DCIT CIR 3(2)(1), MUMBAI V. INDIAN EXPRESS NEWSPAPAERS (MUMBAI) LTD, MUMBAI

ITA 2536/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3360 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V MOHAN
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2536/MUM/2018 (ASSESSMENT YEAR 2011-12 ) DCIT, CIRCLE-3(2)(1), R.NO. 608, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S INDIAN EXPRESS NEWSPAPER (MUMBAI) P. LTD., EXPRESS TOWER, 229, NARIMAN POINT, MUMBAI- 400021. PAN: AAACI2555F APPELLANT RESPONDE NT APPELLANT BY : SHRI PRAMOD NIKALJE (DR) RESPONDENT BY : SHRI V. MOHAN (AR) DATE OF HEARING : 23.04.2019 DATE OF PRONOUNCEMEN T : 23.04.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)- 8, MUMBAI [HEREINAFTER REFERRED AS LD. CIT(A)] DATE D 15.02.2018 FOR ASSESSMENT YEAR 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.54,34,825/- U/S 14A R.W.R. 8D WITHOUT APPRECIATING THE FACT THAT THE AM OUNT OF DISALLOWANCE U/S 14A OF THE I. T. ACT, 1961 HAS TO BE COMPUTED AS PE R RULE 8D OF I.T. RULES, 1962 AS HELD IN THE ORDER OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.54,34,825/- U/S 14A R.W.R. 8D AND UPHOLDING THE SUO MOTO DISALLOWANCE M ADE BY THE ASSESSEE AT RS.8,03,496/- HOLDING THAT THE ONUS WAS UPON THE AO TO PROVE THAT INTEREST EXPENDITURE WAS INCURRED FOR MAKING INVESTMENTS CAP ABLE OF EARNING EXEMPT ITA NO. 2536 MUM 2018-M/S INDIAN EXPRESS NEWSPAPER (MUM BAI) P. LTD. 2 INCOME WHEN INFACT THE ONUS OF ESTABLISHING ITS CLA IM OF DEDUCTION LIES ON THE ASSESSEE? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.54,34,825/- U/S 14A R.W.R. 8D BY ACCEPTING THE CLAIM OF THE ASSESSEE TH AT INVESTMENTS WERE MADE FROM OWN FUNDS WITHOUT ACTUALLY VERIFYING THE SOURC ES OF SUCH INVESTMENTS, WITHOUT APPRECIATING THAT THE ASSESSEE HAD NOT PROV ED IT BEFORE THE ASSESSING OFFICER OR IN APPEAL PROCEEDINGS THAT INVESTMENTS W ERE ACTUALLY MADE FROM OWN FUNDS? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,94,648/- BEING CLAIM OF LAND REVENUE TAX AGAINST INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING THE FACT THAT NO SUCH DEDUCTIONS IS AL LOWABLE AS PER THE PROVISIONS OF I. T. ACT, 1961 IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY? 5. THE APPELLANT PRAYS THAT FOR THIS AND OTHER REAS ONS IT IS SUBMITTED THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT ALL THE GROUNDS OF APPEAL RAI SED BY REVENUE ARE COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVEN UE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R (AY) 2010-11 AND 2011-12 . THE LD. AR OF THE ASSESSEE FURTHER SUBMIT S THAT GROUND NO. 1 TO 3 RELATES TO DISALLOWANCE UNDER SECTION 14A R.W. RU LE 8D ARE COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 6780/MUM/2014 DATED 22.06.2016. AND THE GROUND NO.4 WHICH RELATES TO DEDUCTION OF LAND REVE NUE WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPER TY IS ALSO COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2012-13 IN ITA NO. 3664/MUM/2016 DA TED 31.03.2018. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE COPY OF DECISION ITA NO. 2536 MUM 2018-M/S INDIAN EXPRESS NEWSPAPER (MUM BAI) P. LTD. 3 OF TRIBUNAL IN ASSESSMENT YEAR 2010-11 & 2011-12 IN ASSESSEES OWN CASE AS REFERRED ABOVE. 3. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE GROUNDS OF APPEAL A ND ON COMPARISON OF GROUNDS OF APPEAL IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2010-11 & 2012-13 SUBMITS THAT HE STRONGLY RELIED UPON THE ORDER OF ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. GROUND NO. 1 TO 3 RELATES TO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. WE HAV E NOTED THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SHOWN THE EXEMPT INCOME OF RS. 1.2 CRORE AND NO SUO-MOTO DISALLOWANCE. WHEN THE ASSESSEE WAS CONFRONTED THE ASSESSEE CONTENDED THAT THEY HAVE NOT INCURRED ANY EXPENSES TO EARN TH E EXEMPT INCOME. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORREC TNESS OF THE CLAIM OF ASSESSEE. THE ASSESSING OFFICER INVOKED THE PROVISI ON OF SECTION 14A R.W. RULE 8D MADE DISALLOWANCE OF RS. 54,34,825/- O N ACCOUNT OF INTEREST EXPENDITURE AS WELL AS .5% OF AVERAGE VALU E OF INVESTMENT I.E. RS. 8,03,496/-. THUS, MADE A TOTAL DISALLOWANCE OF RS. 62,38,321/-. BEFORE LD CIT (A) THE ASSESSEE HAVE SHOWN THAT SH ARE CAPITAL AND RESERVE AND IN FAR EXCESS THAN THE INVESTMENT MADE BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR AS RECORDED IN PARA 3.1 OF HIS ORDER. ITA NO. 2536 MUM 2018-M/S INDIAN EXPRESS NEWSPAPER (MUM BAI) P. LTD. 4 THE ASSESSEE ALSO RELIED ON THE DECISION OF BOMBAY HIGH COURT IN HDFC BANK (383 ITR 529 BOM) AND RELIANCE UTILITIES AND POWER LTD (313 ITR 340 BOM) ON THE RATIO OF LAW THAT IF THE R ESERVE FUNDS ARE IN FAR EXCESS OF THE INVESTMENT, THE ASSUMPTION IS THAT TH E INVESTMENTS ARE MADE OUT OF OWN FUNDS AND NO BORROWED FUNDS ARE UTI LIZED. THE LD. CIT(A), DELETED THE INTEREST DISALLOWANCE OF RS. 5 4,34,825/- BY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2010-11 AND REMAINING DISALLOWANCE OF RS. 8,03,496/- WAS SUSTAINED. WE HAVE NOTED THAT THE LD . CIT(A) BY FOLLOWING THE DECISION OF TRIBUNAL FOR AY 2010-11 A ND DELETED THE DISALLOWANCE OF INTEREST EXPENSES AND SUSTAINED TH E ADMINISTRATIVE EXPENSES TO THE EXTENT OF .5% OF THE AVERAGE VALUE OF INVESTMENT. 5. NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T RIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-1, THE GROUND NOS . 1 TO 3 OF THE APPEAL ARE DISMISSED. 6. GROUND NO.4 RELATED TO DELETING THE DISALLOWANCE OF RS. 1,94,648/- ON ACCOUNT OF LAND REVENUE. WE HAVE NOTED THAT SIMILAR DISALLOWANCE WAS MADE FOR ASSESSMENT YEAR 2012-13, HOWEVER, ON APPEA L BEFORE THE LD. CIT(A), THE SAME WAS DELETED BY FOLLOWING THE DECIS ION OF ASSESSMENT YEAR 2010-11. WE HAVE FURTHER NOTED THAT THE LD. CI T(A) BY FOLLOWING ITA NO. 2536 MUM 2018-M/S INDIAN EXPRESS NEWSPAPER (MUM BAI) P. LTD. 5 THE DECISION OF ASSESSMENT YEAR 2012-13 DELETED THE DISALLOWANCE BY PASSING THE FOLLOWING ORDER: 2. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT (A) IN AY 2010-11 HAS DELETED THE DISALLOWANCE ON THE GROUNDS THAT TH E MUNICIPAL TAX ARE LIABLE FOR DEDUCTION. THE CIT(A) IN THIS YEAR FOLLO WING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR AY 2010-11 A LLOWED THE CLAIM BY OBSERVING PARA 5.2.1 AS UNDER: - 5.2.1 THIS GROUND PERTAINS TO DISALLOWANCE OF RS. 194,548/- BEING THE LAND REVENUE TAX PAID BY THE APPELLANT. T HIS ISSUE HAS ALSO COME UP IN APPEAL BEFORE MY LEARNED PREDECESSO R IN APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2010-11. AT PARA 5.3.2, CIT(A) HELD THAT UNDISPUTEDLY. THE SAID PAYMENTS AR E IN THE NATURE OF TAXES PAID AND AKIN TO MUNICIPAL TAXES AND THERE FORE, AN ALLOWABLE DEDUCTION. I DO NOT FIND ANY REASON TO DE PART FROM THE DECISION OF MY LEARNED PREDECESSOR AND THEREFORE TH E DISALLOWANCE OF RS 1,94,648/-ON THIS ACCOUNT IS DEL ETED. THIS GROUND OF APPEAL IS ALLOWED. 3. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). HENCE, THIS ISSUE OF REVENUES APPEAL IS ALSO DISMISSED. 7. CONSIDERING THE DECISION OF TRIBUNAL ON IDENTICAL F ACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/04/2019. SD/- SD /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 23.04.2019 SK ITA NO. 2536 MUM 2018-M/S INDIAN EXPRESS NEWSPAPER (MUM BAI) P. LTD. 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI