DCIT-3(2)(1), MUMBAI V. M/S.I.B.HOLDINGS LIMITED, MUMBAI

ITA 2537/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3364 (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: CHETAN A KARIA
• Keywords: 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. 2537/MUM/2018 (ASSESSMENT YEAR 2011-12 ) DCIT, CIRCLE-3(2)(1), R.NO. 608, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S I.B. HOLDINGS LTD., M-62, 63, FIRST FLOOR, CONNAUGHT PLACE, NEW DELHI- 110001. PAN: AABCF1242P APPELLANT RESPONDE NT APPELLANT BY : SHRI PRAMOD NIKALJE (DR) RESPONDENT BY : SHRI CHETAN A. KARIA (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) WAS RIGHT IN DELETING THE DISALLOWANCE OF RS .5,27,18,701/- 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, 1962 WHEN THE COMPUTATION OF THE ASSESSEE WAS NOT FOUND TO BE CORRECT AND AS HELD IN THE ORDER OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE MANUFACTURI NG CO. LTD.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF RS.5,25,34,581/- U/S ITA NO. 2537 MU M 2018-M/S I.B. HOLDINGS LTD. 2 14A R.W.R. 8D(2)(II) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO MAKE ANY DISALLOWANCE UNDER THE SAID SECTION AND THEREBY NOT ADHERING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT OF BO MBAY IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD.? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF RS.1,84,120/- U/S 14A R.W.R. 8D(2)(III) WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE HAD FAILED TO MAKE ANY DISALLOWANCE UNDER THE SAID SECTION AND TH EREBY NOT ADHERING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT OF BO MBAY IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD.? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN NOT CONSIDERING THE FACT THAT THE AMOUNT DISALLOWANCE U/S 14A TO THE AMOUNT OF RS. 5,27,18,7 01/- MADE BY THE AO WAS ON THE BASIS OF CBDT CIRCULAR NO. 5 OF 2014 DAT ED 11.02.2014. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN DELETING THE AMOUNT OF DI SALLOWANCE U/S 14A TO THE AMOUNT OF RS. 5,27,18,701/- HOLDING THAT DISALLOWAN CE U/S 14A CANNOT BE MADE IN RESPECT OF INVESTMENT MADE IN SUBSIDIARY AN D RELATED COMPANIES WHEREAS IN THE RECENT JUDGMENT OF THE APEX COURT IN THE CAES OF M/S MAXOPP INVESTMENT LTD. VS. CIT IN CIVIL APPEAL NO. 104-109 OF 2015 DATED 12.02.2018, IT HAS BEEN HELD THAT SECTION 14A APPLI ES IRRESPECTIVE OF WHETHER THE SHARES ARE HELD TO GAIN CONTROL OR AS STOCK-IN- TRADE? 6. 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. PERUSAL OF GROUNDS OF APPEAL SHOWS THAT THOUGH THE REVENUE HAS RAISED MULTIPLE GROUND OF APPEAL, HOWEVER, IN SUM AND SUBS TANCE, THE SOLE GROUND OF APPEAL RELATES TO DELETING THE DISALLOWAN CE UNDER SECTION 14A R.W. RULE 8D. ITA NO. 2537 MU M 2018-M/S I.B. HOLDINGS LTD. 3 3. THE LD. AR OF THE ASSESSEE AT THE OUTSET OF HEARING S SUBMITS THAT THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 1 4A R.W.RULE 8D OF RS. 5,27,18,701/- DESPITE THE FACT THAT NO EXEMPT I NCOME WAS EARNED BY THE ASSESSEE DURING THE RELEVANT PERIOD. THE LD. CI T(A) DELETED THE ENTIRE DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE D ELHI HIGH COURT IN CHEMINVEST LTD. (378 ITR 33), THEREFORE THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE A ND AGAINST THE REVENUE. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE STRONGLY RELIED UPON THE DECISION OF ASSESS ING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS MADE HUGE INVESTMENT IN EQUITY SHARE/SECURITIES OF RS. 1374 C RORE WHICH IS CAPABLE OF GENERATING INCOME WHICH DOES NOT FORM PART OF TO TAL INCOME. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE H AS INCURRED HUGE INTEREST EXPENDITURE ON BORROWED FUND AS WELL AS AD MINISTRATIVE EXPENSES. THE ASSESSING OFFICER ISSUED SHOW-CAUSE N OTICE TO THE ASSESSEE AS TO WHY THE PROVISION OF SECTION 14A R.W .RULE 8D SHOULD NOT BE INVOKED FOR MAKING DISALLOWANCE UNDER SECTION 14 A. THE ASSESSEE FILED ITS REPLY. THE ASSESSEE IN ITS REPLY HAS CLEA RLY CONTENDED THAT THE ASSESSEE HAS NOT EARNED ANY TAX FREE INCOME ON INVE STMENT MADE IN ITA NO. 2537 MU M 2018-M/S I.B. HOLDINGS LTD. 4 SHARE AND SECURITIES DURING THE YEAR. THEREFORE, TH E PROVISION OF SECTION 14A WILL NOT ATTRACT. THE ASSESSEE ALSO RELIED ON V ARIOUS DECISIONS. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSIN G OFFICER. THE ASSESSING OFFICER INVOKED THE PROVISION OF RULE 8D BY REFERRING THE CBDT CIRCULAR NO. 14/2018 DATED 22.11.2001 AND CIR CULAR NO. 8/2002 DATED 27.08.2002 AND CIRCULAR NO. 5/2014 DATED 11.0 2.2014. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 5,25,34,581/- AND ADMINISTRATIVE EXPENSES @ .5% OF AVERAGE VALUE OF INVESTMENT OF RS. 1,84,120/- THEREBY MAKING THE TO TAL DISALLOWANCE OF RS. 5,27,18,701/-. THE LD. CIT(A) DELETED THE ENTIR E DISALLOWANCE HOLDING THAT ASSESSING OFFICER HAS NOT GIVEN ANY CO GENT OR SPECIFIC REASON FOR DISSATISFACTION WITH THE ASSESSEES CONT ENTION THAT NO DIVIDEND INCOME WAS RECEIVED DURING THE YEAR AND HENCE, DISA LLOWANCE UNDER SECTION 14A WAS NOT WARRANTED. THE LD. CIT(A) FOLL OWED THE DECISION OF HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. (SUP RA) AND DELETED THE ENTIRE DISALLOWANCE. 6. NO CONTRARY FACTS OR DECISION IS BROUGHT TO OUR NOT ICE TO TAKE OTHER VIEW; THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE DELHI HIGH COURT IN CHEMINVEST LTD. (SUPRA), WE HOLD THAT THE GROUNDS OF APPEAL RAISED BY REVENUE ARE SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOUR OF ASSESSEE. THEREFORE, THE GROUNDS OF APPEAL RAISE D BY REVENUE ARE DISMISSED. ITA NO. 2537 MU M 2018-M/S I.B. HOLDINGS LTD. 5 7. 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 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