SUN-N-SAND HOTELS P LTD, MUMBAI V. DCIT CIR 8(3), MUMBAI

ITA 2040/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2877 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.2040/MUM./2014 (ASSESSMENT YEAR : 2007-08 ) SUN-N-SAND HOTELS PVT. LTD., 39, JUHU BEACH, MUMBAI 400 049 PAN AAACS5571P .. APPELLANT V/S THE DY. CIT,CIR.8(3), 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI PRAKASH K. JOTWANI, A.R. REVENUE BY : SHRI K.L.KANAK, D.R. DATE OF HEARING 28.09.2015 DATE OF ORDER 28.10 .2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 17.02.2014. TH E ASSESSEE HAS TAKEN TWO EFFECTIVE GROUNDS OF APPEAL. THE FIRST GROUND IS RELATING TO TAXABILITY OF SALES TAX BENEFIT RECEIVED BY THE ASSESSEE UNDER THE POLICY OF THE GOVERNMENT OF MAHARASHTRA FOR S ETTING UP WIND MILLS TO PROMOTE WIND POWER GENERATION. 2. AT THE OUTSET THE CASE OF THE ASSESSEE IS THAT THE SALE S TAX ITA NO.2040/MUM./2014 SUN-N-SAND HOTELS PVT. LTD. A.Y.2007-08 2 SUBSIDY RECEIVED BY THE ASSESSEE BEING INCENTIVE FOR SETTING UP OF WIND POWER MILLS IN MAHARASHTRA HAS TO BE TREATED AS CAPITAL IN NATURE. WHEREAS, THE A.O. AS WELL AS THE CIT(A) HELD IT TO BE A REVENUE RECEIPT AND ACCORDINGLY TAXED THE SAME. TH E LEARNED AR HAS SUBMITTED THAT THE ABOVE GROUND TAKEN BY THE ASSES SEE IS IDENTICAL WITH THE QUESTION OF LAW ARISING IN ASSESS EES OWN CASE FOR A.Y. 2003-04 PRESENTLY PENDING BEFORE THE BOMBAY HIGH COURT IN ITXA/1063/2014. IT IS A MATTER OF RECORD THAT THE I SSUE OF TAXABILITY OF SALES TAX INCENTIVE RECEIVED BY THE ASSES SEE HAS FIRST ARISEN IN RELATION A.Y.2003-04 AND THE TRIBUNAL VIDE ORDER DATED 08.01.2014 IN THE OWN CASE OF ASSESSEE FOR A.Y. 2003 -04 TO 2006-07 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE A ND IN FAVOUR OF REVENUE . THE LEARNED AR HAS DRAWN OUR ATTENTION TO THE APPLICATION MOVED BY THE ASSESSEE U/S. 158A DATED 31 ST AUGUST 2015, WHEREIN IT HAS BEEN STATED THAT THE ISSUE INVOLVED IN THE PRESENT APP EAL IS REPETITIVE IN NATURE AND IS PRESENTLY PENDING BEFORE TH E HONBLE BOMBAY HIGH COURT IN APPEAL FILED BY THE ASSESSEE AGA INST THE FINDING OF TRIBUNAL ON THE SAME ISSUE IN THE EARLIER ASSESSMENT YEAR. ON THE APPLICATION OF THE ASSESSEE, A REPORT FROM THE A.O. U/S. 158A(2) WAS CALLED UPON. THE A.O. HAS SENT HIS REPO RT DATED 23.09.2015 ADDRESSED TO THE CIT DR WHICH HAS BEEN F URTHER PLACED ON RECORD BY THE LD. DR WITH HIS FORWARDING L ETTER DATED 30.09.2015. WE HAVE PERUSED THE REPORT OF THE A.O. WH EREIN THE A.O. HAS STATED THAT THE ISSUED INVOLVED IN ASSESSES APPEAL BEFORE THE ITAT FOR A.Y. 2007-08 & 2008-09 IS IDEN TICAL TO THE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE BEFORE THE HONBLE ITA NO.2040/MUM./2014 SUN-N-SAND HOTELS PVT. LTD. A.Y.2007-08 3 HIGH COURT FOR A.Y. 2003-04 VIDE ITXA/1063/2014. 