ACIT 13(1)(1), MUMBAI V. NAVYUG KRISHI SADHAN P. LTD, MUMBAI

ITA 2656/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0703 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B P PUROHIT
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2656 /MUM/2018 ASSESSMENT YEAR : 2014-15 ACIT 13(1)(1), MUMBAI VS. NAVYUG KRISHI SADHAN PVT. LTD., ASPEE HOUSE, B J PATEL ROAD, MALAD (W), MUMBAI 400 064 PAN : AAACN2326D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT JOTHILAKSHMI NAYAK RESPONDENT BY : SHRI B P PUROHIT DATE OF HEARING : 1 6 .0 5 .201 9 DATE OF PRONOUNCEMENT : 27 .06 . 201 9 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-21, MUMBAI, DATED 31.01.2018, WHICH I N TURN ARISES OUT OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE I.T. ACT, 1961 FOR A.Y. 2014-15. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) IS CORRECT IN DELETING THE DISAL LOWANCE OF RS.5,30,300/- MADE U/S.14A R.W.R. 8D RELYING ON DECISION OF HON'B LE ITAT IN ASSESSEE'S OWN CASE FOR AY 2013-14 DELETING QUANTUM ADDITION O N THE SAME ISSUE WITHOUT APPRECIATING THE FACT THAT THIS DECISION IS NOT ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IS FILED BEFORE VARIO US AUTHORITIES? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) WAS CORRECT IN DELETING THE DIS ALLOWANCE WITHOUT APPRECIATING THE FACT THAT THE AUDITORS OF THE ASSE SSEE VIDE COL. 11 OF ITA 2656/MUM/2018 NAVYUG KRISHI SADHAN PVT LTD 2 FORM NO. 3CA OF AUDIT REPORT U/S. 44AB WORKED OUT D ISALLOWANCE AT RS. 62,33,780/-? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS CORRECT IN DELETING THE DISAL LOWANCE OF RS.5,30,300/- MADE U/S. 14A R.W.R. 8D, WHILE THE ASSESSEE HAS EAR NED EXEMPT INCOME. 3. THE FACTS IN BRIEF ARE THAT DURING THE ASSESSMEN T PROCEEDINGS, ASSESSEE EARNED DIVIDEND OF ` 51,04,491/-, WHICH WAS CLAIMED AS EXEMPT U/S. 10 O F THE INCOME TAX ACT, 1961. THE ASSESSEE MADE SUO MO TO DISALLOWANCE OF ` 85,000/- U/S. 14A OF THE ACT. ACCORDING TO THE AO, THE ASSESSEE HAS NOT CALCULATED THE DISALLOWANCE IN TERMS OF SECTION 14A READ WITH RULE 8D, AND THEREFORE, REJECTED THE CONTENTIONS OF THE ASSESSEE . THE LD AO APPLIED THE PROVISIONS OF SECTION 14A OF THE ACT AND CALCULATED THE DISALLOWANCE OF ` 62,33,780/- COMPRISING OF ` 57,19,780/- U/R. 8D(2)(II) AND ` 5,14,000 U/R. 8D(2)(III) AND AFTER MAKING ALLOWING DEDUCTION IN R ESPECT OF SUO MOTTO DISALLOWANCE OF RS. 85,000/- MADE A NET ADDITION OF ` 61,48,780/- TO THE INCOME OF THE ASSESSEE AND FRAMED ASSESSMENT U/S. 1 43(3) OF THE ACT, DATED 19.09.2016. 4. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2013-1 4, WHICH IS REPRODUCED IN PARA 6 OF THE APPELLATE ORDER. ITA 2656/MUM/2018 NAVYUG KRISHI SADHAN PVT LTD 3 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THE PRESENT CASE ALSO THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL, RESERVES AND SURPLUS ARE MORE THAN THE INVESTMENTS MADE IN SHARES AND SECURITIES AND, THER EFORE, DISALLOWANCE U/R. 8D(2)(II) IS NOT CALLED FOR. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), WHICH HAS BEEN PASSED FOLLOWING THE DEC ISION OF THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE. SO FAR AS DISALLO WANCE U/R 8D(2)(III) IS CONCERNED, THE ASSESSEE HAS ITSELF DISALLOWED A SUM OF ` 85,000/-. THE LEARNED CIT(A) DELETED THE DISALLOWANCE AS MADE BY THE AO U/R 8D(2)(III) BY FOLLOWING THE CO-ORDINATE BENCH DECISION IN THE CAS E OF THE ASSESSEE FOR A.Y. 2013-14 BY HOLDING THAT INVESTMENT IN SUBSIDIARY AN D GROUP COMPANIES ARE TO BE EXCLUDED WHILE CALCULATING DISALLOWANCE U/S. 14A READ WITH RULE 8D(2(III), AS THE PURPOSE OF INVESTMENT WAS TO GAIN CONTROL OV ER THE SUBSIDIARY. WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE C IT(A) AS THE SAME IS AGAINST THE DECISION MADE BY THE HONBLE APEX COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT 402 ITR 640 . IN OUR OPINION, THE AO HAS RIGHTLY COMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(II) AND MADE THE DISALLOWANCE ACCORDINGLY. WE, ARE THEREFORE, INCLINED TO SET AS IDE THE FINDINGS OF THE CIT(A) ON THIS ISSUE AND UPHOLD THE ORDER OF THE AO . THE AO IS DIRECTED TO ALLOW THE DEDUCTION OF SUO-MOTO DISALLOWANCE OF EXP ENSES OF RS.85,000/- FROM THE DISALLOWANCE AS MADE U/S. 14A R.W.R 8D(2)( III). THIS GROUND IS PARTLY ALLOWED. ITA 2656/MUM/2018 NAVYUG KRISHI SADHAN PVT LTD 4 6. THE ISSUES RAISED IN GROUND NOS. 2 AND 3 ARE CON NECTED TO GROUND NO.1. SINCE WE HAVE ALREADY DECIDED THE ISSUE PARTLY IN F AVOUR OF THE ASSESSEE, GROUND NOS. 2 & 3 NEED NOT BE ADJUDICATED. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7 TH JUNE, 2019 SD/- SD/- (SANDEEP GOSAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 27 TH JUNE, 2019 SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI