ACIT CIR 2(3)(1), MUMBAI V. TATA REALTY & INFRASTRUCTURE LTD, MUMBAI

ITA 173/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7124 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR, HON'BLE ACCOUNTANT MEMBER ITA. NO S . 173 & 171 /MUM/201 7 (A.Y S : 2012 - 13 & 2013 - 14 ) ACIT CIRCLE 2(3)(1) R.NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. TATA REALTY & INFRASTRUCTURE LTD., ELPHINSTONE BUILDING, 2 ND FLOOR, VEER NARIMAN ROAD, MUMBAI 400 001 PAN NO: AACCT 6242 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NITE SH JOSHI REVENUE BY : SHRI MANJUNATHA SWAMY DATE OF HEARING : 18.06.2018 DATE OF PRONOUNCEMENT : 22 .06 .2018 O R D E R PER C. N. PRASAD (JM) 1. THESE TWO APPEALS ARE FILED BY THE REVENUE AGA INST THE ORDER OF THE LD.CIT(A) - 6, MUMBAI DATED 14.10.2016 FOR THE ASSESSMENT YEARS 20 12 - 13 AND 2013 - 14 RESPECTIVELY. 2. THE ONLY GROUND IN BOTH THE REVENUES APPEALS IS IN RESPECT OF DELETION OF DISALLOWANCE MADE U/S. 14A OF THE ACT. 3. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THESE A SSESSMENT YEARS ASSESSEE DID NOT RECEIVE ANY EXEMPT 2 ITA.NOS. 173 & 171 /MUM/2017 M/S. TATA REALTY & INFRASTRUCTURE LTD., INCOME AND IN THE ABSENCE OF RECEIPT OF ANY EXEMPT INCOME DURING THESE ASSESSMENT YEARS THERE SHOULD NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT. PLACING RELIANCE ON THE NAGPUR BENCH OF THE T RIBUNAL IN THE CASE OF ACIT V. M/S. BALLARPUR INDUSTRIES LTD., IN ITA.NO S . 376 TO 379/ NAG /2014 DATED 04.12.2015 , THE LD. COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE TRIBUNAL CONSIDERING VARIOUS DECISIONS AND PARTICULARLY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST V. CIT IN ITA.NO. 749 OF 2014 ORDER DATED 02.09.2015 , HELD THAT IF THERE IS NO EXEMPT INCOME DURING THE YEAR , NO DISALLOWANCE IS ATTRACTED U/S. 14A OF THE ACT. 4. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THIS DECISION OF THE NAGPUR BENCH OF THE TRIBUNAL IS NOW AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT ( NAGPUR BENCH ) IN ITA.NO. 51 OF 2016 DATED 13.10.2016 , WHEREIN THE HON'BLE HIGH COURT REFUSED TO ADMIT THE QUESTION OF LAW AND REJECTED THE APPEAL FILED BY T HE REVENUE. COPY OF THE ORDER IS PLACED ON RECORD AT PAGE NO. 1 OF THE PAPER BOOK. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN UNDISPUTED FACT THAT DURING THESE ASSESSMENT YEARS ASSESSEE DID NOT RECEIVE ANY EXEMPT INCOME . WHEN NO EXEMPT INCOME IS RECEIVED BY THE ASSESSEE , WHETHER THERE CAN BE ANY 3 ITA.NOS. 173 & 171 /MUM/2017 M/S. TATA REALTY & INFRASTRUCTURE LTD., DISALLOWANCE U/S. 14A HAS BEEN CONSIDERED BY THE COORDINATE BENCHES OF THIS TRIBUNAL AND IT HAS BEEN CONSISTENTLY HOLDING THAT IF THERE IS NO EXEMPT INCOME THERE SHOULD NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT . IN THE CASE OF ACIT V. M/S. BALLARPUR INDUSTRIES LTD., (SUPRA) THE NAGPUR BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST V. CIT (SUPRA) HELD AS UNDER: - 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE PRECEDENCE CITED. AS FAR AS THE EXEMPTION FOR THE YEARS UNDER CONSIDERATION WERE CONCERNED, IT WAS AN ADMITTED FACTUAL POSITION THAT T HE AO HAS NOT MENTIONED ANY SUCH AMOUNT. MEANING THEREBY, THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION. IN REPLY TO ONE OF OUR QUESTIONS, THE LEARNED AR, MR. K. P. DEWANI HAS ALSO MADE A STATEMENT AT BAR THAT NO DIVID END WAS DECLARED, HENCE, THERE WAS NO EARNING OF EXEMPTED DIVIDEND INCOME. HE HAS ALSO CLARIFIED THAT FOR THE PURPOSE OF INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT, THE AO HAS APPLIED THE FORMULA ONLY IN RESPECT OF DISALLOWANCE OF PROPORTION ATE INTEREST EXPENDITURE. THERE WAS NO ALLEGATION OF THE AO THAT THE EXEMPT INCOME WAS EARNED BY THE ASSESSEE. IN THE LIGHT OF THE UNDISPUTED FINDING ON FACTS, WE HAVE PERUSED THE DECISION OF THE HONBLE COURTS. WE MAY LIKE TO MENTION THAT A VIEW HAS BEEN EXPRESSED CONSISTENTLY THAT IF THERE IS NO EXEMPTED PROFIT THEN THERE IS NO QUESTION OF INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT BUT, WE HAVE ALSO CAREFULLY PERUSED THAT VERY DECISION OF THE TRIBUNAL NAMELY CHEMINVEST LTD. (SUPRA) WAS REVE RSED BY THE HONBLE DELHI HIGH COURT, COPY PLACED IN THE COMPILATION. THE HONBLE DELHI HIGH COURT IN ITA NO.749/2014 VIDE ORDER DATED 02 - 09 - 2015 TITLED AS CHEMINVEST LTD. VS CIT HAS DECIDED THE SUBSTANTIAL QUESTION OF LAW THAT WHETHER DISALLOWANCE U/S 1 4A OF THE ACT CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. THE FINAL VERDICT WAS AS UNDER: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDI TURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 7. IN SHORT, IN A SITUATION WHEN THAT VERY ORDER OF THE TRIBUNAL WHICH WAS THE BASIS FOR INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE IT ACT GOT REVERSED BY THE HONBLE DELHI HIGH COURT, HENCE, THE VERY SAID BASIS DO NOT SURVIVE ANY MORE. AS A RESULT, WE HEREBY CONFIRM THE FINDINGS OF THE LEARNED CIT (A) ON THIS ISSUE. WE HEREBY ALSO HOLD THAT IN VIEW OF THE NUMBERS OF DECISIONS ON THIS ISSUE IN FAVOUR OF THE TAX PAYERS, WE FIND NO FORCE IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS DISMISSED. 7. THIS DECISION OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT V. M/S. BALLARPUR INDUSTRIES 4 ITA.NOS. 173 & 171 /MUM/2017 M/S. TATA REALTY & INFRASTRUCTURE LTD., LIMITED IN ITA.NO. 51 OF 2016 DATED 13.10.216 BY REJECTING THE APPEAL OF THE REVENUE AND HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. WHILE HOLDING SO THE HON'BLE HIGH COURT OBSERVED AS UNDER: - ON HEAR ING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOTH THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT THAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE AUTHORITIES RELIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIVED BY THE ASSESSEE AND THE SAME WAS INCLU DIBLE IN THE TOTAL INCOME. IN THE FACTS OF THE CASE, THE AUTHORITIES HELD THAT SINCE THE INVESTMENTS MADE BY THE ASSESSEE IN THE SISTER CONCERNS WERE NOT THE ACTUAL INCOME RECEIVED BY THE ASSESSEE, THEY COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME. THE FINDINGS OF FACTS RECORDED BY BOTH THE AUTHORITIES DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. SINCE NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS INCOME TAX APPEAL, THE INCOME TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT, WE AFFIRM THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 9. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND JUNE, 2018. SD/ - SD/ - (RAJESH KUMAR) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 22 / 06/2018 GIRIDHAR, SR.PS 5 ITA.NOS. 173 & 171 /MUM/2017 M/S. TATA REALTY & INFRASTRUCTURE LTD., COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI