CENTRAL DEPOSITORY (INDIA) LTD, MUMBAI V. ADDL CIT RG 2(1), MUMBAI

ITA 1588/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8258 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: YASH PARMAR
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) I.T.A. NO. 1588 /MUM/201 6 ( / ASSESSMENT YEA R :20 11 - 12 ) CENTRAL DEPOSITOR Y SERVICES (INDIA) LIMITED, 17 TH FLOOR, PHEROZ JEEJOBHOY TOWER, DALLA STREET, MUMBAI - 400023 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX - RANGE 2(1), MUMBAI. / ASSESSEE BY : SHRI YASH PARMAR / REVENUE BY : SHRI RAJAT MITTAL PAN : AAAC C6233A / DATE OF HEARING : 23.10. 2017 / DATE OF PRONOUNCEMENT : 24. 11 .2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE WHICH IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - 4 , MUMBAI, DATED 2.12.2015 FOR THE ASSESSMENT YEAR 20 11 - 12 . 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.46,16,406/ - UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 BY THE LD.CIT(A) AS MADE B Y BY THE AO DESPITE THE FACT THAT THE INVESTMENT S WHICH YIELD OR CAPABLE OF YIELDING TAXABLE INCOME ARE TO BE EXCLUDED WHILE CALCULATING DISALLOWANCE U/S 14A OF THE ACT. 2 I.T.A. NO. 1588 /MUM/201 6 3. AT THE OUTSET, THE LD. AR SUB MITTED BEFORE THE BENCH THAT SIMILAR ISSUE HAD C O ME UP BEFORE THE BENCH IN ASSESSEES OWN CASE IN ITA NO.6460/MUM/2014 (AY - 2010 - 2011) VIDE ORDER DATED 3.10.2016 WHEREIN ON IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE , THE ISSUE DECIDED BY THE BENCH IN FAV OUR OF THE ASSESSEE BY HOLDING THAT THE INVESTMENT S ON WHICH THE INCOME IS LIABLE FOR TAX HAS TO BE EXCLUDED WHILE CALCULATING THE DISALLOWANCE U/S 14A R.S.R 8D OF THE RULES. 4. THE LD. DR FAIRLY AGREED WITH THE SUBMISSIONS OF THE LD.AR. 5 . WE HAVE CAREF ULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE . WE FIND THAT THE ISSUE INVOLVED IN THE CURRENT YEAR IS WHETHER THE INVESTMEN T S ON WHICH THE INCOME IS NOT EXEMPT FROM TAX IS TO BE INCLUDED OR EXCLUDED WHILE CALCULATING THE DISALLOWANCE U/S 14A R.W.R.8D. WE FIND THAT THE IDENTICAL ISSUE (SUPRA) HAS BEEN DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL, WHEREIN VIDE PARA FOUR OF THE ORDER, IT HAS BEEN HELD BY THE TRIBUNAL AS UNDER : 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT THE ONLY DISPUTE QUA THE DISALLOWANCE UNDER SECTION 14A WHICH HAS BEEN RAISED BY THE LD. COUNSEL BEFO RE US IS THAT, THERE ARE CERTAIN INVESTMENTS WHICH ARE GENERATING TAXABLE INCOME AND THEREFORE, THESE INVESTMENTS SHOULD BE REMOVED FROM THE WORKING OF THE AVERAGE INVESTMENT UNDER FORMULA PRESCRIBED UNDER RULE 8D(2)(III). THE DETAILS OF THE INVESTMENT CON SIDERED FOR DISALLOWANCE AND ALSO THE INVESTMENT WHICH ARE GENERATING TAXABLE INCOME WERE GIVEN IN THE FOLLOWING MANNER: - 3 I.T.A. NO. 1588 /MUM/201 6 PARTICULARS AS ON 31.03.2010 AS ON 31.03.2009 TOTAL INVESTMENTS RS. 2,22,51,04,146 RS. 1,21,57,53,656 LESS: INVESTMENTS GENERA TING TAXABLE INCOME SCH EDULE (1) RS. 40,60,85,329 RS. 25,65,26,626 INVESTMENT CONSIDERED FOR SEC 14A DISALLOWANCE RS. 1,81,90,18,817 RS. 95,92,27,030 SCH . 1: INVESTMENT GENERATING TAXABLE INCOME PARTICULARS 31.03.2010 31.03.2009 IN R S. IN RS. INVESTMENT IN TAXABLE BONDS 11.35% IDBI OMNI BONDS 2008 SR. XV 10,00,00,000 10,00,00,000 NCD TATA CAPITAL LIMITED (12%) 5,00,00,000 5,00,00,000 9.62% L & T FINANCE 2,81,06,000 - 7.70% REC 4,94,01,550 - 7.90% REC 10,04,62,550 - TOTAL INVESTMENT IN TAXABLE BONDS(A) 32,79,70,100 15,00,00,000 INVESTMENT IN MUTUAL FUND (GROWTH PLANS) FORTIS FLEXI DEBT FUND REGULAR GROWTH PLAN 1,02,38,889 1,02,38,889 BIRLA FIXED TERM PLAN - INSTITUTIONAL SERIES BK - GROWTH 3,25,00,000 3,25,00,000 HDFC FMP 13M MARCH 2008 (VII)(2) - WHOLESALE PLAN GROWTH - 3,10,21,498 HDFC FIXED TERM SERIES 63 - INSTITUTIONAL GROWTH - 3,23,90,000 ICICI PRUDENTIAL INSTITUTIONAL SHORT TERM PLAN CUMULATIVE OPTION 3,76,340 3,76,2 40 ICICI PRUDENTIAL FIXED MATURITY PLAN SERIES 51 1 YEAR PLAN A CUMULATIVE 3,50,00,000 - TOTAL INVESTMENT IN MUTUAL FUND (GROWTH PLANS) (B) 7,81,15,229 10,65,26,627 TOTAL INVESTMENTS GENERATING TAXABLE INCOME (A) + (B) 40,60,85,32 9 25,65,26,627 WE AGREE WITH THE CONTENTION OF LD. COUNSEL THAT, IF THE INVESTMENT WHICH ARE GENERATING TAXABLE INCOME OR ARE CAPABLE OF EARNING TAXABLE INCOME, THEN SAME SHOULD BE REMOVED FROM THE WORKING OF THE AVERAGE INVESTMENT UNDER THE FORMULA GI VEN UNDER RULE 8D(2)(III), BECAUSE THE SAID CLAUSE ITSELF REFERS TO THE WORKING OF THE AVERAGE VALUE OF THE INVESTMENT, THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THIS INTER ALIA MEANS THAT, IF THE INVESTMENT WHICH IS GENERA TING INCOME OR IS CAPABLE OF EARNING TAXABLE INCOME, THEN SAME SHOULD NOT BE THE PART OF THE WORKING OF AVERAGE VALUE OF THE INVESTMENT. THUS, WE DIRECT THE ASSESSING OFFICER TO REMOVE THE INVESTMENTS, WHICH ARE EITHER GENERATING TAXABLE INCOME OR CAPABLE OF EARNING TAXABLE INCOME. THE 4 I.T.A. NO. 1588 /MUM/201 6 DISALLOWANCE UNDER RULE 8D(2)(III) THUS, SHOULD BE WORKED OUT AFTER REMOVING SUCH INVESTMENTS. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY TREATED AS ALLOWED 6 . WE, THEREFORE, MAINTAINING THE CONSISTENCY WITH THE EAR LIER YEAR ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, HOLD THAT THE DISALLOWANCE MADE UNDER RULE 8D(2)(III) HAS TO BE WORKED OUT AFTER EXCLUDING THE INVESTMENT S WHICH ARE CAPABLE OF EARNING OF TAXABLE INCOME. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH NOV , 2017 . S D SD (JOGINDER SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 24 . 1 1 . 2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPEL LANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI