DCIT 4(1)(1), MUMBAI V. ENAM SHARES AND SECURITES P.LTD, MUMBAI

ITA 154/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8989 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: RAJNIKANT CHANIYARI
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

1 ITA NO.154/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.154/MUM/2016 (ASSESSMENT YEAR 2011-12) THE DCIT-4(1)(1), MUMBAI VS M/S ENAM SHARES AND SE CURITIES PVT LTD 24 BD, RAJABAHADUR AMBALAL DOSHI MARG, FORT, MUMBAI-400 023 PAN : AAACE5146N APPELLANT RESPONDEDNT APPELLANT BY SHRI RAM TIWARI RESPONDENT BY SHRI RAJNIKANT CHANIYARI DATE OF HEARING 24-10-2017 DATE OF PRONOUNCEMENT 27-10-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-9, MUMBAI DATED 07-10-2015 AND IT PERTAINS TO AY 2011- 12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 29-09-2011 DECLARING TOTAL INCOME OF RS.1,10,63,023. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 19-02-2014 DETERMINING THE TOTAL INCOME AT RS.11,79,90,675 AFT ER MAKING CERTAIN DISALLOWANCES INCLUDING DISALLOWANCE U/S 14A OF THE I.T. ACT, 1961. THE AO ALSO 2 ITA NO.154/MUM/2016 MADE SIMILAR ADJUSTMENTS TO BOOK PROFIT COMPUTED UN DER THE MAT PROVISIONS OF INCOME-TAX ACT, 1961. AGGRIEVED BY THE ASSESSME NT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 2. BEFORE THE CIT(A), ASSESSEE CONTENDED THAT THE AO W AS ERRED IN MAKING ADJUSTMENTS TOWARDS BOOK PROFIT COMPUTED UNDER THE PROVISIONS OF SECTION 115JB OF THE INCOME-TAX ACT, 1961 IN RESPECT OF DIS ALLOWANCE MADE U/S 14A OF THE INCOME-TAX ACT, 1961. THE CIT(A), AFTER CONSID ERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO BY RELYING UPON THE DECISI ON OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.711/ MUM/2012 DELETED ADDITION MADE BY THE AO TOWARDS DISALLOWANCE U/S 14 A AND ALSO DIRECTED THE AO TO COMPUTE THE BOOK PROFIT U/S 115JB AS PER THE DIRECTION OF ITAT. THE RELEVANT PORTION OF THE ORDER OF CIT(A) IS EXTRACTE D BELOW :- 5.4. DECISION: I HAVE CONSIDERED THE STAND OF THE AO AS WELL AS SU BMISSIONS OF THE APPELLANT. I HAVE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE. ALL THE GROUNDS OF APP EAL TAKEN TOGETHER IS OF ONLY ONE ISSUE I.E. REGARDING DISALL OWANCE U/S 14A AND FURTHER RE- COMPUTATION OF INCOME U/S 115JB OF I.T. ACT, 1961. I FIND THAT THE ISSUE OF DISALLOWANCE TO BE M ADE U/S. 14A OF THE ACT AND ITS IMPACT ON SECTION 115JB HAS BEEN DELIBE RATED UPON BY THE VARIOUS BENCHES OF THE TRIBUNAL IN THE CASES RELIED UPON BY THE AR. IN THE MATTER OF RADHA MADHAV INVESTMENT LTD. (SUPRA) THE ISSUE HAS BEEN DECIDED AS UNDER: '2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL BEFORE US. WE FIND THAT ISSUE OF DISALLOWA NCE ULS.14A OF THE ACT WHILE CALCULATING BOOK PROFITS U LS. 1151B OF THE ACT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE H 3 ITA NO.154/MUM/2016 TRIBUNAL IN THE CASES REFERRED ABOVE BY THE AR. WE FIND THAT FOLLOWING DECISIONS OF THE GOETZE INDIA LTD. (SUPRA ) 'K BENCH OF MUMBAI TRIBUNAL IN THE CASE OF RELIANCE INDUSTRI ES LTD. (SUPRA) HAS HELD THAT PRINCIPAL OF APPORTIONME NT AS PROVIDED ULS. J 4A SHOULD NOT BE APPLIED WHILE COMP UTING THE BOOK PROFIT ULS. 1151B OF THE ACT. 'IN SO FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENS ES U/S 14A OF THE ACT IS CONCERNED FOR EARNING EXEMPT INCO ME OFRS. 345,69,24,6961-, WE ARE OF THE CONSIDERED VIE W THAT BY FOLLOWING THE ORDER OF ED. CIT(A) FOR THE P RECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2002-03, IT WI LL BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO 1 % OF THE EXEMPT INCOME WHICH WORKS OUT TO RS. 3,45,69,25 01-, HOWEVER, IN REGARD TO DISALLOWANCE U/S 14A FOR COMP UTING BOOK PROFIT U/S 1 15JB OF THE ACT, WE OBSERVE THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF RELIANCE INDUSTRIAL INFRASTRUCTURE LTD VIS ADD!. CIT IN [TA NOS. 69 AND 701MUM12009 (AY- 2005-06 AND 2006-07) AND TRIBUNAL VIDE ORDER DATED 5.4.2013 AFT ER FOLLOWING THE DECISION OF DELHI BENCH OF TRIBUNAL I N GOETZE (INDIA) LTD (32 SOT 101) (DEL) AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN MIS BENGAL FINANCE AND INV ESTMENT P. LTD. IN [TA NO. 56201/MUM/2010, DATED 31.07.2012 HAS HELD THAT WHILE COMPUTING BOOK PROFIT U/S 1151B OF THE ACT, PROVISIONS OF SECTION 14A CANNOT BE IMPORTED. THEREFORE, AMOUNT DISALLOWED WS 14A OF THE ACT CANNOT BE CONSIDERED WHILE COMPUTING BOOK PROFIT U/S 1151B OF THE ACT. ACCORDINGLY, THE ISSUE WAS DECIDED IN FAVOUR O F THE ASSESSEE. IN VIEW OF ABOVE GROUND NO.4 OF THE APPEAL TAKEN BY THE ASSESSEE IS ALLOWED IN PART BY RESTRICTING THE DISA LLOWANCE TO RS. 3295590- TOWARDS ADMINISTRATIVE AND GENERAL EXPENSES U/S 14A OF THE ACT TOWARDS EARNING OF EXEM PT INCOME U/S 10(34) & U/S 10(38) OF THE ACT WHILE COM PUTING TOTAL TAXABLE INCOME UNDER THE NORMAL PROVISIONS OF ACT. HOWEVER, NO DISALLOWANCE UNDER SECTION 14A BE CONSI DERED WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. CONSEQUENTLY, GROUND NO.4 TAKEN BY THE DEPARTMENT I S REJECTED. FOLLOWING THE ABOVE GROUND NO-3 IS DECIDED IN FAVOU R OF THE ASSESSEE. 4 ITA NO.154/MUM/2016 THE ABOVE ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE APPELLANT COMPANY IN ITS OWN CASE IN A.Y 2008-09 BY THE TRI BUNAL VIDE ITA NO 711/MUM/2012 WHERE THE HONBLE MUMBAI HAS RELIED O N THE JUDGEMENTS REFERRED ABOVE AND HAS HELD AS UNDER: 'RESPECTFULLY, FOLLOWING THE ABOVE MENTIONED DECISI ONS AT PARAGRAPH 4 OF THE ORDER, WE REVERSE THE ORDER OF T HE FAA AND DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE.' THE SUBSTANTIAL GROUND OF APPEAL REGARDING DISALLOW ANCE U/S 14A AND ITS IMPACT ON SECTION 115JB IS DECIDED IN F AVOUR OF THE ASSESSEE FOR THE REASON THAT THE ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY HON'BLE ITAT. ACCORDING LY, THE AO IS DIRECTED TO RE-COMPUTE THE INCOME U/S.115JB AS PER THE DIRECTION OF HON'BLE ITAT IN THE CASE IN EARLIER ASSESSMENT, AS REFERRED. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE ONLY ISSUE THAT CAME UP FOR OUR CONSIDERATION IS WHETHER ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE DISALLOWANCE U/S 14A CAN BE ADJUSTED TO RECOMPUTE BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE ISSUE IS NO LONGER RES INTEGRA. THE ITAT, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 HAS CONSIDERED SIMILAR ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 115JB OF THE ACT. THE ITAT, BY FOLLOWING THE DECISION OF RADHA MADHAV INVESTMENT LTD VS DCIT ITA NO.3897/MUM/2012 HAS HELD THAT AMOUNT DISALLOWE D U/S 14A OF THE ACT, CANNOT BE CONSIDERED WHILE COMPUTING BOOK PROFIT U/ S 115JB OF THE ACT. WE FURTHER NOTICE THAT A SIMILAR ISSUE HAS BEEN CONSID ERED BY THE ITAT, DELHI SPECIAL BENCH IN THE CASE OF ACIT VS VIREET INVESTM ENTS PVT LTD (2017) 82 5 ITA NO.154/MUM/2016 TAXMAN.COM 415 (DELHI TRIB) (SB) WHEREIN THE SPECIA L BENCH HAS OBSERVED THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SE CTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED U/ S 14A R.W.R.8D(2) OF I.T. RULES, 1962. THEREFORE, WE ARE OF THE CONSIDERED V IEW THAT THE AO WAS INCORRECT IN MAKING ADJUSTMENTS TOWARDS DISALLOWANC E U/S 14A IN COMPUTING BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115JB O F THE INCOME-TAX ACT, 1961. THE CIT(A), AFTER CONSIDERING RELEVANT PROVISIONS H AS RIGHTLY DELETED ADDITIONS MADE BY THE AO. WE DO NOT FIND ANY ERROR OR INFIRM ITY IN THE ORDER OF THE CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 4. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 27 TH OCTOBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI