BOMBAY REAL ESTATE DEVELOPEMENT CO. P.LTD, MUMBAI V. DCIT CIR 1(1)(1), MUMBAI

ITA 2972/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7906 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2972/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13) BOMBAY REAL ESTATE DEVELOPMENT CO. PVT. LTD. NOSHIRWAN MANSION, 3 RD FLOOR, HENRY ROAD, COLABA, MUMBAI - 400 039 / VS. DY. CIT, CIRCLE - 1(1)(1), MUMBAI ./ ./ PAN/GIR NO. AAACB 2092 E ( / AP PELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DEEPAK TRALSHAWALA / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 12.10.2017 / DATE OF PRONOUNCEMENT : 13.12 . 2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 13.02.2017 AND PERTAINS TO THE ASSESSMENT YEAR 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS U NDER: 2 ITA NO. 2972/MUM/2017 (A.Y. 2012 - 13) BOMBAY REAL ESTATE DEVELOPMENT CO. PVT. LTD. VS. DY. CIT 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF A SUM OF RS. 28.30.611/ - UNDER THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 A) WITHOUT CONSIDERI NG THE FACTS OF THE CASE AND VARIOUS JUDGMENTS QUOTED BY THE APPELLANTS B) WITHOUT CONSIDERING THE FACT THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE TAX FREE INCOME C) EVEN AFTER ACCEPTING THE FACT THAT THE INVESTMENTS IN MUTUAL FUNDS ARE MADE OUT OF OWN FUNDS AND NOT OUT OF BORROWED FUNDS. 2. HENCE, THE TOTAL INCOME BE REDUCED BY RS. 28,30,611/ - AND THE INCOME U/S 115JB BE CONSIDERED AT RS. 13,05,103/ - ONLY THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AND AMEND THE ABOVE GROUND OF APPEAL AS THE OCCASION MAY DEMAND OR CIRCUMSTANCES REQUIRE. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. UPON CAREFUL CONSIDERATION, I FIND THAT THE DIVISION BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN I T A NO. 6561/MUM/2014 FOR ASSESSMENT YEAR 2010 - 11 VIDE ORDER DATED 06.09.2017 HAS HELD AS UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, MATERIAL PLACED BEFORE US AND THE ORDERS OF AUTHORITIES BELOW INCLUDING THE DECISIONS REFERRED TO AND RELIED UPON BY THE PARTIES AT THE TIME OF HEARING. FROM THE FACTS, WE OBSERVE THAT THE AO HAS NOT RECORDED ANY SATISFACTION WITH REFERENCE TO THE BOOKS OF ACCOUNTS, AS TO HOW THE EXPENDITURES WERE INCURRED IN RELATION TO THE EXEMPT INCOME AND INVOKED THE PROVISIONS OF SECTION 14A R.W.R 8D CITING TO BE IT IS MANDATORY WITH EFFECT FROM ASSESSMENT YEAR 2008 - 09. THE CASE OF THE I.T.A. 3 ITA NO. 2972/MUM/2017 (A.Y. 2012 - 13) BOMBAY REAL ESTATE DEVELOPMENT CO. PVT. LTD. VS. DY. CIT NO.6561/MUM/2014 ASSESSEE IS ALSO SUPPORTED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF TAIKISHA ENGG. IND IA LTD (SUPRA), IN WHICH IT HAS BEEN HELD THAT WHERE ORDINARY DISALLOWANCE MADE BY THE ASSESSEE IS FOUND TO BE UNSATISFACTORY ON EXEMPT INCOME, THE AO IS CAPABLE AND AUTHORIZED TO COMPUTE DEDUCTION UNDER RULE 8D, HOWEVER SATISFACTION OF THE AO HAS TO BE RE CORDED. THE RELEVANT OBSERVATIONS OF THE HON - BLE DELHI HIGH COURT ARE REPRODUCED BELOW (20 OF ORDER) : '20. HOWEVER, IN THE PRESENT CASE WE NEED NOT REFER TO SUB RULE (2) TO RULE 8D OF THE RULES AS CONDITIONS MENTIONED IN SUB SECTION (2) TO SECTION 14A OF THE ACT READ WITH SUB RULE (1) TO RULE 8D OF THE RULES WERE NOT SATISFIED AND THE ASSESSING OFFICER ERRED IN INVOKING SUB RULE (2), WITHOUT ELUCIDATING AND EXPLAINING WHY THE VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE WAS UNREASONABLE AND UNSATISFACTORY. WE DO NOT FIND ANY SUCH SATISFACTION RECORDED IN THE PRESENT CASE BY THE ASSESSING OFFICER, BEFORE HE INVOKED SUB RULE (2) TO RULE 8D OF THE RULES AND MADE THE RE - COMPUTATION. THEREFORE, THE RESPONDENT ASSESSEE WOULD SUCCEED AND THE APPEAL SHOULD BE DISMIS SED' 7. DURING THE COURSE OF HEARING, THE LD. AR ALSO OFFERED THAT DISALLOWANCE OF RS. 2 LAKHS MAY BE MADE IN THE LINE WITH THE DECISION OF THE CO - ORDINATE BENCH IN THE EARLIER YEAR IN ASSESSEE'S OWN CASE IN WHICH THE SIMILAR DISALLOWANCE WAS MADE ON LUMP SUM BASIS. THE LD. AR ALSO TOOK US THROUGH THE ANNUAL ACCOUNTS OF THE COMPANY SPECIFICALLY SCHEDULE - J, 'ADMINISTRATIVE AND OTHER EXPENSES' AND POINTED OUT THAT ALL THE EXPENSES WAS INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE EXCLUSIVELY AND CA NNOT BE SO ATTRIBUTED TO EXEMPT INCOME. HOWEVER, THE EXPENDITURE ON TELEPHONE, I.T.A. NO.6561/MUM/2014 POSTAGE RS.1,49,989/ - , RENT RS.6,00,000/ - AND ELECTRICITY CHARGES RS.1,91,484/ - OUT OF WHICH ONLY A SMALL FRACTION COULD BE DISALLOWED AS ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. IN VIEW OF THIS FACT AND SETTLED LEGAL POSITION, WE ARE INCLINED TO HOLD THAT INVOCATION OF PROVISION OF SECTION 14A R.W.R.8D(2) IS NOT JUSTIFIED WITHOUT RECORDING ANY SATISFAC TION WITH REFERENCE TO THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ON THE BASIS OF WHICH THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE AT ALL. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT A REASONABLE DISALLOWANCE COULD BE MADE ATTRIBUTING TO THE EARNING O F THE EXEMPT INCOME WHICH IN THE PRESENT CASE IS RS.2,50,000/ - . 6. SINCE THE FACTS ARE IDENTICAL, I FOLLOW THE AFORESAID DECISION AND DIRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO RS.2,50,000/ - . 4 ITA NO. 2972/MUM/2017 (A.Y. 2012 - 13) BOMBAY REAL ESTATE DEVELOPMENT CO. PVT. LTD. VS. DY. CIT 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 13.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./AS STT. REGISTRAR) , / ITAT, MUMBAI