M/S SAJJAN INDIA LTD., Mumbai V. ASST. CIT 8(1)(2), Mumbai

ITA 2375/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7380 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Assessee Lawyers: SHANKARLAL JAIN
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 22

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI MANOJ KR. AGGARWAL, ACCOUNTANT MEMBER ITA NO.2375/MUM/2019 (ASSESSMENT YEAR 2009-10) M/S SAJJAN INDIA LTD. MATULYA CENTER A NO.2, GROUND FLOOR, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-40001 3 P AN: AAACS6498M VS. ACIT-8(1)(2), 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDENT APPELLANT BY : SHRI SHANKARLAL JAIN (AR REVENUE BY : T.S. KHALSA (SR. DR) DATE OF HEARING : 14.01.2021 DATE OF PRONOUNCEMEN T : 22.01.2021 ORDER PER MAHAVIR SINGH, VP: 1. THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI [FOR SHORT THE LD. CIT(A)] IN APPEAL NO. CIT(A)-14/IT-16/17-18 ORDER DATED 18.01.2019. T HE ORDER GIVING APPEAL EFFECT TO THE ORDER OF ITAT WAS PASSED BY AC IT-8(1)(2), MUMBAI UNDER SECTION 143(3) R.W.SEC. 254 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORD ER DATED 05.01.2017. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) RETAINING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.R. 8D(2)(III) OF THE INCOME TAX RULES, 1962 (HEREINAFTER THE RULES ), DESPITE THE FACT THAT THERE WAS A CLEAR DIRECTION BY THE TRIBUNAL TO CONS IDER THE ISSUE IN ITA NO. ITA NO. 2375 MUM 2019-M/S SAJJAN INDIA LTD. 2 5856/MUM/2012 ORDER DATED 23.04.2014. FOR THIS ASSE SSEE HAS RAISED THE FOLLOWING GROUNDS: 1. LD CIT(A) ERRED IN RETAINING DISALLOWANCE U/S.14A R .W.R.8D(2)(III) AT RS. 50,05,026/- HOLDING THAT APPELLANT CANNOT BE AGGRIE VED AS DISALLOWANCE WAS OFFERED IN RETURN OF INCOME AND HENCE THE ISSUE WAS NOT RAI SED BEFORE ITAT, AS SUCH NO RELIEF IS ALLOWABLE IGNORING ORDER AS PASSED BY HON BLE ITAT IN ITA NO. 5856/MUM/2012 WHEREIN HONBLE ITAT DIRECTED TO FOLL OW ITS DIRECTIONS AS GIVEN FOR A.Y. 2007-08. 1.1 HONBLE ITAT IN A.Y. 2007-08 HELD THAT AS INVE STMENT ACTIVITIES ARE CARRIED OUT AT HEAD OFFICE DISALLOWANCE WILL BE MADE AFTER CONSIDE RATION OF SUCH EXPENSES ALONG WITH OTHER DIRECTIONS. 3. BRIEF FACTS ARE THAT THE ASSESSEE FILED RETURN OF I NCOME ON 29.09.2009 FOR THE RELEVANT ASSESSMENT YEAR 2009-10, ALONG WITH THIS R ETURN ASSESSEE FILED COMPUTATION OF INCOME IN WHICH THE EXPENSES DISALLO WED SUO-MOTO UNDER SECTION 14A OF THE ACT R.W.R. 8D(2)(III) OF THE RUL ES AT RS. 55,05,020/-. THE ASSESSING OFFICER (AO) ACCEPTED THIS SUO-MOTO DISAL LOWANCE MADE BY ASSESSEE UNDER RULE 8D(2)(III) IN ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) DATED 28.12.2011. THE ASSESSEE HAS NOT RAISE D ANY ISSUE ON THIS ACCOUNT BEFORE THE CIT(A). HOWEVER, THE ASSESSEE BE FORE THE CIT(A) RAISED ISSUES ON OTHER ADDITIONS. THE MATTER WAS CARRY FOR WARD TO THE TRIBUNAL AND BEFORE THE TRIBUNAL THE ISSUE OF SUO-MOTO DISALLOWA NCE WAS RAISED IN ASSESSMENT YEAR 2008-09 IN ITA NO. 7532/MUM/2011 FO R THE FIRST TIME AND ALSO RAISED IN THIS VERY ASSESSMENT YEAR 2009-10 IN ITA NO. 5856/MUM/2012 AND TRIBUNAL VIDE ORDER DATED 23.04.2 014 DECIDE THE ISSUE FOR ASSESSMENT YEAR 2008-09 VIDE PARA-37 AS UNDER: ITA NO. 2375 MUM 2019-M/S SAJJAN INDIA LTD. 3 37. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS ALSO SIMILAR TO THE ISSUE ARISING OUT OF GROUND NO.8 TO 11 RAISE D BY THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT 2007-08 CITED ABOVE. IN THIS YEAR AL SO, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ASSESS EE'S CONTENTION ABOUT THE DISALLOWANCE OF INTEREST AS THE ASSESSEE'S CASE HAS BEEN THAT INVESTMENTS HAVE BEEN MADE OUT OF SURPLUS FUNDS AND NO BORROWED FUNDS HAV E BEEN UTILIZED. IF THE ASSESSEES CONTENTION AS PER THE WORKING GIVEN IS F OUND ACCEPTABLE, THEN NO DISALLOWANCE OF INTEREST EXPENSES SHOULD BE MADE. A S REGARDS THE ADMINISTRATIVE- EXPENSES, THE SAME HAS TO BE SEEN WITH REGARD TO TH E PROVISIONS OF RULE -8D(III) AND WHILE TAKING AVERAGE INVESTMENTS, THOSE INVESTMENTS SHOULD BE REMOVED WHICH ARE NOT CAPABLE OF YIELDING EXEMPT INCOME. THE ASSESSIN G OFFICER WILL DECIDE THIS ISSUE IN THE LIGHT OF THESE OBSERVATIONS AND AFTER GIVING DUE AND EFFECTIVE OPPORTUNITY OF HEARING TO PRESENT ITS CASE. THUS, G ROUND NO.2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. SIMILARLY FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 58 56/MUM/2012, THE TRIBUNAL ON IDENTICAL FINDINGS RESTORED THE MATTER BACK TO THE FILE OF THE AO VIDE PARA-40. THE AO IN THE SET-ASIDE ASSESSMENT PR OCEEDINGS OR THE APPEAL GIVING EFFECT TO THE ORDER OF TRIBUNAL PASSED AN OR DER UNDER SECTION 143(3) R.W.SEC. 254 OF THE ACT DATED 05.01.2017, WHEREIN T HE SUO-MOTO DISALLOWANCE OF RS. 50,05,020/- UNDER RULE 8D(2)(II I) WAS AFFIRMED BY OBSERVING IN PARA-7 AS UNDER: 7. DISALLOWANCE U/S.14A 7.1 AS PER PARA 1 OF THE ORDER U/S. 143(3) OF THE A CT DATED 28.12.2011 DISALLOWANCE U/S.14A WAS MADE U/RULE 8D(2)(II) AMOUNTING TO RS. 57,27,607/- AS ASSESSEE HAS SUOMOTO DISALLOWED SUM OF RS.50,05,020/- U/RULE 8D( 2)(III) IN THE RETURN OF INCOME FILED. IN VIEW OF THE ITAT DECISION, THE DIS ALLOWANCE U/S. 14A MADE U/RULE 8D AMOUNTING TO RS. 57,27,607/- IS HEREBY DELETED. 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE TRIBUNAL IN ASSESSM ENT YEARS 2007-08 TO ITA NO. 2375 MUM 2019-M/S SAJJAN INDIA LTD. 4 2009-10 HAS SET-ASIDE THE ISSUE TO THE FILE OF THE AO TO VERIFY THE HEAD OFFICE EXPENSES INCURRED, WHICH ARE TAKEN INTO COGNIZANCE, FOR MAKING DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. BU T CIT(A) HAS DECIDED THE ISSUE IN PARA-4 AS UNDER: 4. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APP ELLANT. SO FAR AS THE FIRST AND SECOND GROUNDS OF APPEAL ARE CONCERNED, I'M NOT IN AGREEMENT WITH THE SUBMISSION OF THE APPELLANT THAT THE AO SHOULD HAVE DISTURBED THE SUO MOTO DISALLOWANCE OF RS. 50,05,026/- MADE BY THE APPELLANT U/S 14A OF TH E IT ACT READ WITH RULE 8D(2)(III) IN ITS RETURN OF INCOME WHILE GIVING EFF ECT TO THE ORDER OF HONOURABLE ITAT. IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT ON 28/12/2011, THE AO HAS ACCEPTED THE DISALLOWANCE OF RS. 50,05,026/- MADE BY THE APPELLANT U/S 14A OF THE IT ACT READ WITH RULE 8D(2)(III) IN ITS RETURN OF INCOME. THE AO HAS MADE ONLY ADDITIONAL DISALLOWANCE OF RS. 57,27,607/ - U/S 14A OF THE IT ACT READ WITH RULE 8D(2)(II). WHEN THE AO HAD ACCEPTED THE D ISALLOWANCE MADE BY THE APPELLANT U/S 14A OF THE IT ACT READ WITH RULE 8D(2 )(III), THERE IS NO QUESTION OF THE APPELLANT BEING AGGRIEVED BY THE ORDER OF THE AO ON THIS ISSUE. ACCORDINGLY, THIS ISSUE WAS NOT RAISED BEFORE THE CIT(A). WHEN THE IS SUE DOES NOT ARISE OUT OF ORDER OF THE CIT(A), THE SAME COULD NOT HAVE BEEN RAISED BY THE APPELLANT BEFORE THE ITAT. ACCORDINGLY, IT WAS NOT RAISED BEFORE THE ITA T BY THE APPELLANT. WHEN ISSUE OF DISALLOWANCE U/S 14A OF THE IT ACT READ WITH RUL E 8D(2)(III) WAS NOT RAISED BEFORE, HONOURABLE ITAT, THERE IS NO QUESTION OF HO NOURABLE ITAT ISSUING A DIRECTION ON THIS ISSUE. DIRECTIONS ISSUED BY THE H ONOURABLE TRIBUNAL HAVE TO BE READ IN CONJUNCTION WITH THE GROUNDS OF APPEAL RAIS ED/ RELIEF CLAIMED BEFORE IT. THEREFORE, ACTION OF THE AO IN RETAINING THE SUO MO TO DISALLOWANCE OF RS. 50,05,026/-, MADE BY THE APPELLANT U/S 14A OF THE I T ACT READ WITH RULE 8D (2)(III) IN ITS RETURN OF INCOME, WHILE GIVING EFFECT TO THE ORDER OF HONOURABLE ITAT IS UPHELD AND THESE GROUNDS OF APPEAL ARE DISMISSED. 6. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. WE NOTED THAT THE CIT(A) STATED IN HIS ORDER AS NOTED ABOVE, THAT THE ASSESSEE HAS NOT RAISED THE ISSUE BEFORE THE ITAT AND ONCE THE ISSUE HAS NO T BEEN RAISED, THERE IS NO QUESTION OF TRIBUNAL ISSUING ANY DIRECTION ON THIS ISSUE. WE FURTHER NOTED ITA NO. 2375 MUM 2019-M/S SAJJAN INDIA LTD. 5 FROM THE ORDER OF TRIBUNAL, AS REPRODUCED ABOVE THA T THE SPECIFIC GROUND WAS TAKEN BEFORE THE TRIBUNAL I.E. GROUND NO.3 IN I TA NO. 5856/MUM/2012 WHICH IS REPRODUCED BY TRIBUNAL AND SAME READS AS U NDER: 3. THE LD. ASSESSING OFFICER AS WELL AS CIT(A) SHOU LD HAVE APPRECIATED THAT EXPENSE IS DISALLOWABLE U/R 8D(2)(III) R.W. SECTION 14A OF INCOME TAX ACT WITHOUT CONSIDERING THE FACT THAT INCOME ARISING ON INVESTM ENTS IS LIABLE TO BE TAXED AND HENCE) PROVISIONS OF SECTION 14A ARE INAPPLICABLE. 7. WE NOTED THAT THE TRIBUNAL HAS SPECIFICALLY SET-ASI DE THIS ISSUE FOR ASSESSMENT YEAR 2008-09 VIDE PARA-40 AS UNDER: 40. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH IS ISSUE IS SIMILAR TO AND GROUND NO.8 TO 11 RAISED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2008-09 AND IN VIEW OF THE FINDINGS GIVEN THEREIN, THIS MATTER IS RESTORED BAC K TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AS PER THE OBSER VATIONS GIVEN IN THE SAID APPEALS AFTER GIVING DUE AND EFFECTIVE OPPORTUNITY OF HEARI NG TO PRESENT ITS CASE. THUS, GROUND NO.1, 2 AND 3 ARE ALLOWED FOR STATISTICAL PU RPOSES. 8. FROM THE ABOVE, IT IS CLEAR THAT THE TRIBUNAL SPECI FICALLY SET-ASIDE THE ISSUE. SIMILARLY IN ASSESSMENT YEAR 2009-10 ALSO, THE TRIB UNAL SET-ASIDE THIS ISSUE SPECIFICALLY AS NOTED ABOVE IN PARA-40 OF THE TRIBU NAL DATED 23.04.2014. WE FURTHER NOTED FROM THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE AND FROM THE RECORDS. THIS ISSUE HAS BEEN CONSIDERED BY THE TRIB UNAL IN ASSESSMENT YEAR 2011-12 IN ITA NO. 5550/MUM/2015 VIDE ORDER DATED 2 8.11.2017, WHEREIN THE ISSUE WAS SET-ASIDE TO THE FILE OF THE AO FOR V ERIFICATION OF FACTS AND AFTER THAT CONSIDERING THE DISALLOWANCE. 9. IN VIEW OF THE ABOVE, WE OBSERVED HERE THAT THE CIT (A) I.E. FIRST APPELLATE AUTHORITY HAS NOT GONE INTO DETAILS AND WITHOUT REA DING THE FILE PASSED THE ITA NO. 2375 MUM 2019-M/S SAJJAN INDIA LTD. 6 ORDER. HENCE, ONCE AGAIN WE ARE RESTORING THIS ISSU E BACK TO THE FILE OF AO AND AO WILL GO INTO THE DETAILS OF HEAD OFFICE EXPE NSES AND THEN WILL DECIDE THE ISSUE AS PER LAW. 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2021. SD/- SD/- MANOJ KR.AGGARWAL MAHAVIR SINGH ACCOUNTANT MEMBER VICE-PRESIDENT MUMBAI, DATE: 22.01.2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT, MUMB AI