DCIT 1(3)(2), MUMBAI V. TIFCO HOLDINGS LTD, MUMBAI

ITA 2964/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5628 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 2964 /MUM/2017 ASSESSMENT Y EAR: 2012 - 13 THE DCIT 1(3)(2), ROOM NO. 540 5 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 VS. M/S TIFCO HOLDINGS LTD., 3 RD FLOOR, MANDIK HOUSE, COLABA, MUMBAI - 400001 PAN: AAACT4065F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI H.N. SINGH (CIT DR) ASSESSEE BY : SHRI BHADRESH DOSHI (A R) DATE OF HEARING: 30 /08 /201 8 DATE OF PRONOUNCEMENT: 20 / 11 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 23.01.2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) (FOR SHORT THE CIT (A)) - 2 , MUMBAI , FOR THE A S S ESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE APPELLANT/ ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF GRANTING LOANS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS.3,77,48,4000/ - .THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DE TERMINING THE TOTAL INCOME OF RS. 4,54,40,500/ - INTER ALIA MAKING ADDITION OF RS.73,18,104/ - U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES (RULES). IN THE FIRST APPEAL THE LD. CIT(A) PARTLY ALLOWED THE GROUND PERTAINING TO THE ADDITION IN QUESTION AND DI RECTED THE AO TO RECOMPUTE THE DISALLOWANCE U/S 14A OF THE EXPENDITURE ATTRIBUTABLE 2 ITA NO. 2964 / MUM/2017 ASSESSMENT YEAR: 2012 - 13 TO EXEMPT INCOME VIS - - VIS NON EXEMPT INCOME. AGAINST THE SAID FINDINGS OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3 . T HE REVENUE HAS CHALLENGED THE I MPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) IS RIGHT IN DIRECTING THE ASSESSING OFFICER TO REWORK THE DISALLOWANCE U/S 14A ON PROPORTIONATE BASIS, THEREBY GIVING RELIEF OF RS. 73,18,104/ - TO THE ASSESSEE, WHICH HAS THE IMPACT OF MAKING THE STATUTORY RULE 8D, REDUNDANT AND ENTERING INTO THE LEGISLATIVE REALM OF RE - DRAFTING THE MANDATORY RULE MADE BY PARLIAMENT? 2. WHETHER ON THE FACTS AND IN CIRC UMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) IS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSE BY RELYING ON THE DECISION OF HIS PREDECESSOR FOR AY. 2011 - 12, IN THE ASSESSEES OWN CASE, WITHOUT APPRECIATING THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT EACH ASSESSMENT YEAR IS A SEPARATE UNIT AND THUS A MISTAKE COMMITTED BY REVENUE IN EARLIER YEAR IS NOT A BINDING PRECEDENT TO BE FOLLOWED TO PERPETUATE THE ERROR EVEN IF IT LEADS TO INFRINGEMENT OF LAW LAID IN THE FORM OF RULE 8D.? 4. BEFORE US THE LD DEPARTMENTAL REPRESENTATIVE, RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT SINCE THE AO HAS COMPUTED THE ADDITION IN ACCORDANCE WITH THE PROVISIONS OF THE A CT, THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION. THE LD. DR FURTHER SUBMITTED THAT SINCE EA CH ASSESSMENT YEAR IS A SEPARATE UNIT THE LD. CIT(A) HAS RELIED ON THE FINDINGS OF THE THEN CIT(A) IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011 - 12. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT SINCE THE LD. CIT(A) HAS PASSED THE SAID ORDER FOLLOWING THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY IN ASSESSEES OWN APPEAL FOR THE ASSESSMENT YEAR 2011 - 12, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. THE LD. COUNSEL FURTHER SUBM ITTED THAT THE ITAT 3 ITA NO. 2964 / MUM/2017 ASSESSMENT YEAR: 2012 - 13 HAS DELETED THE ADDITIONS MADE U/S 14A READ WITH SECTION 8D OF THE RULES IN THE ASSESSMENT YEARS 2008 - 09 AND SAID FINDINGS WERE FOLLOWED IN THE SUBSEQUENT YEARS I.E., IN THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12. 6. WE NOTICE THAT THE C OORDINATE BENCH OF THE TRIBUNAL HAS DISMISSED THE REVENUES APPEAL HOLDING AS UNDER: THE AUTHORITIES BELOW HAVE NOT EXAMINED THIS ISSUE BY CONSIDERING THE FACT THAT THE INVESTMENT IN QUESTION ARE IN SISTER CONCERN AND ARE IN THE NATURE OF STRATEGIC INVES TMENT. HOWEVER, THE ASSESSEE ITSELF HAS MADE A DISALLOWANCE OF RS. 62.17 LAKHS UNDER SECTION 14A WHICH COVERS THE INTEREST EXPENDITURE OF RS. 50,58,468/ - FOR THE ASSESSMENT YEAR 2008 - 09, THEREFORE, NO FURTHER DISALLOWANCE IS CALLED FOR U/S 14A. SIMILARLY FO R THE ASSESSMENT YEAR 2009 - 10, THE ASSESSEE MADE SUO MOTU DISALLOWANCE OF RS. 50.58 LAKH U/S 14A NO FURTHER DISALLOWANCE IS CALLED FOR, 7. IN THE ASSESSMENT YEAR 2010 - 11, THE LD. CIT(A) HAD GIVEN A WORKING OF DISALLOWANCE ON PROPORTIONATE BASIS AND THE C OORDINATE BENCH UPHELD THE FINDINGS OF THE LD. CIT(A). SIMILARLY, THE COORDINATE BENCH DECIDED THE APPEAL OF THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2011 - 12 BY FOLLOWING THE DECISIONS RENDERED IN THE EARLIER ASSESSMENT YEARS. HOWEVER, WE NOTICE THAT THE LD. CIT (A) HAD NO OCCASION TO CONSIDER THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS COMMISSIONER OF INCOME TAX (CIVIL APPEAL NOS. 104 - 109 0F 2015) IN WHICH IT HAS BEEN HELD THAT DOMINANT PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MADE BY AN ASSESSEE MAY NOT BE RELEVANT AND IF EXPENDITURE IS INCURRED ON EARNING DIVIDEND INCOME, THAT MUCH OF THE EXPENDITURE HAS TO BE DISALLOWED . FURTHER, THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF JOINT INVESTMENTS VS. COMMISSIONER OF INCOME TAX, 372 ITR 694 (DELHI) IN WHICH IT HAS BEEN HELD THAT BY NO STRETCH OF IMAGINATION CAN SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX 4 ITA NO. 2964 / MUM/2017 ASSESSMENT YEAR: 2012 - 13 EXEMPT INCOME I S TO BE DISALLOWED. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) AND DIRECT THE AO TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF THE DECISIONS REFERRED ABOVE. WE FURTHER DIRECT THE AO TO AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING ORDER AFRESH. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2012 - 20 13 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOV. , 2018 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 20 / 11 / 201 8 ALINDRA, PS / 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, MUMBAI