SUNSHINE COMMUNICATIONS PVT. LTD., MUMBAI V. ACIT CENT. CIR. 5(4), MUMBAI

ITA 2193/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3327 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.2193/MUM/2016 ( ASSESSMENT YEAR: 2008-09 ) SUNSHINE COMMUNICATION PVT.LTD. THAR & CO., 203 CAPRI BUILDING OPPOSITE HDIL TOWERS ANANT KANEKAR MARG BANDRA(E) MUMBAI-400 051 VS. ACIT, CENTRAL CIRCLE-5(4) MUMBAI PAN/GIR NO. A A DCS4276S APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI NIMESH THAR, AR REVENUE BY SHRI V.VINOD KUMAR, DR DATE OF HEARING 2 6 /02/2020 DATE OF PRONOUNCEME NT 04 /03/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)53, MUMBAI, DATED 29/12/2015 AND IT PERTAINS TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE LEARNED CIT (A) HAS ERRED IN LAW & ON FACTS IN UPHOLDING THE FOLLOWING ACTIONS OF THE ASSESSING OFFICER, WHICH I S INVALID AND BAD IN LAW. 1) THE LEARNED CIT (A) HAS ERRED IN LAW & ON FACTS IN UPHOLDING ADDING BACK THE DISALLOWANCE MADE U/S 14A OF THE INCOME TA X ACT, 1961 IN THE ORIGINAL ASSESSMENT ORDER DATED 31-12-2010 OF INCOM E TAX U/S 143 (3) OF THE INCOME TAX ACT, 1961 IN RE COMPUTING BOOK PR OFITS U/S 115JB OF THE IT ACT, 1961, VIDE RECTIFICATION ORDER U/S 154 OF T HE IT ACT 1961 DATED 08- 08-2012 WHICH IS INVALID AND BAD IN LAW. ITA NO.2193/MUM/2016 SUNSHINE COMMUNICATION PVT.LTD. 2 2) THE APPELLANT CRAVES LEAVE TO ADD TO AND/ OR AME ND AND/ OR DELETE AND/ OR MODIFY AND/ OR ALTER THE AFORESAID GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS. 3) ALL THE AFORESAID GROUNDS OF APPEAL ARE INDEPEN DENT, IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF ADVERTISING AGENCY, FILE D ITS RETURN OF INCOME FOR AY 2008-09 ON 30/09/2008, DECLARING TOTA L LOSS OF RS.2,17,74,086/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE I.T.ACT, 1961 ON 31/12/2010, DETERMINING THE TO TAL LOSS AT RS.1,13,89,410/-, AFTER MAKING ADDITIONS TOWARDS DI SALLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A R.W.RULE 8D OF I.T.RULES,1962, AMOUNTING TO RS.1,04,06,558/- . SUBSEQUENTLY, THE LD. AO HAS RECTIFIED ASSESSMENT U/S 154 OF THE I.T.ACT, 1961, VIDE HIS ORDER DATED 08/08/2012 AND DETERMINED TOTA L LOSS AT RS.1,13,89,410/- UNDER NORMAL PROVISIONS OF THE I.T .ACT, 1961 AND BOOK PROFIT OF RS.1,80,61,368/- U/S 115JB OF THE I. T.ACT,1961, BY MAKING ADJUSTMENTS TO BOOK PROFIT COMPUTED U/S 115J B OF THE I.T.ACT,1961 TOWARDS DISALLOWANCES MADE U/S 14A OF THE I.T.ACT, 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESEE SUBMITTED THAT DISALLOWANCES CONTEMPLATED U/S 14A O F THE I.T.ACT,1961 CANNOT BE ADJUSTED TO BOOK PROFIT COMP UTED U/S 115JB OF THE I.T.ACT, 1961. THE LD.CIT(A) AFTER CONSIDERI NG RELEVANT SUBMISSIONS OF THE ASSESEE AND ALSO TAKEN NOTE OF V ARIOUS JUDICIAL PRECEDENTS HELD THAT THERE IS NO MERIT IN ARGUMENTS OF THE ASSESEE THAT DISALLOWANCES MADE TOWARDS EXPENDITURE INCURRE D IN RELATION TO ITA NO.2193/MUM/2016 SUNSHINE COMMUNICATION PVT.LTD. 3 EXEMPT INCOME U/S 14A OF THE I.T.ACT,1961, CANNOT B E ADDED TO BOOK PROFIT COMPUTED U/S 115JB OF THE I.T.ACT,1961. AGGR IEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE U S. 5. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF ITAT, MUMBAI, IN THE CASE OF M/S AWAS D EVELOPERS AND CONSTRUCTION PVT.LTD. VS DCIT IN ITA NO. 2682/MUM/2 016, WHERE THE TRIBUNAL BY FOLLOWING THE SPECIAL BENCH DECISION OF ITAT, DELHI IN THE CASE OF ACIT VS VIREET INVESTMENTS PVT.LTD. (20 17) 82 TAXMANN 415, DELETED ADDITIONS OF DISALLOWANCES U/S 14A R.W .RULE 8D OF I.T.RULES, 1962 TO BOOK PROFIT COMPUTED U/S 115JB O F THE I.T.ACT,1961. 6. THE LD. DR, ON THE OTHER HAND FAIRLY ACCEPTED TH AT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF ITAT SPECIAL BENCH, HOWEVER HE SUBMITTED THAT ON A PLAIN READING OF SECTION 115JB OF THE I.T.ACT,1961, ANY EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME NEEDS TO BE ADDED BACK TO BOOK PROFIT COMPUTED U/S 115JB OF THE I.T.ACT,1961. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE ISSUE INVOLVED IN PRESENT APPEAL, I.E, WHETHER DISA LLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A R.W.RULE 8D OF THE I.T.RULES,1962, NEEDS TO BE ADJUSTED, WH ILE COMPUTING BOOK PROFIT U/S 115JB OF THE I.T.ACT,1961,OR IS NO T A RES INTEGRA . THE ITAT SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET I NVESTMENTS PVT.LTD. (SUPRA) HAS CONSIDERED AN IDENTICAL ISSUE AND HELD THAT ITA NO.2193/MUM/2016 SUNSHINE COMMUNICATION PVT.LTD. 4 COMPUTATION UNDER CLAUSE(F) OF EXPLANATION 1 TO SE CTION 115JB OF ACT, IS TO BE MADE WITHOUT RESORTING TO COMPUTATIO N AS CONTEMPLATED U/S 14A R.W.RULE 8D OF I.T.RULES, 1962. A SIMILAR V IEW HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT, IN THE CAS E OF CIT VS BENGAL FINANCE AND INVESTMENTS LTD. IN ITA NO.337 O F 2013, DATED 10/02/2015. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT THE LD. AO, AS WELL AS THE LD.CIT(A) WERE ERRED IN RE-COMPU TATION OF BOOK PROFIT BY ADDING DISALLOWANCES OF EXPENSES IN REL ATION TO EXEMPT INCOME U/S 14A R.W.RULE 8D OF I.T.RULES, 1962. HENC E, WE DIRECT THE LD. AO TO DELETE ADDITIONS MADE TOWARDS DISALLOWANC ES U/S 14A OF THE I.T.ACT,1961, TO BOOK PROFIT COMPUTED U/S 115JB OF THE I.T.ACT, 1961. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04/03/2 020 SD/- (RAVISH SOOD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//