3. IN VIEW OF ABOVE REPORT OF A.O. AND HAVING REGA RD TO THE FACTS AND CIRCUMSTANCE OF THE CASE, THE APPLICATION OF THE ASSESSEE U/S.158A IS ACCEPTED AND THE APPEAL OF THE A SSESSEE IS DISPOSED OFF WITH THE OBSERVATION THAT WHEN THE DECISIO N ON THE ISSUE/QUESTION OF LAW ON THIS ISSUE IN THE OTHER CASE O F THE ASSESSEE FOR A.Y. 2003-04 BECOMES FINAL, IT SHALL B E APPLIED TO THE APPEAL OF THE ASSESSEE FOR THE YEAR UNDER CONSIDER ATION AND IF SO REQUIRED, THE ASSESSEE WILL BE AT LIBERTY TO MOVE AN A PPLICATION BEFORE THE APPROPRIATE AUTHORITY IN THIS RESPECT. THE ASSESSEE SHALL NOT BE ENTITLED TO FURTHER RAISE THIS QUESTION IN APPEAL OR OTHERWISE BEFORE ANY HIGHER APPELLATE AUTHORITY I.E. HO NBLE HIGH COURT OR HONBLE SUPREME COURT. AS ON TODAY, THE ISSU E STANDS COVERED BY THE DECISION OF THE TRIBUNAL IN THE OWN CA SE OF THE ASSESSEE FOR EARLIER YEARS. WITH THE ABOVE OBSERVA TIONS THIS ISSUE DECIDED ACCORDINGLY. 4. THE NEXT ISSUE RAISED BY THE ASSESSEE IS RELATING TO DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE ASSE SSMENT YEAR INVOLVED IN THE PRESENT APPEAL IS A.Y. 2007-08. TH E A.O. COMPUTED THE DISALLOWANCE U/S. 14A ON ACCOUNT OF EXPE NDITURE INCURRED IN RELATION TO EARNING OF TAX EXEMPT INCOME AS PER THE FORMULA PRESCRIBED UNDER RULE 8D OF THE I.T. RULES. THE LEARNED CIT(A) HOWEVER, RELYING UPON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD . [2010] 328 ITR 81 (BOM) OBSERVED THAT THE RULE 8D IS APPLIC ABLE PROSPECTIVELY FROM A.Y. 2008-09 ONWARDS AND THAT FOR THE ASSESSMENT YEARS THE DISALLOWANCE U/S 14A IS TO BE CO MPUTED ON ITA NO.2040/MUM./2014 SUN-N-SAND HOTELS PVT. LTD. A.Y.2007-08 4 SOME REASONABLE BASIS. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAD NOT USED ANY BORROWED MONEY FOR THE PURPOSE OF MAKING INVESTMENTS HENCE, NO INTEREST DISALLOWANC E WAS WARRANTED IN THIS CASE. HOWEVER, HE DIRECTED TO A.O . TO RECOMPUTE THE DISALLOWANCE ON SOME REASONABLE BASIS EXCLUDING THE INTEREST PART. 5. THE LEARNED AR OF THE ASSESSEE COULD NOT POINT OUT ANY DEFECT IN THE ORDER OF THE CIT(A) IN RELATION TO THE A BOVE DIRECTIONS GIVEN BY HIM IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. (SUPRA). THE FINDING OF THE LEARNED OF THE CIT(A) ON THIS ISSUE IS THEREFORE UPHELD. 6. SUBJECT TO OUR OBSERVATIONS MADE AND DIRECTIONS GI VEN ABOVE, THE APPEAL OF THE ASSESSEE IS TREATED AS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.2015 SD/- SD/- (N.K.BILLAIYA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28/10/2015. * M.P. . COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.