THACKER AND COMPANY LTD, MUMBAI V. ITO 2(3)(3), MUMBAI

ITA 3381/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9381 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 20-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGHLD
• Assessee Lawyers: DHARMESH SHAH LD
• Keywords: Business income; Business expenditure; Rule of consistency; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.3381/MUM/2019 ( / ASSESSMENT YEAR : 2013-14 ) THACKER AND COMPANY LIMITED 60, JATIA CHAMBERS DR. V.B. GANDHI MARG FORT, MUMBAI 400 001 / VS. INCOME TAX OF FICER - WARD 2(3)(3) ROOM NO.555, 5 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 %& ./ ./PAN/GIR NO. AAACT-3200-A ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : SHRI DHARMESH SHAH, LD. AR REVENUE BY : SHRI AMIT PRATAP SINGH, LD. DR / DATE OF HEARING : 05/08/2020 / DATE OF PRONOUNCEMENT : 17/08/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-6, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT-6/IT-39/2016-17 DATED 26/04/2019 ON FOLLOWING GROUNDS OF APPEAL: - THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O (ASSESSING OFFICER) IN CONSIDERIN G NET INTEREST INCOME OF RS.14,29,539/- AS INCOME FROM OTHER SOURCES IGNORIN G THE FACT THAT APPELLANT WAS A REGISTERED NBFC COMPANY SINCE 1998 AND FOR VARIOUS PRECEDING AND SUBSEQUENT ASSESSMENT YEARS HAD BEEN OFFERING THE INTEREST INC OME AS BUSINESS INCOME WHICH WAS ACCEPTED AS SUCH BY THE REVENUE IN ALL THE ASSE SSMENTS COMPLETED U/S 143(3) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF NOT ALLOWING THE BUSINESS EXPEN DITURE OF RS.27,75,500/- IN VIEW OF THE FACT THAT AO TREATED THE NET INTEREST INCOME AS INCOME FROM OTHER SOURCES THOUGH THE APPELLANT IS A NON-BANKING FINANCIAL COM PANY(NBFC) AND WIDELY HELD PUBLIC LTD. COMPANY WHICH NEEDED TO INCUR SUCH BASI C ADMINISTRATIVE EXPENSES FOR STATUTORY COMPLIANCES AND BUSINESS PURPOSES. 2.1 WITHOUT PREJUDICE AND ON THE FACTS AND CIRCUMST ANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT ALLOWING THE ADMINISTRATIVE EXPENDITUR E OF RS.27,75,500/- INCURRED STATUTORILY WHICH WAS TO BE ALLOWED IN THE HANDS OF A LISTED PUBLIC COMPANY AS BUSINESS EXPENDITURE. 3. WITHOUT PREJUDICE AND IN THE ALTERNATIVE, ON TH E FACTS AND CIRCUMSTANCES OF THE CASE AND ON MERITS THE LD. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE U/S 14A R.W.R. 8D OF THE ACT OF RS.9,15,011/-. AS EVIDENT, THE SOLE SUBJECT MATTER OF INSTANT APPE AL IS TREATMENT OF INTEREST INCOME EARNED BY THE ASSESSEE AND DISALLOW ANCE U/S 14A. 2. WE HAVE CAREFULLY HEARD THE ARGUMENTS ADVANCED B Y BOTH THE SIDES. WE HAVE ALSO PERUSED RELEVANT MATERIAL ON RE CORD INCLUDING DOCUMENTS PLACED IN THE PAPER-BOOK. OUR ADJUDICATIO N TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PA RAGRAPHS. 3.1 THE MATERIAL ON RECORD WOULD SHOW THAT AN ASSES SMENT WAS FRAMED AGAINST THE ASSESSEE FOR THE YEAR UNDER CONS IDERATION U/S 143(3) ON 22/03/2016 WHEREIN THE RETURNED INCOME OF RS.36. 96 LACS WAS ASSESSED AT RS.80.11 LACS. IT WAS PRIMARILY DUE TO DISALLOWANCE U/S 14A FOR RS.12.11 LACS AND IN VIEW OF THE FACT THAT INTE REST INCOME EARNED BY THE ASSESSEE WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 3 AS AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE AND NO EXPENDITURE WAS ALLOWED AGAINST THE SAME. 3.2 THE ASSESSEE IS STATED TO BE A RESIDENT CORPORA TE ENTITY AND A NON- BANKING FINANCIAL COMPANY (NBFC). IT HOLDS CERTIFIC ATE OF REGISTRATION AS NBFC SINCE 09/03/1998 FROM RBI, A COPY OF WHICH IS PLACED ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT TRA NSPIRED THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.60.56 LACS AN D INCURRED FINANCE COST OF RS.46.27 LACS. THE LD. AO OPINED THAT SINCE THE ASSESSEE DID NOT HAVE ANY BUSINESS OTHER THAN INCOME FROM HOUSE PROPERTY AND THE ASSESSEE HAS BEEN ALLOWED DEDUCTION U/S 24 WHICH WO ULD COVER ALL DEDUCTIONS, THE NET INTEREST INCOME OF RS.14.29 LAC S WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE . CONSEQUENTLY, OTHER BUSINESS EXPENSES CLAIMED BY THE ASSESSEE WERE NOT ALLOWED I N TOTO. 3.3 THE SECOND ISSUE PERTAINS TO DISALLOWANCE U/S 1 4A SINCE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.12.91 LACS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPUTED DISAL LOWANCE AT RS.2.95 LACS AND SUBMITTED THAT NO FRESH INVESTMENT S WERE MADE DURING THE YEAR AND NO EXPENDITURE WAS INCURRED TO EARN TH E EXEMPT INCOME. HOWEVER, NOT SATISFIED, LD. AO APPLYING RULE 8D, WO RKED OUT AGGREGATE DISALLOWANCE OF RS.12.11 LACS AND ADDED THE SAME TO TOTAL INCOME OF THE ASSESSEE. THE SAID DISALLOWANCE COMPRISED-OFF O F INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.10.46 LACS AND EX PENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.1.65 LACS. THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 4 3.4 ALTHOUGH THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE LD. CIT(A), HOWEVER IT FAILED TO MAKE EFFECTIVE REPRESENTATION ON VARIOUS DATES. THE ASSESSEE COULD FILE ONLY WRITTEN SUBMISSIONS VIDE R EPLY DATED 18/04/2019 WHICH WERE DULY CONSIDERED WHILE FRAMING THE APPELL ATE ORDER. THE ASSESSEES EXPLANATIONS COULD NOT CONVINCE LD. CIT( A) WHO UPHELD THE ACTION OF LD. AO IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. THE ADMINISTRATIVE EXPENSES AGGREGATING TO RS.27.75 LACS AS CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE WAS ALSO NOT ALLOWED. CONSEQUENTLY, SEPARATE DISALLOWANCE U/S 14A AS MADE BY LD. AO WOULD NOT BE JUSTIFIED AND THEREFORE, THE SAME WAS DELETE D. AGGRIEVED THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, LD. AR, DRAWING OUR ATTENTION TO ASSE SSEES FINANCIAL STATEMENTS, URGED THAT THE ASSESSEE WAS REGISTERED NBFC SINCE 1998 AND IT WAS IN THE BUSINESS OF ADVANCING LOANS AND T HEREFORE, THE INTEREST INCOME WOULD CONSTITUTE BUSINESS INCOME FOR THE ASSESSEE. IT HAS BEEN SUBMITTED THAT IN ALL THE PRECEDING AS WELL AS IN S UCCEEDING YEARS, THE INTEREST INCOME WAS ALWAYS BEEN REFLECTED AS BUSINESS INCOME AND THE SAID TREATMENT WAS NEVER DISTURBED BY THE REVENUE. IN SUPPORT, COMPUTATION OF INCOME FOR AYS 2011-12 & 2012-13 HAS BEEN PLACED ON RECORD. THE LD. AR FURTHER URGED THAT CONSEQUENTLY ALL EXPENDITURE INCURRED BY THE ASSESSEE DURING THE COURSE OF ITS B USINESS WOULD BE AN ALLOWABLE EXPENDITURE. THE LD. DR SUBMITTED THAT TH E ASSESSEE REMAINED NEGLIGENT IN ATTENDING THE APPELLATE PROCE EDINGS AND THE ADJUDICATION WAS DONE ON THE BASIS OF ASSESSMENT OR DER AND MATERIAL ON THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 5 RECORD AND THEREFORE, THE SAME WOULD NOT REQUIRE AN Y INTERFERENCE ON OUR PART. 5. UPON CAREFUL CONSIDERATION, WE CONCUR WITH LD. A RS SUBMISSIONS THAT THE ASSESSEE WAS REGISTERED AS NBFC WITH RBI A ND WOULD EARN INTEREST INCOME BY ADVANCING LOANS. THE ACTIVITY OF ADVANCING LOANS, IN SUCH A CASE, WOULD BECOME ASSESSEES BUSINESS AND N ATURALLY, THE INTEREST EARNED THEREUPON WOULD CONSTITUTE BUSINESS INCOME FOR THE ASSESSEE. IN FACT, IT IS THE PLEA OF LD. AR THAT SU CH INCOME WAS ALWAYS OFFERED TO TAX AS BUSINESS INCOME AND THE SAID TREATMENT WAS NEVER DISTURBED. THE RULE OF CONSISTENCY WOULD DEMAND THA T THEIR BEING NO CHANGE IN FACTS OR CIRCUMSTANCES, THE ACCEPTED POSI TION SHOULD NOT BE DISTURBED. SINCE THE ASSESSEE FAILED TO MAKE EFFECT IVE REPRESENTATION BEFORE LD. FIRST APPELLATE AUTHORITY, WE DEEM IT FI T TO REMIT THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR RE-ADJUDICATION IN TH E LIGHT OF ARGUMENTS PUT FORTH BY LD. AR BEFORE US. IF THE INTEREST INCOME H AS BEEN ACCEPTED TO BE THE BUSINESS INCOME IN ALL THE OTHER YEARS, THE SAI D TREATMENT SHOULD NOT BE DISTURBED IN THIS YEAR. CONSEQUENTLY, THE ASSESS EE WOULD BE ELIGIBLE TO CLAIM THE DEDUCTION OF BUSINESS EXPENDITURE, IF OTHERWISE FOUND IN ORDER. SINCE THE MATTER OF DISALLOWANCE U/S 14A WAS NOT ADJUDICATED BY LD. CIT(A) IN VIEW OF THE FACT THAT ENTIRE BUSINESS EXPENDITURE WAS DISALLOWED AS WELL AS CONFIRMED, THE SAME MAY ALSO BE RE-ADJUDICATED IN THE SET ASIDE PROCEEDINGS. THACKER AND COMPANY LIMITED ITA NO.3381/MUM/2019 ASSESSMENT YEAR: 2013-14 6 6. RESULTANTLY, THE APPEAL STANDS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED ON 17 TH AUGUST, 2020. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 17/08/2020 SR.PS, JAISY VARGHESE !'#' / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.