DCIT- CC- 3(3),CENTRAL RANGE-3, MUMBAI V. MGN AGRO PROPERTIES PVT. LTD. (SUCCESSOR TO WELSPUN FINTRADE PVT. LTD.), MUMBAI

ITA 3177/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7422 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 14-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Assessee Lawyers: MITESH N SHAH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3177/MUM/2018 ASSESSMENT YEAR: 2013 - 14 DCIT CC 3(3), CENTRAL RANGE - 3, ROOM NO. 1923, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021. VS. M/S MGN AGRO PROPERTIES PVT. LTD. (S UCCESSOR TO WELSPUN FINTRADE P LTD. ) , 9 TH FLOOR, B - WING, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400013. PAN NO. AAACW2877J APPELLANT RESPONDENT REVENUE BY : MR. D.G. PANSARI, DR ASSESSEE BY : MR. MITESH N. SHAH, AR DATE OF HEARING : 12/07/2019 DATE OF PRONOUNCEMENT : 22/07/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2013 - 14. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX - 14, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME T AX ACT 1961, (THE ACT). M/S MGN AGRO PROPERTIES ITA NO. 3177/MUM/2018 2 2. THE GROUND S OF APPEAL FILED BY THE R EVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 14A OF THE ACT R . W . R 8D(2)(III) TO THE EXTENT OF EXPENSES CLAIMED BY THE ASSESSEE, EVEN THOUGH THE CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 WHICH CLARIFY ON RULES OF 8D DOES NOT SPECIFY ANY SUCH LIMIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RESTRICTING THE B OOK PROFIT U/S 115JB(2) TO 50% OF EXPENSES CLAIMED WITHOUT GIVING ANY PROPER BASIS FOR ADOPTING THIS VALUE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WHILE DECIDING ON THE ISSUE OF ADDITION OF DISALLOWANCE U/S 14A TO BOOK PROFIT U/S 115JB(2) ERRED IN NOT CONSIDERING THE DECISION OF F BENCH OF ITAT, MUMBAI IN THE CASE OF VIRAJ PROFILES LTD. (2016) 156 ITD 72, MUMBAI WHICH IS SQUARELY COVERED IN FAVOUR OF THE REVENUE. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILE D ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013 - 14 ON 17.09.2012 DECLARING TOTAL INCOME OF RS.57,880/ - . THE ASSESSING OFFICER (AO) ARRIVED AT A TOTAL TAXABLE INCOME OF RS.3,51,54,530/ - UNDER NORMAL PROVISIONS AND BOOK PROFIT OF RS.18,38,31,897/ - U/S 115JB OF THE ACT. AS PER THE NORMAL PROVISION, TAX PAYABLE IS LESS THAN THE TAX CALCULATED U/S 115JB OF THE ACT. THEREFORE, THE AO CONSIDERED FOR TAX PURPOSE THE BOOK PROFIT OF RS.18,38,31,897/ - U/S 115JB OF THE ACT. WHILE ARRIVING AT THE BOOK PROFIT U/S 115JB, THE AO MADE A DISALLOWANCE OF RS.3,50,96,652/ - U/S 14A OF THE ACT. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS.4,43,81,857/ - AND HAS CLAIMED IT AS EXEMPT U/S 10(34) OF THE A CT. IN M/S MGN AGRO PROPERTIES ITA NO. 3177/MUM/2018 3 RESPONSE TO A QUERY RAISED BY THE AO TO SHOW CAUSE AS TO WHY THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULE S ) SHOULD NOT BE MADE, THE ASSESSEE FILED A CALCULATION SHEET ON THE ABOVE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID REPLY OF THE ASSESSEE AND MADE A DISALLOWANCE OF RS.3,50,96,652/ - U/S 14A R.W RULE 8D. BOTH IN THE NORMAL COMPUTATION AND ALSO IN BOOK PROFIT U/S 115JB, THE AO MADE AN ADDITION OF THE ABOVE AMOUNT OF RS.3,50,96,652/ - . 4. AGGRIEVED BY THE OR DER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). IN THE ORDER DATED 01.02.2018, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE WHICH IS REPRODUCED BELOW: SO FAR AS THE THIRD GROUND OF APPEAL CHALLENGING THE ADDITION OF A MOUNT DISALLOWED UNDER SECTION 14A OF THE IT ACT TO THE BOOK PROFIT IS CONCERNED, I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT THAT THE SAME CANNOT BE DONE. IN VIEW OF THE DECISION OF SPECIAL BENCH OF TRIBUNAL, DELHI IN CASE OF ACIT V VIREET INVE STMENT PVT. LTD. [2017] 82 TAXMANN.COM 415 (DELHI - TRIB.) (SB) IT IS HELD THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S. 14A OF THE ACT R.W. RUL E 8D OF THE RULES. IN THE CASE OF RELIANCE NATURAL RESOURCES LTD FOR AY 2009 - 10, VIDE ORDER DATED 11/08/2017, ITAT MUMBAI HAS UPHELD THE ADDITION OF 10% OF DIVIDEND INCOME WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. IN THE YEAR UNDER CONSIDERAT ION, THE APPELLANT HAS EARNED RS.4,43,81,857 AS EXEMPT INCOME. 10% OF THIS AMOUNT WILL EXCEED THE TOTAL EXPENSES DEBITED BY THE APPELLANT. THEREFORE, CONSIDERING THE OTHER INCOME, 50% OF TOTAL EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT I.E. RS.14,19,0 92 IS DIRECTED TO BE ADDED M/S MGN AGRO PROPERTIES ITA NO. 3177/MUM/2018 4 TO BOOK PROFIT UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB (2) OF THE ACT. THIS GROUND OF APPEAL IS, ACCORDINGLY, PARTLY ALLOWED. 5. BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE AO AND REITERATES THE GROUNDS OF A PPEAL. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF VIREET INVESTMENT (P.) LTD . (SUPRA), THE QUESTION B EFORE THE TRIBUNAL IS, WHETHER THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO EXEMPT INCOME AS CONTEMPLATED IN CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB(2) COULD BE ARRIVED AT BY RESORTING TO PROVISIONS OF SECTION 14A OR NOT. THE SPECIAL BENCH OF THE TRIBUNAL IN THE ABOVE CASE HELD THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED U/S 14A R.W. RULE 8D. WE FIND THAT THE LD. CIT(A) IN THE INSTANT CASE HAS RIGHTLY RELIE D ON THE ABOVE DECISION AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE WHICH HAS BEEN EXTRACTED AT PARA 4 HEREINABOVE. WE CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE RE VENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 22/07/2019. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER M/S MGN AGRO PROPERTIES ITA NO. 3177/MUM/2018 5 MUMBAI ; DATED: 22/07/2019 RAHUL SHARMA, SR. P.S. 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI