,40,10,214 II) DISALLOWANCE OF INTEREST EXPENSES RS.2,42,92,562 2.2 AGGRIEVED BY THE AFORES AID ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2014 - 15, THE ASSESSEE FILED APPEALS BEFORE THE CIT (APPEALS) 4, BANGALORE CHALLENGING THE ADDITIONS / DISALLOWANCES MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R. W. RULE 8D. THE LEARNED CIT (APPEALS) VIDE THE IMPUGNED ORDER DT.29.12.2017 ALLOWED THE ASSESSEE PARTIAL RELIEF BY DELETING THE DISALLOWANCE MADE UNDER SECTION 14A R.W. 3 IT A NO. 1365 /BANG/20 18 RULE 8D(2)(II). THE LEARNED CIT (APPEALS), HOWEVER, UPHELD THE DISALLOWANCE OF RS.18.73,808 UNDER SECTION 14A R.W. RULE 8D(III). 3. REVENUE, BEING AGGRIEVED BY THE ORDERS OF THE CIT (APPEALS) 4, BANGALORE DT.29.12.2017 FOR ASSESSMENT YEAR 2014 - 15 HAS FILED THIS APPEAL BEFORE THE TRIBUNAL WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS : - 4. GROUNDS 1, 4 & 5 , BEING GEN ERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 4 IT A NO. 1365 /BANG/20 18 5. GROUNDS 2 & 3 - DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(2)(II) RS.1,21,36,406 . 5.1 IN THE GROUNDS RAISED (SUPRA), REVENUE ASSAILS THE ACTION OF THE LEARNED CIT (APPEALS) IN DELETING THE DISALLOWANCE OF RS.1,21,36,406 MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R.W. RULE 8D(2)(II). IT IS CONTENDED THAT LEARNED CIT (APPEALS) ERRED IN ALLOWING THE ASSESSEE S APPEAL ON THIS ISSUE BY CONTR AVENING THE PROVISIONS OF SEC. 14A OF THE ACT AND I N NOT FOLLOWING THE INSTRUCTIONS LAID DOWN IN CBDT S CIRCULAR NO.5/2014 DT.11.2.2014. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD AND HE PLACED STRONG SUPPORT ON THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 5.2.1 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR REVENUE AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(2)(II); WHICH IS THE ISSUE FOR CONSIDERATION BEFORE US. IT IS SEEN THAT IN THE CASE ON HAND THE ASSESSEE'S CONTENTION HAS ALL ALONG BEEN THAT INVESTMENT IN MUTUAL FUNDS AND SHARES HAVE BEEN OUT OF ITS OWN FUND AND NOT OUT OF INTEREST 5 IT A NO. 1365 /BANG/20 18 BEARING FU NDS; WHICH HAVE BEEN UTILIZED AND SPECIFICALLY INVESTED IN THE ASSETS FOR WHICH THEY HAD BEEN TAKEN. 5.2.2 ON A PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE LEARNED CIT (APPEALS), HAS IN PARA 7.1 THEREOF, CONSIDERED THE DISALLOWANCES MADE BY T HE ASSESSING OFFICER UNDER RULE 8D(2)(II); THE SUBMISSIONS OF THE ASSESSEE THEREON AND FINALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DELETING THE DISALLOWANCE OF RS.1,21,36,406 UNDER SECTION 14A R.W. RULE 8D(2)(II) HOLDING AS UNDER : - 6 IT A NO. 1365 /BANG/20 18 7 IT A NO. 1365 /BANG/20 18 IN BACKGROUND OF THE ABOVE DISCUSSION, FACTS & CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION ON THE ISSUE, THE DISALLOWANCE TO THE EXTENT OF RS.1,21,36,406 MADE ON ACCOUNT OF PROPORTIONATE INDIRECT INTEREST, CANNOT BE UPHELD. THE SAME IS ACCORDINGL Y DIRECTED TO BE DELETED. 5.2.3 WE ARE IN AGREEMENT WITH THE FINDINGS OF THE LEARNED CIT (APPEALS) (SUPRA) THAT THE ASSESSING OFFICER HAS ONLY MADE SOME GENERAL OBSERVATIONS ON THE FUND FLOW POSITION; BUT COULD NOT POINT OUT ANY SPECIFIC TR ANSACTIONS OR IDENTIFY ANY FUNDS FLOW, SPECIFICALLY LINKED TO 8 IT A NO. 1365 /BANG/20 18 DIVERSION OF INTEREST BEARING FUNDS TO SHARE INVESTMENT ACTIVITY. THE ASSESSING OFFICER HAS NOT CONTROVERTED THE ASSESSEE'S STATED POSITION THAT IT HAD SUFFICIENT OWN FUNDS AND RESERVES FOR INVESTMENT IN MUTUAL FUNDS AND SHARES AND THAT ITS INTEREST BEARING FUND WERE SPECIFICALLY INVESTED IN THOSE ASSETS FOR WHICH PURPOSE IT WAS TAKEN FOR NON - EXEMPT BUSINESS ACTIVITY WHICH IS NOT WITHIN THE PURVIEW OF SECTION 14A OF THE ACT. IN THE VIEW OF THE MATTER AND CONSIDERING THE FACTUAL MATRIX OF THE CASE ON HAND, WE FIND NO REASON TO INTERFERE WITH OR DEVIATE FROM THE FINDINGS OF THE LEARNED CIT (APPEALS) IN DELETING THE DISALLOWANCE OF RS.1,21,36,406 UNDER SECTION 14A R.W. RULE 8D(2)(II). CONSEQ UENTLY, GROUNDS RAISED BY REVENUE ARE DISMISSED. 6. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 2014 - 15 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5TH DAY OF SEPT., 201 8 . SD/ - ( LALIET KUMAR ) JUDICIAL MEMBER SD/ - ( JASON P BOAZ ) ACCOUNTANT MEMBER BANGALORE, DT. 05 .09.2018. *REDDY GP