TATA INVESTMENT CORPORATION LTD., MUMBAI V. DCIT-2(3)(1), MUMBAI

ITA 2332/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6675 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 2332/MUM/2016 (ASSESSMENT YEAR: 2012-13) M/S. TATA INVESTMENT CORPORATION LTD. ELPHISTONE BUILDING 2ND FLOOR, 10, VEER NARIMAN ROAD, MUMBAI 400001 VS. D C I T - 2(3)(1) ROOM NO. 552, 5TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACT4120F APPELLANT RESPONDENT APPELLANT BY: SHRI M.M. GOLVALA & SHRI AMEY WAGLE RESPONDENT BY: SHRI V. VIDHYADHAR DATE OF HEARING: 28.06.2018 DATE OF PRONOUNCEMENT: 28.06.2018 O R D E R PER B.R. BASKARAN, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 11.02.2016 PASSED BY THE CIT(A)-6, MUMBAI AND IT RE LATES TO A.Y. 2012-13. 2. THE ISSUE URGED IN THIS APPEAL RELATES TO DISALLOWA NCE OF EXPENSES RELATING TO EXEMPT INCOME MADE UNDER SECTION 14A OF THE INCOME TAX ACT (HEREINAFTER THE ACT) AND ALSO DISALLOWANCE MADE FOR COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS AN INVESTOR COMPANY AND IT EARNED EXEMPT INCOME OF ` 665150 LAKHS BY WAY OF DIVIDEND AND ` 5172 LAKHS BY WAY OF INTEREST ON TAX FREE BONDS AN D ` 4696.06 LAKHS BY WAY OF LONG TERM CAPITAL GAIN. THE ASSESSEE COMPUTED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AT ` 745.46 LAKHS. FOR COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF T HE ACT. THE ASSESSEE ITA NO. 2332/MUM/2016 M/S. TATA INVESTMENT CORPORATION LTD. 2 ALSO WORKED THE EXPENSES RELATING TO EXEMPT INCOME FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF T HE ACT AT ` 552.93 LAKHS. THE AO NOTICED THAT THE AMOUNT DISALLOWABLE AS PER RULE 8D OF THE I.T. RULES ACTUALLY WORKED OUT TO ` 587.78 LAKHS. SINCE THE ASSESSEE HIMSELF HAS DISALLOWED A SUM OF ` 745.46 LAKHS UNDER SECTION 14A, THE AO DID NOT DISTURB THE WORKING MADE BY THE ASSESSEE. THE AO AL SO ACCEPTED THE WORKING OF EXPENSES RELATING TO EXEMPT INCOME MADE BY THE ASSESSEE FOR COMPUTING BOOKS PROFIT UNDER SECTION 115JB OF THE A CT. 4. IN APPELLATE PROCEEDINGS THE LEARNED CIT(A) HELD T HAT THE AMOUNT WORKED OUT FOR DISALLOWANCE UNDER SECTION 14A OF TH E ACT HAS TO BE ADOPTED WHILE COMPUTING THE BOOK PROFIT UNDER SECTI ON 115JB OF THE ACT. IN THIS REGARD THE LEARNED CIT(A) PLACED RELIANCE O N THE DECISION RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GODREJ CONSUMER PRODUCTS LTD. VS. ADDL. CIT 48 TAXMANN.COM 293. ACC ORDINGLY HE DIRECTED THE AO TO ADD THE AMOUNT COMPUTED UNDER SECTION 14A OF THE ACT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 5. IT IS PERTINENT TO NOTE THAT THE INCOME COMPUTED U NDER SECTION 115JB OF THE ACT WAS ASSESSED AS TOTAL INCOME IN TH E HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, SINCE TH E TOTAL INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT WAS LOWER TH AN THE BOOK PROFIT. HENCE THE ISSUE THAT REQUIRES ADJUDICATION IS WHETH ER THE LEARNED CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ADOPT THE DISA LLOWANCE COMPUTED UNDER SECTION 14A OF THE ACT FOR THE PURPOSE OF COM PUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 6. THE LEARNED A.R. PLACED RELIANCE ON THE DECISION RE NDERED BY THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT P. L TD. (2017) 165 ITD 27 (DEL) WHEREIN IT WAS HELD THAT THE ADDITION UNDER C LAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) RELATING TO EXEMPT INCOME SHO ULD BE COMPUTED WITHOUT RESORTING TO COMPUTATION CONTEMPLATED UNDER SECTION 14A READ WITH RULE 8D OF THE I.T. RULES. THE LEARNED A.R. SU BMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE COORDINATE BE NCH IN ASSESSEES ON ITA NO. 2332/MUM/2016 M/S. TATA INVESTMENT CORPORATION LTD. 3 CASE FOR A.Y. 2011-12 IN ITA NO. 1569/MUM/2015 AND THE TRIBUNAL, VIDE ITS ORDER DATED 09.02.2018 HELD THAT THE DISALLOWAN CE WORKED OUT UNDER SECTION 14A OF THE ACT SHOULD NOT BE ADOPTED FOR TH E PURPOSES OF SECTION 115JB OF THE ACT. 7. WE HAVE HEARD THE LEARNED D.R. ON THIS ISSUE AND PE RUSED THE RECORD. IN VIEW OF THE DECISION RENDERED BY THE SPE CIAL BENCH IN THE CASE OF VIREET INVESTMENT P. LTD., THE DIRECTION OF THE LEA RNED CIT(A) TO ADOPT THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB IS LIABLE TO BE SET ASIDE. THE ASSESSEE ALSO TOOK US TO THE WORKING MADE BY IT FOR ASCERTAINING THE EXPENSES RELATING TO EXEMPT INCOME FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. WE NOTICED T HAT THE ASSESSEE HAS ALLOCATED EXPENSES IN THE RATIO OF TAXABLE INCOME A ND EXEMPT INCOME AND THE SAID METHOD WAS DETERMINED BY THE DEPARTMENT IN A.Y. 2000-01. IT IS STATED THAT THE SAME METHOD IS BEING FOLLOWED FOR A .Y. 2000-01 ONWARDS BY THE ASSESSEE. SINCE A CONSISTENT METHOD IS BEING FO LLOWED BY THE ASSESSEE FOR MORE THAN 10 YEARS AND SINCE THE ALLOCATION OF EXPENSES IS ON THE BASIS OF EXEMPT INCOME AND TAXABLE INCOME, WE ARE OF THE VIEW THAT THE COMPUTATION MADE BY THE ASSESSEE FOR DETERMINING EX PENSES RELATING TO EXEMPT INCOME FOR THE REQUIREMENT OF PROVISIONS OF SECTION 115JB OF THE ACT DOES NOT REQUIRE DISTURBANCE. ACCORDINGLY WE SE T ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE AO TO A CCEPT THE COMPUTATION MADE BY THE ASSESSEE FOR THE PURPOSE OF SEC. 115JB OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2018. SD/ - SD/ - (AMARJIT SINGH) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28 TH JUNE, 2018 ITA NO. 2332/MUM/2016 M/S. TATA INVESTMENT CORPORATION LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -6, MUMBAI 4. THE CIT - 2, MUMBAI 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.