DCIT 8(1)(1), MUMBAI V. RELIANCE LAND P. LTD, NAVI MUMBAI

ITA 2551/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5539 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 2551 / MUM/20 17 ( ASSESSMENT YEAR : 2013 - 14 ) DCIT - 8(1)(1), ROOM NO.624, 6 TH FLOOR AAYAKAR BHAVAN M.K. MARG MUMBAI 400 020 VS. M/ S. RELIANCE LAND PVT LTD., HBLOCK, FIRST FLOOR DHIRUBHAI AMBANI KNOWLEDGE CITY, THANE BELAPUR ROAD, KOPARKHAIRNE, NAVI MUMBAI 400 710 PAN/GIR NO. AAACR2367J APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI H.N. SINGH ASSESSEE BY SHRI JITENDRA SANGHAVI DATE OF HEARING 07 / 08 /201 8 DATE OF PRONOUNCEMENT 05 / 11 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 14, MUMBAI DATED 25/01/2017 FOR A.Y.201 3 - 14 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - (I) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 2,83,70,379/ - U/S. 14A IGNORING THE FACT THAT TH E DEPARTMENT HAS NOT ACCEPTED THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. LTD. VS DCIT (2010) 328 ITR 81 (BOM). 2. THE CIT (A)'S ORDER IS CONTRARY TO LAW AND ON FACTS AND DESERVES TO BE SET ASIDE. ITA NO. 2551/MUM/20 17 M/S. RELIANCE LAND PVT. LTD., 2 3. THE APPELLANT CRA VES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NE W GROUND THAT MAY BE NECESSARY. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE AO RESTORED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4 . FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OR REAL ESTATE, PROPERTY DEVELOPMENT AND REAL ESTATE CONSULTANCY. THE ASSESSING OFFICER VIDE HIS ORDER DATED 11/12/2016 DISALLOWED THE EXPENDITURE OF RS. 2,83,70,379 / - U NDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D. 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE DISALLOWANCE MADE BY AO INVOKING RULE 8D AFTER OBSERVING AS UNDER: - 3 . 3 I HAVE CONSIDERED THE SUBMISSIONS MADE. (IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD (DELHI HIGH COURT) ITA NO. 486/2014 & ITA NO. 299/2014,, DATED 5/9/2014 IT HAS BEEN HELD THAT : ''THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD VS M/S LAKHANI MA RKETING INCL IAT NO. 970/2008 DECIDED ON 02.04.2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT VS. HERO CYCLES LIMITED, [2010] 323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CAN NOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX - 1 VS. CORRTECH ENERY (P) LTD {2014] 223 TAXMANN 1 (GUJ). THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, VS. M/S SHIVAM MOTORS (P) LTD DECIDED ON 05.05.2014. IN THE SAID DECISION IT HAS BEEN HELD 'AS REGARDS THE SECOND QUESTION. SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSES IN RELATION TO INCOME WHICH DOES NOT FORM PAN OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WH ICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ITA NO. 2551/MUM/20 17 M/S. RELIANCE LAND PVT. LTD., 3 ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEEN AFFIRMED BY THE TRIBUNAL DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISAL LOWANCE OF RS 2,03 ,7 52/ - MADE BY THE ASSESSING OFFICER WAS IN ORDER.' 3.4 SIMILARLY IN THE CASE OF KRISHNA KNITWEAR TECHNOLOGIES LTD VS DCIT ITA NO. 2565/MUM/2012 DATED 15/2/2016 FOR A.Y 2008 - 09 OF ITAT MUMBAI BENCH A RELIED ON THE DECISION IN THE CASE O F CHEMINVEST LTD VS CIT 378 ITR 33 WHEREIN THE CASE OF CIT VS RAJENDRA PRASAD MOODY 115 ITR 519(SC) IS DISCUSSED OF JURISDICTIONAL TRIBUNAL THEREAFTER HELD THAT NO DISALLOWANCE U/S 14A IS CALLED FOR ONCE THERE IS NO EXEMPT INCOME RECEIVED OR RECEIVABLE BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. IN THE CASE OF HUNTSMAN INTERNATIONAL (INDIA) PVT LTD VS DCIT 66 TAXMANN.COM 325 A.Y 2010 - 11 OF ITAT K BENCH VIDE ORDER DATED 18/12/2015 HELD THAT SINCE THE 1 ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION , NO DISALLOWANCE U/S 14A OF THE ACT CAN BE MADE. 3.5 IN THIS YEAR THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME. THEREFORE RESPECTFULLY FOLLOWING THE DECISIONS AS ABOVE, THE DISALLOWANCE MADE U/S 14A IS DELETE D . 4. IN THE RESULT APPEAL IS TREATED AS ALLOWED. 5. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT DISALLOWANCE MADE U/S.14A R.W.R. 8D WAS DELETED BY CIT(A) AFTER RELYING ON THE DECISION OF CO - ORDINATE BENCH IN CASE OF KRI SHNA KNITWEAR TECHNOLOGIES LTD., WHEREIN IT WAS HELD NO DISALLOWANCE U/S.14A IS CALLED FOR ONCE THERE IS NO EXEMPT INCOME RECEIVED OR RECEIVABLE BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. T HE DETAILED FINDING SO RECORDED BY CIT(A) AT PARA 3.3 ARE A S PER MATERIAL ON RECORD, THEREFORE, DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. ITA NO. 2551/MUM/20 17 M/S. RELIANCE LAND PVT. LTD., 4 6. LEARNED AR ALSO PLACED ON RECORD THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD., 378 ITR 33 WHEREIN IT WAS HELD THAT NO DISALLOWANCE U/S.14A CAN B E MADE WHERE THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. 7. WE HAD CAREFULLY GONE THROUGH THE DECISION OF THE DELHI HIGH COURT WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER: - THE EXPRESSION 'DOES NOT FORM PART OF THE TO TAL INCOME' IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE P URPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. HELD, THAT NO EXEMPTED INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR AND SINCE THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT IN DOUBT, NO DISALLOWANCE COULD BE MADE U/S.14A. 8. FURTHERMORE, THE PROPOSITION THAT NO DISALLOWANCE CAN BE MADE U/S.14A IN CASE THERE IS NO EXEMPT INCOME IS ALSO SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS. 1. JOINT INVESTMENTS V. CIT (372 ITR 694 (DEL) 2. INDUS VALLEY INVESTMENTS V DCIT BEING ITA NO.3763/DEL/2013 FOR A.Y.2009 - 10 DATED 29/04/2015 3. M/S. DAGA GLOBAL CHEMICALS VS. ASST . CIT BEING ITA NO.5592/MUM/2012 DATED 01/01/2015. 4. M/S. SLYVEX CABLE CO. PVT. LTD., V DY. CIT BEING ITA NO.8581/MUM/2011 FOR A.Y.2008 - 09 DATED 24/02/2016. ITA NO. 2551/MUM/20 17 M/S. RELIANCE LAND PVT. LTD., 5 9. IT IS NOT IN DISPUTE THAT ASSESSEE WAS NOT IN RECEIPT OF ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, ACCORDINGLY ON THIS PROPOSITION ALSO, NO DISALLOWANCE IS WARRANTED U/S.14A R.W. R. 8D. 15. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF INTEREST IN RESPECT OF FUNDS BORROWED FOR THE PURPOSE OF BUSINESS. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 11 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 05 / 11 /201 8 KARUNA SR. PS C OPY 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//