M/s DHFL Vysya Housing Finance Ltd., Bangalore V. DCIT, Bangalore

ITA 282/BANG/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1249 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PREDEEP KUMAR
• Assessee Lawyers: S ANNAMALAI
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NOS. 281 & 282/BANG/2016 (ASSESSMENT YEARS : 2010 11 & 2012 13) M/S. DHFL VYSYA HOUSING FINANCE LTD., NO. 3 JVT TOWERS, 8 TH A MAIN ROAD, SAMPANGIRIRAMNAGAR, NEAR HUDSON CIRCLE BANGALORE - 560028. PAN AABCV5640B .. APP ELLANT VS. DCIT, CIRCLE- 11 (1), BANGALORE. R ESPONDENT ASSESSEE BY : SHRI S. ANNAMALAI, ADVOCATE REV ENUE BY : DR. P. V. PREDEEP KUMAR, ADDL. C IT ( DR ) DATE OF HEARING : 18.07.2018 DATE OF PRONOUNCEMENT : 07.09.2018 O R D E R PER SHRI A. K. GARODIA, A.M. : BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND TH ESE ARE DIRECTED AGAINST A COMBINED ORDER OF THE CIT (A), 2 BENGALURU DATED 16.11.2015 FOR ASSESSMENT YEARS 2010 11 & 2012 13. THESE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN BOTH YEARS BUT ONLY TWO COMMON GRIEVANCES ARE THERE IN EACH OF THESE TWO YEARS. TH E FIRST GRIEVANCE IS THIS THAT THE INTEREST EARNED ON BANK DEPOSITS RS. 26,20,964/ - IN A. Y. 2010 11 AND RS. 52,30,705/- IN A. Y. 2012 13 IS NOT ENTITLED TO B E INCLUDED IN BUSINESS INCOME FOR DETERMINING THE DEDUCTION U/S 36 (1) (VIII). TH E SECOND GRIEVANCE IS REGARDING DISALLOWANCE U/S 14A. ON THIS ISSUE, THE ASSESSEE HAS TWO ALTERNATIVE CLAIMS THAT THERE SHOULD BE NO DISALLOW ANCE U/S 14A AND ALTERNATIVELY, THIS IS THE ALTERNATIVE CLAIM THAT EVEN IF IT IS HELD THAT THERE HAS TO 2 ITA NOS. 281 & 282/BANG/2016 BE SOME DISALLOWANCE U/S 14A THEN ALSO, THIS SHOULD BE HELD THAT SUCH DISALLOWANCE SHOULD NOT EXCEED 0.5% OF INVESTMENT W HICH EARNED EXEMPT INCOME AND IN THIS MANNER, SUCH DISALLOWANCE IN EAC H YEAR SHOULD BE MAXIMUM RS. 2,526/-. 3. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT ON THE FIRST ISSUE, HE IS PLACING RELIANCE ON THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR A. Y. 2004 05 IN ITA NO. 1173/B/2011 DATED 28 .08.2014, COPY ENCLOSED WITH SYNOPSIS FILED BY HIM AND OUR ATTENTION WAS DR AWN TO PARA 9 OF THIS TRIBUNAL ORDER AND IT WAS POINTED OUT THAT THE TRIBUNAL HAS FOLLOWED ANOTHER TRIBUNAL ORDER RENDERED IN THE CASE OF CANFIN HOMES LTD. VS. JCIT AS REPORTED IN 103 TTJ 108 (BANG) APPROVED BY HONBLE KARNATAKA HIGH COURT AS PER THE JUDGMENT DATED 05.07.2010 IN ITA NO. 3159/2005, COPY ENCLOSED WITH SYNOPSIS FILED BY HIM. REGARDING THE SECOND GRIEVANCE, HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF R ELIANCE UTILITIES & POWER LTD. AS REPORTED IN 313 ITR 340 AND HE SUBMITTED TH AT AS PER THIS JUDGMENT, IF THE INTEREST FREE FUNDS ARE MORE THAN IT IS TO BE P RESUMED THAT INVESTMENTS ARE OUT OF SUCH INTEREST FREE FUNDS. IT WAS ALSO SUBMIT TED THAT IN A. Y. 2012 13, THERE IS NO DIVIDEND INCOME AND THEREFORE, IN THAT YEAR, THERE CAN BE NO DISALLOWANCE U/S 14A AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CHEMIINVEST LTD. VS. CIT AS REPORTED IN 378 ITR 33. REGARDING THE ALTERNATIVE CONTENTION, RELIANCE WAS PLACED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ACIT VS. VIREET IN VESTMENT PVT. LTD. AS REPORTED IN 165 ITD 27. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF LOWER AUTHORITIES ON BOTH ISSUES. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. REGARDING THE FIRST ISSUE, WE FIND THAT LEARNED CIT (A) HAS ALSO FOLLOWED THE SAME TRIBUNAL ORDER RENDERED IN THE CASE OF CANFIN HOMES LTD. VS. JCIT (SUPRA) BUT DECIDED IN FAVOUR OF THE ASSESSEE ABOUT IN RESPECT OF INTEREST EARNED ON GOVT. SECURI TIES AND DECIDED AGAINST THE ASSESSEE IN RESPECT OF INTEREST EARNED FROM BANK. B Y FOLLOWING THE SAME TRIBUNAL ORDER, IN ASSESSEES OWN CASE IN A. Y. 200 4 05, THE TRIBUNAL DECIDED BOTH ASPECTS IN FAVOUR OF THE ASSESSEE. RESPECTFULL Y FOLLOWING THIS TRIBUNAL 3 ITA NOS. 281 & 282/BANG/2016 ORDER, IN THE PRESENT TWO YEARS ALSO, WE DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE ON BOTH ASPECTS. 5. REGARDING THE SECOND ISSUE I.E. DISALLOWANCE U/S 14A, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT IN A. Y. 2012 13, NO DIVIDEND WAS RECEIVED AND THEREFORE, THERE CANNOT BE ANY DISALLOWANCE U/S 14A IN THAT YEAR AS PER THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMIINVEST LTD. VS. CIT (SUPRA) BUT FOR EXAMINING THIS FACTUAL ASPECT AS TO WHETHER THERE IS ANY DIVIDEND RECEIVED IN THIS YEAR OR NOT, THE MATTER H AS TO GO BACK TO AO FOR FRESH DECISION BECAUSE THERE IS NO FINDING OF LOWER AUTHO RITIES ON THIS ASPECT AND BEFORE US ALSO, EVIDENCE IN THIS REGARD IS NOT PROD UCED. HENCE IN A. Y. 2012 13, WE RESTORE THIS ISSUE TO THE FILER OF A.O. FOR FRESH DECISION IN THE LIGHT OF THIS DECISION OF HONBLE DELHI HIGH COURT. WE ORDER ACCO RDINGLY. 6. IN RESPECT OF DISALLOWANCE U/S 14A IN BOTH YEARS , IT WAS SUBMITTED THAT THERE SHOULD NOT BE ANY DISALLOWANCE BECAUSE OWN FUNDS AN D INTEREST FREE FUNDS ARE MORE THAT INVESTMENTS AND RELIANCE WAS PLACED ON TH E JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA). IN THIS REGARD, WE FIND THAT THIS JUDGMENT IS IN THE CONTEXT OF DISALLOWANCE OF INTEREST U/S 36 (1) (III) AND HENCE , IN OUR CONSIDERED OPINION, THIS JUDGMENT IS NOT APPLICABLE WHEN THE DISPUTE IS REGARDING DISALLOWANCE U/S 14A BECAUSE U/S 14A READ WITH RULE 8D, IN CASE OF M IXED FUNDS, IF THE ASSESSEE AND REVENUE ARE NOT ABLE TO ESTABLISH DIRE CT NEXUS, PROPORTIONATE DISALLOWANCE IS TO BE MADE. HENCE, ON THIS ASPECT, THERE IS NO MERIT IN THE ARGUMENT OF THE LEARNED AR OF THE ASSESSEE AND THE SAME IS REJECTED. 7. REGARDING THE ALTERNATIVE CONTENTION OF RESTRICT ING THE DISALLOWANCE BY CONSIDERING ONLY THOSE INVESTMENTS ON WHICH, DIVIDE ND WAS RECEIVED, WE RESTORE THE MATTER TO THE FILE OF AO FOR A FRESH DE CISION IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDE RED IN THE CASE OF ACIT VS. VIREET INVESTMENT PVT. LTD. (SUPRA). 4 ITA NOS. 281 & 282/BANG/2016 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE ME NTIONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 07.09.2018. MS* COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.