BRICS GILT FINANCE P.LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 1567/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5420 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 12-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1567/M/2018 ASSESSMENT YEAR: 2011-12 M/S. BRICS GILT FINANCE PVT. LTD., 72, 7 TH FLOOR, MAKER CHAMBER IV, NARIMAN POINT, MUMBAI 400 021 PAN: AAACJ 8885B VS. DCIT 1(2), ROOM NO.537, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI JITENDRA JAIN, A.R. REVENUE BY : SHRI JOTHI LAKSHMI NAYAK, D.R. DATE OF HEARING : 15.05.2019 DATE OF PRONOUNCEMENT : 20.05.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 27.11.2013 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER OF CONFIRMING THE DISALLOWANCE OF RS 17.18.351/- UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 ('THE ACT') R.W. RULE 8D OF THE INCOME-TA X RULES, 1962 ('L.T. RULES') AFTER CONSIDERING THE FACT THAT THE APPELLANT COMPANY HAS SUO MOTTO DISALLOWED AN AMOUNT OF RS 32.099/- TOWARDS SUCH EXPENDITURE. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LEARN ED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT R. W RULE 8D OF THE L.T. RULES IGNORING THE FACT THAT WHILE WORKING OUT SUCH DISALLOWANCE, STRATEGIC INVESTMENTS MADE BY ITA NO.1567/M/2018 M/S. BRICS GILT FINANCE PVT. LTD. 2 THE APPELLANT COMPANY OUGHT TO HAVE BEEN EXCLUDED F OR THE PURPOSES OF COMPUTING AVERAGE VALUE OF INVESTMENTS. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEAR NED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE SECTION 14A OF THE ACT R. W RULE 8 D OF THE L.T. RULES IGNORING THE FACT THAT WHILE WORKING OUT SUCH DISALLOWANCE, ONLY THOSE INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME DURING THE YEAR HAS TO BE C ONSIDERED FOR THE PURPOSES OF COMPUTING AVERAGE VALUE OF INVESTMENTS. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. 3. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 4. THE ISSUE RAISED IN SECOND GROUND APPEAL IS NOT PRESSED AT THE TIME OF HEARING BY THE LD. A.R. OF THE ASSESSEE AND THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 5. THE ONLY ISSUE WHICH IS REQUIRED TO BE ADJUDICAT ED IS AGAINST THE ORDER OF LD. CIT(A) ERRING IN CONFIRMIN G THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES IGNORING THE FACT THAT ONLY THOSE INVESTM ENTS WHICH YIELD DIVIDEND INCOME DURING THE YEAR HAVE TO BE CO NSIDERED FOR THE PURPOSE OF COMPUTING THE AVERAGE VALUE OF INVES TMENTS AND CONSEQUENT DISALLOWANCE. 6. THE FACTS IN BRIEF ARE THAT ASSESSEE EARNED EXEM PT INCOME BY WAY OF DIVIDEND OF RS.22,58,210/- WHICH WAS CLAI MED AS EXEMPT UNDER SECTION 10(34) OF THE ACT. THE ASSESS EE ALSO MADE SUO-MOTO DISALLOWANCE OF RS.32,099/- UNDER SECTION 14A TOWARDS AN EXEMPTION INCOME WITHOUT APPLYING THE RU LE 8D(2). THE AO INVOKED RULE 8D(2) AND ACCORDINGLY COMPUTED THE DISALLOWANCE AT RS.17,50,450/- COMPRISING ONLY DIS ALLOWANCE UNDER RULE 8D2(III) AND AFTER ALLOWING THE DEDUCTIO N OF SUO-MOTO ITA NO.1567/M/2018 M/S. BRICS GILT FINANCE PVT. LTD. 3 DISALLOWANCE, A NET ADDITION OF RS.17,18,351/- WAS MADE TO THE INCOME OF THE ASSESSEE VIDE ORDER DATED 27.11.2013 PASSED UNDER SECTION 143(3) OF THE ACT. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ONLY ISSUE PRESSED FOR ADJUDICATION BEFORE US IS THAT WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A RULE 8D2(III) OF THE ACT, ONLY THOSE IN VESTMENTS ARE REQUIRED TO BE INCLUDED FOR THE PURPOSE OF CALCULAT ING THE AVERAGE INVESTMENTS WHICH YIELD EXEMPT INCOME DURIN G THE YEAR. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. A.R. AN D THAT ONLY THOSE INVESTMENTS YIELDING EXEMPT INCOME HAS TO BE CONSIDERED FOR CALCULATING THE AVERAGE INVESTMENTS. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENTS (2017) 82 TAXMANN.COM 415 DELHI TRIBUN AL SPECIAL BENCH WHEREIN IT HAS BEEN HELD THAT ONLY TH OSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVER AGE VALUE OF INVESTMENTS WHICH YIELDED EXEMPT INCOME DURING THE YEAR. WE, THEREFORE, RESPECTFULLY FOLLOWING THE CO-ORDINATE B ENCH OF THE TRIBUNAL, DIRECT THE AO TO COMPUTE THE DISALLOWANCE AFTER TAKING INTO ACCOUNT ONLY THOSE INVESTMENTS WHICH YIELDED E XEMPT INCOME AND FOR THE PURPOSE OF AVERAGE INVESTMENT. GROUND NO.3 IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.05.2019. SD/- SD/- (SANDEEP GOSAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20.05.2019. * KISHORE, SR. P.S. ITA NO.1567/M/2018 M/S. BRICS GILT FINANCE PVT. LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.