DCIT- 3(3)(1), MUMBAI V. QUANT CAPITAL PVT. LTD., MUMBAI

ITA 3345/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7370 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Assessee Lawyers: DEEPAK M JAIN
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 3345 / MUM . /2018 ( ASSESSMENT YEAR : 20 1 4 1 5 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 19(2), MUMBAI . APPELLANT V/S QUANT CAPITAL PVT. LTD. 612 617, MAKER CHAMBERS IV NARIMAN POINT, MUMBAI 400 021 PAN AAACQ1646B . RESPONDENT REVENUE BY : SHRI D.G. PANSARI ASSESSEE BY : SHRI DEEPAK M. JAIN DATE OF HEARING 09 .0 7 .2019 DATE OF ORDER 26.07.2019 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 15 TH MARCH 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 8, MUMBAI, FOR THE ASSESSMENT YEAR 2014 15. 2 . THE ONLY DISPUTE IN THE PRESENT APPEAL IS WITH REGARD TO DELETION OF DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. 3 . BRIEF FACTS ARE, THE ASSESSEE, AS STATED BY THE ASSESSING OFFICER, IS A DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN 2 QUANT CAPITAL PVT. LTD. SHARES AND SECURITIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO ` 17,200. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A R/W RULE 8D SHOULD NOT BE MADE TOWARDS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE MAIN INTENTION BEHIN D INVESTMENT IN SUBSIDIARY IS FOR HOLDING CONTROLLING STAKE AND NOT EARNING DIVIDEND INCOME. FURTHER, IT WAS SUBMITTED , NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. THEREFORE, IT WAS SUBMITTED , NO DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD BE MADE. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO MAKE A DISALLOWANCE OF ` 84,55,299, UNDER RULE 8D(2)(III) TOWARDS ADMINISTRATIVE EXPENSES. THE DISALLOWANCE MADE UNDER SECTION 1 4A R/W RULE 8D WAS ALSO ADDED TO THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE ACT. BEING AGGRIEVED OF SUCH DISALLOWANCE/ ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD , LEARNED COMMISSIONER (APPEALS) FOUND THAT WHILE DECIDING IDENTICAL ISSUE IN CASE OF ASSESSEES HOLDING COMPANY VIZ. RELIANCE CAPITAL LTD. FOR THE A.Y. 2011 12 AND 2012 13, 3 QUANT CAPITAL PVT. LTD. THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING THE SAME, LEARNED COMMISSIONER (APPEALS) DIRECTED THE ASSESSING OFFICER TO COMPUTE DISALLOWANCE UNDER RULE 8D(2)(III) BY TAKING INTO ACCOUNT ONLY THOSE INVESTMENTS ON WHICH THE ASSESSEE HAD RECEIVED EXEMPT INCOME DURING THE YEAR . 5 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR VIEW, THE DIRECTION OF THE LEARNED COMMISSIONER (APPEALS) WITH REGARD TO THE COMPUTATION OF DISALLOWANCE UNDER SECTION 8D(2)(III) IS FULLY IN CONFORMITY WITH THE RATIO LAID DOWN IN THE SPECIAL BENCH DECISION OF THE TRIBUNAL, IN CASE OF CIT V/S VIREET INVESTMENT PVT. LTD., [2017] 82 TAXMANN.COM 415 (DEL.). IN THE AFORESAID DECISION, THE SPECIAL BENCH OF THE TRIBUNAL HAS HELD THAT WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(2)(I II), ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION CAN BE CONSIDERED. THAT BEING THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, GROUNDS RAISED ARE DIS MISSED. 6 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 26.07.2019 SD/ N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 26.07.2019 4 QUANT CAPITAL PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI