DCIT 14(3)(1), MUMBAI V. ROOFTOP INFRA PROJECTS P.LTD, MUMBAI

ITA 3481/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2472 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: AJAY R SINGH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3481/M/2015 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX-14(3)(1), ROOM NO.455, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 VS. M/S. ROOFTOP INFRA PROJECTS PVT. LTD., 1 ST FLOOR, CAPRI BUILDING, ANANT KANEKAR MARG, BANDRA EAST, MUMBAI 400 051 PAN: AADCR6244H (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY R. SINGH, A.R. REVENUE BY : SHRI B.S. BIST, D.R. DATE OF HEARING : 17.10.2016 DATE OF PRONOUNCEMENT : 21.10.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 11.03.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) IN DELE TING THE DISALLOWANCE OF RS.1,93,69,565/- WHICH WAS MADE BY THE ASSESSING OF FICER (HEREINAFTER REFERRED TO AS THE AO) UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE COMPANY HAD INVESTED IN EQUITY SHARES OF ITS GROUP COMPANIES TO THE TUNE OF RS.18,09,33,700/-. THE ASSESSEE SUBMITTED THAT IT WAS A STRATEGIC INVESTMENT WHICH WAS MADE FOR TH E PURPOSE OF CONTROLLING INTEREST/STAKE IN THE GROUP CONCERNS AND THAT NO DI VIDEND INCOME WAS EARNED DURING THE YEAR. THE AO, HOWEVER, REJECTED THE ABOV E CONTENTIONS OF THE ITA NO.3481/M/2015 M/S. ROOFTOP INFRA PROJECTS PVT. LTD. 2 ASSESSEE AND COMPUTED THE DISALLOWANCE UNDER SECTIO N 14A AS PER RULE 8D OF THE INCOME TAX RULES AND ACCORDINGLY ADDED A SUM OF RS.1,93,69,565/- INTO THE INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWAN CE OF EXPENDITURE IN RELATION TO EARNING OF TAX EXEMPT INCOME. 3. IN APPEAL, THE LD. CIT(A), HOWEVER, DELETED THE DISALLOWANCE SO MADE BY THE AO RELYING UPON VARIOUS DECISIONS OF THE HIG HER AUTHORITIES AND OBSERVING THAT SINCE THE ASSESSEE HAD NOT EARNED AN Y EXEMPT INCOME FROM THE STRATEGIC INVESTMENTS MADE IN GROUP COMPANIES, HENC E, NO DISALLOWANCE WAS ATTRACTED IN THIS CASE UNDER SECTION 14A. BEING AG GRIEVED BY THE ABOVE ORDER, THE REVENUE HAS COME IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. WE FIND THAT THE CASE OF THE ASSESSEE IS S QUARELY COVERED BY THE DECISION OF THE VARIOUS HIGH COURTS. THE HONBLE D ELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PRIVATE LIMITED REPORTED IN 372 ITR 694 HAS HELD THAT SECTION 14 OF THE ACT OR RULE 8D CANNOT BE INTERPRE TED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME OF THE ASSESSEE IS TO BE D ISALLOWED. THAT THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. THIS PROPORTION OR PORTION OF THE TAX EXEMP T INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT OF TAX EXEMPT INCOME. SIM ILAR VIEW HAS BEEN TAKEN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF PCIT VS. EMPIRE PACKAGE PVT. LTD. IN ITA NO.415 OF 2015 DT.12/1/16 (P&H). THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S CH EMINVEST LTD. VS. CIT (2015) 61 TAXMAN.COM 118, WHEREIN ALSO THE ASS ESSEE HAD MADE STRATEGIC INVESTMENTS IN SUBSIDIARIES/GROUP COMPANIES FOR RET AINING CONTROL OVER THEM BUT HAS NOT RECEIVED ANY DIVIDEND INCOME FROM SUCH INVESTMENTS, HAS HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS R ECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR AND THAT THE EXPR ESSION DOES NOT FORM PART OF ITA NO.3481/M/2015 M/S. ROOFTOP INFRA PROJECTS PVT. LTD. 3 THE TOTAL INCOME, IN SECTION 14A OF THE ACT ENVISA GES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDED IN T HE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. ALMOST IDENTICAL ISSUE HAS BEEN TAKEN BY THE HONBL E ALLAHABAD HIGH COURT IN THE CASE OF CIT KANPUR VS. M/S. SHIVAM MO TORS PVT. LTD. IN ITA NO.88 OF 2014 VIDE ORDER DATED 05.05.2014; BY THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECTH ENERGY PVT. LTD. IN ITA NO.239 OF 2014 VIDE ORDER DATED 24.03.2014 AND BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. DELITE ENTERPRISES IN IT A NO.110 OF 2009 VIDE ORDER DATED 26.02.09. 5. THE LD. DR HAS NOT POINTED OUT ANY CONTRARY DECI SION TO THE ABOVE PROPOSITION. 6. IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES O F THE CASE, AS DISCUSSED ABOVE, AND IN THE LIGHT OF THE ABOVE DECISIONS OF T HE HIGHER COURTS, WHICH ARE OTHERWISE BINDING ON THIS TRIBUNAL, WE ARE OF THE V IEW THAT NO DISALLOWANCE UNDER SECTION 14A IS ATTRACTED IN THIS CASE. 7. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS THEREFORE UPHELD. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.10.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.10.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.3481/M/2015 M/S. ROOFTOP INFRA PROJECTS PVT. LTD. 4 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.