DCIT 3(2)(2), MUMBAI V. NIPPON INVESTMENT & FINANCE COMPANY LIMITED, MUMBAI

ITA 3043/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0044 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Earning of tax free income; Revised return
• Section: 14A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 3043 /MUM/2016 ( / ASSESSMENT YEAR: 2010 - 11 ) DCIT 3(2)(2 ) ROOM NO. 674, 6 TH FLOOR , AAYAKAR BHAVAN , M. K. ROAD, MUMBAI - 4000 20 / VS. NIPPON INVESTMENT & FINANCE COMPANY LTD. 171, MITTAL COURT, 17 TH FLOOR, NARIMAN POINT, MUMBAI - 400021 ./ ./ PAN NO. AABCN1023E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SUMAN KUMAR / RESPONDENTBY : NONE / DATE OF HEARING : 2 6/02 /201 8 / DATE OF PRONOUNCEMENT : 28/02/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CI T (APPEAL) 8, MUMBAI DATED 18.01.16 F OR AY 201 1 - 12 ON THE GROUNDS MENTIONED HEREIN BELOW: - 1 'ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D.CIT(A) IS ERRED IN DELETING THE 2 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT ADDITION OF RS.3,24,95,4181 - MADE BY THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D(2) OF I.T.ACT 1961 IN THE INCOME AS PER NORMAL PROVISIONS OF INCOME TAX ACT,1961 AND BOOK PROFIT U/S.11 5.JB OF I. T. ACT. ' 2. 'ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS ERRED IN HOLDING THAT NO DISALLOWANCE U/S.14A CAN BE MADE AS THERE WAS NO EXEMPT INCOME DURING THE YEAR WHICH IS IN CONTRAVENTION TO CBDT'S CIRCULAR NO. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND INLAW, THE LD.CIT(A) IS ERRED IN HOLDING THAT AO HAS NOT RECORDED ANY REASON WHY HE IS NOT SATISFIED WITH THE POSITION TAKEN BY ASSESSEE THAT NO DISALLOWANCE U/S. 1 4A IS REQUIRED WITHOUT APPRECIATING FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO FOR DISALLOWANCE U/S. 14A TO THE ASSESSEE IMPLIES THAT THE AO WAS NOT SATISFIED WITH THE STAND TAKEN BY THE ASSESSEE.' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 5. 'THE AP PELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE /RESPONDENT IN SPITE OF SEVERAL CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND, LD. DR PRESENT IN THE COURT IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD . 3. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUS INESS OF TRADING IN PROPERTY AND SHARES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING ITS TOTAL INCOME OF RS.6,80,37,132/ - . LATER ON, A REVISED RETURN OF INCOME WAS ALSO FILED BY THE ASSESSEE ON 22.02.2013 THEREBY DECLARING ITS TOTAL INCOME OF RS.3,57,11,000/ - . THE AO, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, O BSERVED THAT THE A SSESSEE HAD MADE INVESTMENT T O THE EXTENT OF RS.47,62,63,590/ - AND CLAIMED DIVIDEN D INCOME OF RS.29,87,703/ - AS EXEMPT INCOME U/S.10(34) OF I.T. ACT AND MADE 4 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT NO DISA LLOWANCE U/S.14A. THE ASSESSEE WAS ASKED TO SUBMIT THE EXPLANATION BY THE AO IN THIS RESPECT. HOWEVER, THE AO WAS NOT SATISFIED WITH THE SUBMISSION S OF THE ASSESSEE AND WORK ED OUT THE DISALLOWANCE AS PER THE FORMULA SPECIFIED IN RULE 8D. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF RS.3,24, 95,418/ - U/S.14A AS PER RULE 8D WHILE COMPLETING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT AND DETERMINED THE TOTAL INCOME AT RS. 6,82,06,418/ - AND ADJUSTED BOOK PROFIT U/S.115JB OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES , DELETED THE DISALLOWANCE MADE BY AO U/S 14A OF THE I.T. A CT THEREBY PARTLY ALLOWING THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 TO 3 4 . THESE GROUND S RAISED BY THE REVENUE ARE INTER - CONNECTED AND INTER - RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITIONS MADE BY AO U/S 14A R.W.R. 5 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT 8D(2) OF THE I.T. ACT AND WHILE HOLDING THAT NO DISALLOWANCE U/S 14A CAN BE MADE AS THERE WAS NO EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THEREFORE WE THOU GHT IT FIT TO DISPOSE OF THESE GROUNDS BY THIS CONSOLIDATED ORDER. 5 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSA RY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT (A) IS CONTAINED IN PARA NO. 5.1.3 OF ITS ORDER AND THE SAME IS REPROD UCED BELOW: - 5.1.3 IN THE INSTANT CASE, IT IS SEEN THAT THE APPELLANT HAS RECEIVED NO DIVIDEND NOR HAS IT CLAIMED ANY EXEMPTION. THE ASSESSING OFFICER HAS ALSO NOT RECORDED ANY REASON WHY HE IS NOT SATISFIED WITH THE POSITION TAKEN BY THE APPELLANT THAT NO DISALLOWANCE UNDER S ECTION 14A IS REQUIRED. HE HAS ALSO NOT ESTABLISHED ANY NEXUS BETWEEN THE INTEREST PAID TO ANY INVESTMENT 6 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT INCOME FROM WHICH IT IS EXEMPT NOR IS THERE ANY EXPENDITURE CLAIMED THAT HAS BEEN CORRECTED BY THE ASSESSING OFFICER TO SUCH INVESTMENT OR TAX - EXEMPT INCOME. I FIND THAT THE RATIOS OF THE JUDGEMENTS CITED ABOVE APPLY IN FULL FORCE TO THE FACTS AND CIRCUMSTANCES OF THIS CASE. THEREFORE, THE DISALLOWANCE MADE UNDER SECTION 14A IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES , WE FIND THAT LD. CIT(A) HAS CLEARLY OBSERVED IN PARA NO. 5.1.2 THAT THE OBSERVATIONS RECORDED BY AO ARE FACTUALLY INCORRECT. THE LD. CIT(A) AFTER APPRECIATION OF DOC UMENTS, FURTHER HELD THAT THE AMOUNT OF RS. 29,87,703/ - CLEARLY REPRESENTS INTERESTS RECEIVED UNDER SCHEDULE - 10 TO THE BALANCE SHEET, WHICH POINTS OUT THAT THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME AND CLAIMED IT AS EXEMPT UNDER I.T. ACT. WHILE R EACHING TO THIS CONCLUSION, THE LD. CIT(A) HAS RELIED UPON SEVERAL JUDGMENTS AS MENTIONED IN HIS ORDER. 7 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT EVEN BEFORE US, LD. DR COULD NOT DEMONSTRATE THAT THE ASSESSEE HAS EARNED ANY EXEMPT INCOME DURING THE YEAR AND THEREFORE IN SUCH A SITUATION, IT IS A SETTLED LAW THAT UNTIL AND UNLESS THERE IS A RECEIPT OF EXEMPT INCOME FOR THE CONCERNED ASSESSMENT YEAR, SECTION 14A CANNOT BE INVOKED. THE CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY TAKING INTO CONSIDERATION THE SETTLED PROPOS ITION OF LAW AS LAID DOWN BY HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (2015) 378 ITR 33 DELHI . IN THE ABSENCE OF ANY NEW FACTS OR CIRCUMSTANCES BROUGHT BEFORE US TO CONTROVERT OR REVERT THE FINDINGS SO RECORDED BY THE CIT(A), WE SEE NO REA SON TO INTERFERE WITH THE WELL REASONED ORDER PASSED BY THE LEARNED CIT(A). IT IS ACCORDINGLY UPHELD AND THESE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. GROUND NO. 4 & 5 6. THESE GROUNDS ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 8 I.T.A. NO. 3043 /MUM/201 6 NIPPON INVESTMENT & FINANCE COMPANY LT 7 . IN THE NET RESU LT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB. 2018 SD/ - SD/ - (G. S. PANNU) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 28 . 02 .201 8 SR.PS. DHANANJAY / 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 FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI