DCIT 10(1), MUMBAI V. APEX REALTY P.LTD, MUMBAI

ITA 2855/MUM/2013

• Counselvise Citation: 285519914 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKRAM BATRA
• Keywords: Earning of tax free income; Revenue expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA 2855/MUM/2013 (ASSESSMENT YEAR : 2009-10) THE DCIT-10(1), R.NO.455, 4 TH FLOOR, AAYKAR BHAVAN,MK ROAD, MUMBAI 400 020 .... APPELLANT VS. M/S. APEX REALTY PVT. LTD. DHEERAJ ARMA, 6 TH FLOOR, ANANT KANKAR MARG, STATION ROAD, BANDRA EAST, MUMBAI 400 051 PAN: AACGA 4700J .... RESPONDENT ASSESSEE BY : SHRI VIKRAM BATRA REVENUE BY : SHRI VIJAY MEHTA DATE OF HEARING : 22/07/2015 DATE OF PRONOUNCEMENT : 31/08/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL IS PREFERRED BY THE REVENUE AND IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 22.01.2 013 OF CIT(A)- 21, MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2009 -10, WHICH IN- TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSES SING OFFICER DATED 22/11/2011 UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 2 ITA 2855/MUM/2013 (ASSESSMENT YEAR : 2009-10) ( IN SHORT THE ACT). THE REVENUE HAS RAISED THE F OLLOWING GROUNDS OF APPEAL:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) ERRED: 1. DIRECTION THE AO TO ALLOW THE ASSESSEE COMPANY TO TREAT THE INTEREST COST OF RS. 1,17,10,935/- AS REVENUE EXPENDITURE & ALSO IN IGNORING THE FACT THAT THE INTEREST BEARING BORROWED FUNDS WERE UTILIZED FOR T HE PURPOSE OF INVESTMENT IN A PARTNERSHIP FIRM M/S. G.K. DEVELOPERS. 2. ALLOWING TO CLAIM THE BUSINESS LOSS OF RS.14,14 , 116/- DERIVED AT AFTER ALLOWING THE CLAIM OF INTEREST PAID RS. 1,17,10,935 /- WHICH WAS PAID ON BORROWED FUNDS UTILIZED FOR INVESTMENT IN A PARTNER SHIP FIRM M/S. G.K. DEVELOPERS. 3. IN NOT APPRECIATING THAT THE ASSESSEE COMPANY W AS LIABLE FOR A DISALLOWANCE AS PER SECTION 14A OF THE ACT WHICH IS MANDATORY AN D THE AA HAS COMPUTED THE SAME AS PER THE ACT. 4. IN NOT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY UTILIZED ITS INTEREST BEARING FUNDS FOR THE PURPOSE OF EARNING EXEMPT INC OME. 5. THE PROVISIONS OF SECTION 14A ARE MANDATORY EVE N THOUGH THE EXEMPT INCOME IS RECEIVED OR NOT. 6. NOT APPRECIATING THAT THE ASSESSEE COMPANY IS A DIFFERENT ENTITY FOR INCOME TAX PURPOSE AND THAT THE PARTNERSHIP FIRM, M/S. G.K . DEVELOPERS, IN WHICH THE BORROWED FUNDS WERE INVESTED IS A DIFFERENT ENTITY FOR INCOME TAX PURPOSE. 7. NOT APPRECIATING THAT THE EXPENDITURE IN RELATI ON TO EXEMPTED INCOME TO BE DISALLOWED U/S.14A EVEN WHEN NO EXEMPTED INCOME IS EARNED DURING THE YEAR AS DECIDED IN CHEMINVEST LTD. VS. ITO (IAT, SPL. BE NCH, DELHI REPORTED IN 121 ITD 318) AND IN PRADEEP KAR S. ACIT [319 ITR 416 (K AR) 8. IGNORING THE FACT THAT THERE WAS A CLEAR CUT NE XUS BETWEEN INTEREST BEARING BORROWED FUNDS UTILIZED FOR EARNING EXEMPT INCOME B Y INVESTMENT IN THE PARTNERSHIP FIRM, AS DECIDED IN CIT VS. POPULAR VEH ICLES & SERVICES LTD. [325ITR 523(KAR.)] 9. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3 ITA 2855/MUM/2013 (ASSESSMENT YEAR : 2009-10) 2. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY DISPUTE RAISED IS WITH REGARD TO T HE ACTION OF THE CIT(A) IN DELETING A DISALLOWANCE OF RS.1,17,43,42 0/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 14A OF THE ACT. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMP ANIES ACT, 1956 AND IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF MAKING INVESTMENTS IN REAL ESTATE VENTURES. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD BORROWED UNSECURED LOANS OF RS.11 ,99,37,000/-, WHICH WERE INVESTED IN M/S. GK DEVELOPERS; A PARTNE RSHIP FIRM, AS PARTNERS CAPITAL CONTRIBUTION. AS PER THE ASSESSI NG OFFICER, ASSESSEE WAS ENTITLED TO THE SHARE OF PROFITS FROM THE PARTNERSHIP FIRM AS A PARTNER, WHICH WAS EXEMPT IN TERMS OF SEC TION 10(2A) OF THE ACT. THEREFORE, THE ASSESSING OFFICER CONCLUDE D THAT AN AMOUNT OF RS.1,17,43,420/- BEING EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME WAS LIABLE TO BE DISALLOWED IN TERMS OF SECTION 14A OF THE ACT. THE AFORESAID DISALLOWANCE OF RS.1,17 ,43,420/- WAS INCLUSIVE OF INTEREST EXPENDITURE ON LOANS AMOUNTIN G TO RS.1,17,10,935/-. THE CIT(A) HAS DELETED THE DISA LLOWANCE, INTER- ALIA, RELYING UPON THE JUDGEMENT OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS DELITE ENTERPRISES (ITA NO.1 10 OF 2009) DATED 26 TH FEBRUARY, 2009 ON THE GROUND THAT SINCE NO EXEMPT ION WAS CLAIMED BY THE ASSESSEE UNDER SECTION 10(2A) OF THE ACT AS THERE WAS NO TAX FREE INCOME, THE PROVISIONS OF SECTION 1 4A OF THE ACT WOULD NOT BE APPLICABLE. AGAINST THE AFORESAID DEC ISION OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4 ITA 2855/MUM/2013 (ASSESSMENT YEAR : 2009-10) 4. AT THE TIME OF HEARING, IT WAS A COMMON GROUND B ETWEEN THE PARTIES THAT THE JUDGEMENT OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF DELITE ENTERPRISES (SUPRA), WHICH HAS BEEN RELIED UPON BY CIT(A), IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. QUITE CLEARLY, IN THE INSTANT YEAR NO EXEMPTION HAS BEEN CLAIMED BY THE ASSESSEE UNDER SECTION 10(2A) OF THE ACT AS THERE W AS NO TAX FREE INCOME AND, THEREFORE, THE PROVISIONS OF SECTION 14 A OF THE ACT ARE NOT APPLICABLE. APART FROM THE AFORESAID, LD. REP RESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO THE FOLLOWING JUDGEMENTS TO SUPPORT THE CONCLUSION OF CIT(A) THAT IN CASE THERE WAS NO EX EMPT INCOME RECEIVED DURING THE YEAR, THE RECOURSE TO SECTION 14A OF THE ACT IS IMPERMISSIBLE. 1. CIT VS. LKHANI MARKETING INCL., 272 CTR 265 (P&H ) 2. CIT V. HOLCIM INDIA (P) LTD., 272 CTR 282(DEL) 3. CIT VS. CORRTECH ENERGY (P) LTD. 272 CTR 262 (GU J) IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY CON TRARY DECISION RELIED UPON BY LD. DEPARTMENTAL REPRESENTATIVE, WE DEEM IT FIT AND PROPER TO UPHOLD THE CONCLUSION DRAWN BY THE CIT(A) , WHICH IS IN CONFORMITY WITH THE RATIO OF THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT(SUPRA). THUS, ON THIS ASPECT, REVENUE F AILS. 5. ANOTHER ASPECT WHICH IS AGITATED IS WITH REGARD TO THE DIRECTION OF CIT(A) TO VERIFY AND ALLOW THE ASSESSEES CLAIM FOR CARRY FORWARD OF THE BUSINESS LOSS PERTAINING TO A.Y 2008-09. O N THIS ASPECT, WE 5 ITA 2855/MUM/2013 (ASSESSMENT YEAR : 2009-10) FIND NO MERIT IN THE GRIEVANCE OF THE REVENUE IN AS MUCH AS THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE FACT-SITUATION AND ALLOW THE CLAIM AS PER LAW. QUITE CLEARLY, THE ASSESSING OFFICER HAD DENIED THE CLAIM FOR CARRY FORWARD OF THE BUSIN ESS LOSS WITHOUT GIVING ANY COGENT REASONS. THE ORDER OF THE CIT(A) ON THIS ASPECT IS ALSO AFFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2015 SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI,DATED :31/08/2015 VM. COPY OF THE ORDER FORWARDED TO : / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS