ASSISTANT COMMISSIONER OF INCOME TAX 14(3)(2), MUMBAI V. SUNDARAM MULTIPAP LIMITED, MUMBAI

ITA 1851/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7342 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2014-2015
• Appeal Filed On: 22-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 142(1); 14A; 115JB; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI RAMIT KOCHAR , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 1851 /MUM/201 8 ( / ASSESSMENT YEAR: 20 1 4 - 15 ) ACIT - 14(3)(2) ROOM NO.482(1), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, NEW MARINE LINES, MUMBAI - 400020 . / VS. M/S. SUNDARAM MULTIPAP LTD. 903, DEV PLAZA, OPP. ANDHERI, FIRE STATION, S.V. ROAD, ANDHERI(W), MUMBAI - 400058 . ./ ./ PAN/GIR N O. : AADCS7829K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 23 / 0 7 / 201 9 / DATE OF PRONOUNCEMENT : 25 /0 7 / 201 9 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 12 . 12 .201 7 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 22 , MUMBAI [HEREINAFTE R REFERR ED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 1 4 - 1 5 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) WAS JUSTIFIED IN RELYING O THE PRECEDENTS CITED WHICH WERE DISTINGUISHABLE IN AS MUCH AS THEY WERE RENDERED IN CASES REVENUE BY : SHRI CHAUDHARY ARUN KUMAR SINGH (SR. A R) ASSESSEE BY: SHRI ANUJ KISNADWALA ITA NO. 1851 /M/201 8 A.Y.20 14 - 15 2 DECIDED PRIOR TO INTRODUCTION OF RULE 8D OR PRIOR TO CLARIFICATION ISSUED BY CBDT CIRCULAR NO. 5 OF 2014 . 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND OF APPEAL TO BE SET ASIDE THAT OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.11.2014 DECLARING TOTAL INCOME TO THE TUNE OF RS.59,46,330/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. 1961. THE CASE WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MAN UFACTURING AND TRADING OF SCHOOL NOTE BOOKS AND PAPER STATIONERY. ON VERIFICATION, IT WAS FOUND THAT THE ASSESSEE HAS SHOWN THE INVESTMENT AMOUNTING TO RS.15,00,50,000/ - AS ON 31.03.2013 AND 15,00,50,000 / - AS ON 31.03.2014. THE ASSESSEE ALSO RECEIVED THE D IVIDEND INCOME TO THE TUNE OF RS.7,500/ - . THE ASSESSEE DID NOT SHOW THE EXPENDITURE TO EARN THE EXEMPT INCOME, THEREFORE, THE AO APPLIED THE PROVISIONS OF SECTION 14A R.W.S. 8D OF THE I.T. ACT, 1961 AND ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME IN SUM OF RS.93,56,125/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 1,53,02,454/ - AND BOOK PROFIT U/S 115JB OF THE ACT WAS ASSESSED TO THE TUNE OF RS.1,61,00,861/ - . F EELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO D ELETED THE ADDITION RAISED IN VIEW OF THE PROVISIONS U/S 14A R.W. RULE 8D OF THE ACT , THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 4 . WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. TH E LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS WRONGLY DELETED THE ADDITION RAISED IN VIEW ITA NO. 1851 /M/201 8 A.Y.20 14 - 15 3 OF THE PROVISIONS U/S 14A R.W. RULE 8D OF THE ACT, THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE, IS LIABLE TO BE SET ASIDE. HOW EVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTION AND ARGUED THAT THE ASSESSEE NOWHERE EARN ANY EXEMPT INCOME, THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION IN ACCORDANCE WITH LAW. BEFORE GOING FURTHER , WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS. PERUSAL OF THE APPELLANT'S P & L ACCOUNT SHOWS THAT THE APPELLANT HA D EARNED DIVIDEND INCOME OF RS. 7,500/ - ONLY. THIS DIVIDEND INCOME WAS EARNED FROM INVESTMENT IN CO - OPERATIVE BANK WHICH IS TAXABLE AND IS NOT EXEMPT. IT IS SEEN THAT THIS DIVIDEND INCOME HAS ALSO BEEN SHOWN AS INCOME FROM OTHER SOURCES AND HAS BEEN OFFERED TO TAX IN THE COMPUTATION OF INCOME A ND HAS NOT BEEN CLAIMED AS EXEMPT. NO EXEMPT INCOME WAS EARNED DURING THE YEAR UNDER CONSIDERATION. I FIND THAT THE VARIOUS COURTS HAVE HELD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN T HE CASE OF CIT VS LAKHANI MARKETING (ITA NO.970/2008), THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. DELITE ENTERPRISES - (INCOME TAX APPEAL NO. 110 OF 2009), HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS CORTECH ENERGY (P) LTD[2014] 223 TAXMANN 1 30 (GUJ) AND THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SHIVAM MOTORS (P) LTD.(ITA NO. 88/2014) HAVE ALL HELD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT .378 FIR 33 (DEL) HAD ALSO HELD AS UNDER, '23. IN THE CONTEXT OF THE FACTS ENUMERATED HONBLE BEFORE 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 EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT I NCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR.' IN VIEW OF THE LEGAL POSITION ON THE ISSUE AS DISCUSSED ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT IS DELETED. CONSEQUENTLY, THE ADJUSTMENT MADE TO THE BOOK P ROFIT U/S 115JB ON ITA NO. 1851 /M/201 8 A.Y.20 14 - 15 4 ACCOUNT OF DISALLOWANCE U/S 14A ALSO DOES NOT SURVIVE. THE APPELLANT'S GROUND OF APPEAL IS ALLOWED. 5 . ON APPRAI SAL OF THE ABOVE MENTIONED FINDING , WE FIND THAT THE ASSESSEE HAS SHOWN THE EXEMPT INCOME IN SUM OF RS.7,500/ - . THE SAID DIV IDEND INCOME WAS EARNED FROM INVESTMENT WHICH IS TAXABLE AND IS NOT EXEMPT FACTUALLY . IN COMPUTATION OF INCOME, THE ASSESSEE NOWHERE SHOWED THE SAID INCOME AS EXEMPT . IN BRIEF, THE ASSESSEE NOWHERE EARNED ANY EXEMPT INCOME IN THE RELEVANT ASSESSMENT YEAR. THE CIT(A) HAS RELIED UPON THE DECISION OF THE CHEMINVEST VS. CIT (378 ITR 33) (DEL) AND OTHERS RELEVANT LAW MENTIONED ABOVE IN THE SAID ORDER. FURTHER, WE FOUND THAT THE CASE OF THE ASSESSEE DULY BEEN COVERED BY THE ASSESSEES OWN CASE FOR THE A.Y. 2012 - 1 3 IN ITA. NO. 5327/M/2015 AND ORS AND FOR THE A.Y. 2013 - 14 IN ITA. NO.6269/M/2017 AND ORS. IN BRIEF, THE ASSESSEE NOWHERE EARNED ANY EXEMPT INCOME, THEREFORE, NO DISALLOWANCE IS REQUIRED IN VIEW OF THE PROVISIONS U/S 14A R.W. RULE 8D OF THE ACT. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE , WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE D ISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 /07 /2019 . SD/ - SD/ - ( RAMIT KOCHAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 25 /07 /2019 V IJAY / SR. PS ITA NO. 1851 /M/201 8 A.Y.20 14 - 15 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI