VIJAY STEEL CORPORATION P.LTD, MUMBAI V. DCIT 9(3), MUMBAI

ITA 3006/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6378 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUOTRA
• Assessee Lawyers: VIVEK JANI
• Keywords: Earning of tax free income; Condonation of delay; Rule 8D
• Section: 143(3); 14A; 6; 10

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE-PRESIDENT AND SHRI PAW AN SINGH JUDICIAL MEMBER ITA NO. 3006/MUM/2017 (ASSESSMENT YEAR 2011-12 ) VIJAY STEEL CORPORATION PVT LTD. 2, SENAPATI BHAWAN, GROUND FLOOR, 19 MEERAVAGH, SNANTACRUZ (WEST) MUMBAI-400054 PAN: AAACV3517E VS. DCIT-9(3), ROOM NO. 229/219 2 ND FLOOR, AAYKAR BHAWAN, M.K.ROAD, MUMBAI-400020 APPELLANT RESPONDE NT APPELLANT BY : SHRI VIVEK JANI (AR) RESPONDENT BY : SH RAJEEV GUBYOTRA (DR) DATE OF HEARING : 01.02.2019 DATE OF PRONOUNCEMEN T : 06.02.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER ( APPEAL S)- 21, MUMBAI DATED 21 ST AUGUST 2015 FOR ASSESSMENT YEAR 2011- 12, WHICH I N TURN ARISE FROM ASSESSMENT ORDER PASSED BY ASSESSING OFFICER ON 30 TH MARCH 2014 UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE HAS RAISED AS MANY AS FOUR GROUNDS OF APPEAL. HOWEVER, IN OUR CONSIDERED VIEW THE ONLY SUBSTANTIAL GROUND OF APPEAL ARE ; (I) WHETHER LEARNED CIT(A) ERRED IN ADDING EXPENSES ATT RIBUTABLE TO THE EARNING DIVIDEND INCOME OF RS. 20,07,706/- UNDER SECTION 14A READ WITH RULE 8D. (II) WHETHER LEARNED CIT(A) ERRED IN ADDING THE INCOME F ROM OTHER SOURCES OF RS. 2,89,131/-. 2 2. AT THE OUTSET OF HEARING THE LEARNED AR OF THE ASSE SSEE SUBMITS THAT HE IS NOT PRESSING GROUND NO.(II) , CONSIDERING THE CONTE NTION OF LEARNED AR OF THE ASSESSEE GROUND NO.(II) OF THE APPEAL IS DISMIS SED AS NOT PRESSED. 3. PERUSAL OF RECORD REVEALS THAT LEARNED COMMISSIONER (APPEALS) PASSED THE IMPUGNED ORDER ON 21 ST AUGUST 2015, HOWEVER, THE PRESENT APPEAL WAS FILED ONLY ON 24 TH APRIL 2017. THE REGISTRY OF THIS TRIBUNAL ISSUED A DEFECT MEMO TO THE ASSESSEE NOTIFYING THE ASSESSEE FOR NOT FILING PETITION FOR CONDONATION OF DELAY AND AFFIDAVIT IN SUPPORT THERE OF. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY IN FI LING THE PRESENT APPEAL. IN THE APPLICATION THE APPLICATION IT IS CONTENDED THAT THE ORDER OF LEARNED COMMISSIONER (APPEALS) WAS COMMUNICATED TO THE ASSE SSEE ON 7 SEPTEMBER 2014 AND THAT THE ASSESSEE REQUIRED TO FI LE APPEAL ON OR BEFORE 5 TH NOVEMBER 2015. THERE IS DELAY OF 522 DAYS IN FILIN G OF THE APPEAL. IT IS FURTHER CONTENDED THAT SH JAGADISH CHANDRA PALI WAL WAS LOOKING AFTER TAXATION AND ACCOUNTS OF THE ASSESSEE. SH JAGADISH CHANDRA PALIWAL WAS EX TEXTILE COMMISSIONER AND WAS FATHER OF MANAGING DIRECTOR OF THE ASSESSEE COMPANY. SH JAGADISH CHANDRA PALIWAL DIE D SUDDENLY ON 31 OCTOBER 2015. THE DIRECTORS AND OTHER MEMBERS OF HI S FAMILY WERE NOT AWARE ABOUT NOT FILING APPEAL BEFORE THE TRIBUNALS. IT WAS FURTHER IT CONTENDED THAT THE OFFICE OF ASSESSEE COMPANY WAS A LSO SHIFTED. THE CHANGE OF OFFICE ACCOMMODATION ALSO CAUSED CONSIDER ABLE DISTURBANCES RESULTING IN MISPLACED FILES, DOCUMENTS AND CONSEQU ENTIAL NON- 3 COMPLIANCE OF THE STATUTORY OBLIGATION. THE ASSESSE E PRAYED FOR CONDONING THE DELAY. THE APPLICATION OF THE ASSESSE E IS SUPPORTED BY THE AFFIDAVIT OF SH. NARENDRA CHANDRA PALIWAL, DIRECTOR OF THE ASSESSEE COMPANY. 4. CONSIDERING THE FACTS EXPLAINED IN THE AFFIDAVIT OF THE DIRECTOR OF THE ASSESSEE THAT THERE IS SUFFICIENT CAUSE FOR CONDON ING THE DELAY IN FILING THE APPEAL, WE ALLOW THE DELAY IN FILING THE PRESEN T APPEAL. 5. BRIEF FACTS LEADING TO ADDITION UNDER SECTION 14A R EAD WITH RULE 8D ARE THAT, DURING ASSESSMENT THE ASSESSING OFFICER FROM THE COMPUTATION OF INCOME THE ASSESSING OFFICER NOTED THAT ASSESSEE RE CEIVED DIVIDEND INCOME OF RS. 40,750 /-, WHICH WAS CLAIMED AS EXEM PT UNDER SECTION 10 (34) OF THE ACT. THE ASSESSING OFFICER ASKED THE AS SESSEE TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8 D SHOULD NOT BE MADE. THE ASSESSEE FILED ITS REPLY, IN REPLY THE AS SESSEE CONTENDED THAT THEY HAVE NOT INCURRED ANY AMOUNT DURING THE YEAR F OR RUNNING TAX-FREE INCOME AND THE ASSESSEE HAS NOT INCURRED ANY EXPEND ITURE FOR EARNING DIVIDEND INCOME, SO NO DISALLOWANCE CAN BE MADE UND ER SECTION 14A READ WITH RULE 8D. THERE IS NO NEXUS BETWEEN DIVIDE ND INCOME EARNED AND THE EXPENDITURE INCURRED. THE ASSESSEE IN ITS S UBMISSION ALSO FURNISHED THE WORKING OF DISALLOWANCE UNDER SECTION 14 A OF RS. 1,92,006 /-. THE CONTENTION OF THE ASSESSEE WAS NO T ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER INVOKED THE PROVISIO N OF RULE 8D AND 4 WORKED OUT THE DISALLOWANCE OF RS. 21,99,712 /- AGA INST RS. 1,92,006/- OFFERED BY ASSESSEE, THEREBY MADE THE ADDITION OF R S.20,07,706/-. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEALS) THE AC TION OF ASSESSING OFFICER WAS CONFIRMED. HENCE, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PRESE NT APPEAL BEFORE US. 6. WE HAVE HEARD THE SUBMISSION OF LEARNED AR OF THE A SSESSEE AND THE LEARNED AR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIOD TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSE E HAS EARNED DIVIDEND INCOME OF RS. 40,750/-. THE ASSESSING OFFICER DISAL LOWED THE AMOUNT OF RS. 21,99,712/- BY APPLYING THE METHOD PRESCRIBED U NDER RULE 8D. THE ASSESSEE RECEIVED CERTAIN DIVIDEND INCOME FROM INVE STMENT IN COMPANIES; THE ASSESSEE HAS NOT MADE ANY EXPENDITURE TO EARN S UCH INCOME. THE LEARNED AR FURTHER SUBMITS THAT IN ANY CASE, THE DI SALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D SHOULD NOT EXCEED TO THE AMOUNT OF EXEMPT INCOME. IN SUPPORT OF HIS SUBMISSION THE LEA RNED AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMENT PRIVATE LTD VERSUS CIT [372 ITR 69 4(DELHI)] AND THE DECISION OF HONBLE APEX COURT IN MAXOPP INVESTMEN T LTD VERSUS CIT IN CIVIL APPEAL NO. 104-106 OF 2015 DECIDED ON 12 FEBR UARY 2018. 7. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SU PPORTED THE ORDER OF AUTHORITIES BELOW. 5 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LIMIT ED IN ISSUE IN THE PRESENT IS TO THE EXTENT OF DISALLOWANCE UNDER SECT ION 14A, WHEN THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 40,750/- O NLY. THE HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMENT PRIVAT E LTD VERSUS CIT(SUPRA) HELD THAT BY NO STRETCH OF IMAGINATION SECTION 14A READ WITH RULE 8D BE INTERPRETED SO AS TO MEAN THAT ENTIRE TA X EXEMPT INCOME IS TO BE DISALLOWED. IT WAS FURTHER HELD THAT WINDOW FOR DISALLOWANCE AS INDICATED IN SECTION 14A, IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY ASSESSEE IN RELATION TO TAX EXEMPT INC OME. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME IS SURELY CANNO T SWALLOW THE ENTIRE AMOUNT. 9. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE DELHI HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D TO THE EXTENT OF EXEM PT INCOME EARNED BY ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION. HENCE, THE GROUND OF APPEAL RAISED B Y ASSESSEE IS ALLOWED. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 FEBRUARY 2 019. SD/- SD/- G.S. PANNU PAWAN SINGH VCE PRESEDENT JUDICIAL MEMBER MUMBAI, DATE: 06.02.2019 6 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI