ITO- 11(3)(4), MUMBAI V. YASH VIKRAM INFRASTRUCTURE PVT. LTD., MUMBAI

ITA 3133/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8418 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3133 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 THE I.T.O. - 11 (3)(4), ROOM NO. 429, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 4 00020 VS. M/S YASH VIKRAM INFRASTRUCTURE PRIVATE LIMITED, 662/8 KANYAKUMARI, SIR S.V. MARG, ANDHERI (EAST), MUMBAI - 400059 PAN: AAACY2465N (APPELLANT) (RESPONDENT) REVENUE BY : BHARTI SINGH ( DR ) ASSESSEE BY : NONE DATE OF HEARING: 16/12 /201 9 DATE OF PRONOUNCEMENT: 30 / 12 /201 9 O R D E R PER RAM LAL NEGI, JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30.03.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEA LS) - 18 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 2013 - 14 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN SECURITY AND SHARES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT RS. 21,48,990/ . THE AO PASSED ASSESSMENT ORDER U/ S 143 (3) OF THE ACT AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,61,41,710/ - AFTER MAKING INTER ALIA DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES (RULES) AMOUNTING TO RS. 1,38,52,391/ - . IN THE FIRST APPEAL, THE LD. CIT (A) RE STRICTED THE ADDITION U/S 14A READ WITH RULE 8D OF THE RULES TO THE EXEMPT INCOME 2 ITA NO. 3133 / MUM/2018 ASSESSMENT YEAR: 2013 - 1 4 AMOUNTING TO RS. 40,32,300/ - RECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 3. . THE REVENUE HAS C HALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT DISALLOWANCE U/S 14A HAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD PRESCRIBED IN RULE 8D OF THE I.T. RULES. WHEN ASSESSEE HIMSELF HAS DISALLOWED EXPENDITURE IN RELATION TO SECTION 14A DISALLOWANCE, WHICH IMPLIES THAT THERE IS EXEMPT INCOME EXPENDITURE AND THE CALCULATION OF EXPENDITU RE IS GUIDED BY SEC. 14A R.W.R. 8D AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN A JUDGMENT DELIVERED ON 12.08.2010 IN ITXA NO. 626/2010 & WRIT PETITION NO. 758/2010 IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO LTD., MUMBAI VS. DCIT 10(2), MUMBAI RULED IN FAVOUR OF THE REVENUE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) ERRED IN GIVING RELIEF TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED DURING THE YEAR BY IGNORI NG THE CBDT CIRCULAR NO. 5/2014 WHICH STATES THAT EVEN IF THERE IS NO EXEMPT INCOME, DISALLOWANCE U/S 14A IS TO BE TRIGGERED. 4. THIS CASE WAS FIXED FOR FINAL HEARING ON 16.12.2019. HOWEVER, ON THE SAID DATE WHEN THE CASE WAS CALLED OUT FOR HEARING, NON E APPEARED ON BEHALF OF THE ASSESSEE. WE NOTICE THAT EARLIER THE CASE WAS FIXED FOR 24.09.2019 AND 09.07.2019 BUT ON BOTH THE DATES, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE. ACCORDINGLY, WE DECIDED TO DISPOSE OF THE PRESENT APPEAL ON THE BASIS OF MAT ERIAL AVAILABLE ON RECORD AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE (DR). HENCE, WE ALLOWED THE LD. DR TO ARGUE THE CASE ON BEHALF OF THE DEPARTMENT. 5. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ASSESSMENT ORDER PASSED BY THE AO SUBMITTED THAT SINCE THE AO HAD COMPUTED THE DISALLOWANCE U/S 14 A READ WITH RULE 8D OF THE INCOME TAX RULES (THE RULES), IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN 3 ITA NO. 3133 / MUM/2018 ASSESSMENT YEAR: 2013 - 1 4 THE CASE OF GODREJ AND BOYCE, THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. 6. WE HAVE CAREFULLY GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. THE LD. CIT(A) HAS RESTRICTED THE ADDITION U/S 14A READ WITH RULE 8D BY FOLLOWING THE DECISION OF HONBLE DELH I HIGH COURT, PUNJAB AND HARYANA HIGH COURT AND THE DECISIONS OF THE COORDINATE BENCHES. THE OPERATIVE PART OF THE ORDER OF THE LD. CIT(A) READS AS UNDER : - 5.3.3. CONCLUSION: THE APPELLANT HAS EARNED EXEMPT INCOME OF RS. 40,32,300/ - . THE OWN FUNDS WERE LESS THAN THE INVESTMENTS. THEREFORE, DISALLOWANCE HAS TO BE MADE BOTH UNDER RULE 8D(2) (II) & 8D(2) (III). AS DISCUSSED ABOVE, RULE 8D IS MANDATORY IN APPLICATION. 5.3.4 HOWEVER, IT HAS BEEN HELD BY VARIOUS COURTS THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D SHOULD BE RESTRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR. THE DECISION ARE AS UNDER: - (I) JOINT INVESTMENT PVT. LTD. (HONBLE DELHI HIGH COURT) (372 ITR 694) (II) NIMBUS COMMUNICATIONS LTD. (HONBLE ITAT, MUMBAI ) 47 ITR (T) 496 (III) DAGA GLOBAL CHEMICALS PVT. LTD. (HONBLE ITAT, MUMBAI) (ITA NO. 5592/MUM/2012). (IV) PEST CONTROL INDIA PVT. LTD. VS. DCIT (MUM ITAT) (ITA NO. 5048/MUM/2016 & ITA NO. 5608/MUM/2016) (V) PR. CIT VS. M/S EMPIRE PACKAGE PVT. LTD. (PUNJAB & HARYANA HC) (ITA NO. 415 OF 2015) (VI) SANGHAVI EXPORTS INTERNATIONAL P LTD. VS. ACIT (ITA NO. 3405/MUM/2015) 5.3.5 THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS THE DISALLOWANCE U/S 14A R.W. RULE 8D IS RESTRICTED TO 4 ITA NO. 3133 / MUM/2018 ASSESSMENT YEAR: 2013 - 1 4 RS. 40,32,300/ - . THUS, DISALLOWANCE OF RS. 40,32 ,300/ - IS HEREBY SUSTAINED. 7. IN THE PRESENT CASE, THE ASSESSEE EARNED EXEMPT INCOME DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AMOUNTING TO RS. 40,32,300/ - . THE AO COMPUTED THE DISALLOWANCE AT RS. 1,38,52,391/ - . IN THE FIRST A PPEAL THE LD. CIT(A) RESTRICTED THE SAME TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. THE FINDINGS OF THE LD. CIT(A) ARE BASED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT. LTD. (SUPRA), HONBLE HIGH PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PR. CIT VS. M/S EMPIRE PACKAGE PVT. LTD (SUPRA) AND THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL. RECENTLY, I N THE CASE OF PR. COMMISSIONER OF INCOME TAX - 2 VS. CARAF BUILDERS AND CONSTRUCTIONS PVT. LTD. 414 IT R 122 (DELHI), THE HONBLE DELHI HIGH COURT HAS HELD THAT UPPER DISALLOWANCE U/S 14A READ WITH RULE 8D CANNOT EXCEED EXEMPT INCOME OF THE RELEVANT YEAR. SINCE, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COUR T AND THE PUNJAB & HARYANA HIGH COURT, AND THE DECISIONS OF THE MUMBAI TRIBUNAL REFERRED ABOVE, WE DO NOT FIND ANY INFIRMITY THEREIN TO INTERFERE WITH. ACCORDINGLY, WE UPHOLD THE DECISION OF THE LD. CIT (A) AND DISMISS THE APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2013 - 2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 30 / 12 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 5 ITA NO. 3133 / MUM/2018 ASSESSMENT YEAR: 2013 - 1 4 3. ( ) / THE C IT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI