DSP ADIKO HOLDINGS PVT. LTD., MUMBAI V. DCIT-CIRCLE- 2(1), MUMBAI

ITA 3512/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7645 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 23-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO. 3512 / MUM . /2018 ( ASSESSMENT YEAR : 2013 14 ) DSP ADIKO HOLDINGS PVT. LTD. 11 TH FLOOR, MAFATLAL CENTRE NARIMAN POINT, MUMBAI 400 021 PAN AAACA3438M . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1), MUMBAI . RESPONDENT ITA NO.3831/MUM./2018 ( ASSESSMENT YEAR : 2013 14 ) JT. COMMISSIONER OF INCOME TAX (OSD) CIRCLE 2(1)(1), MUMBAI . APPELLANT V/S DSP ADIKO HOLDINGS PVT. LTD. 11 TH FLOOR, MAFATLAL CENTRE NARIMAN POINT, MUMBAI 400 021 PAN AAACA3438M . RESPONDENT ITA NO.3832/MUM./2018 ( ASSESSMENT YEAR : 2013 14 ) DY . COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), MUMBAI . APPELLANT V/S DSP HMK HOLDINGS PVT. LTD. 11 TH FLOOR, MAFATLAL CENTRE NARIMAN POINT, MUMBAI 400 021 PAN AAACH1037K . RESPONDENT 2 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. ITA NO.3513/MUM./2018 ( ASSESSMENT YEAR : 2013 14 ) DSP HMK HOLDINGS PVT. LTD. 11 TH FLOOR, MAFATLAL CENTRE NARIMAN POINT, MUMBAI 400 021 PAN AAACH1037K . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1), MUMBAI . RESPONDENT ITA NO.3514/MUM./2018 ( ASSESSMENT YEAR : 2013 14 ) DSP INVESTMENT PVT. LTD. 11 TH FLOOR, MAFATLAL CENTRE NARIMAN POINT, MUMBAI 400 021 PAN AAACB1574H . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1), MUMBAI . RESPONDENT REVENUE BY : SHRI D.G. PANSARI ASSESSEE BY : SHRI MADHUR AGARWAL DATE OF HEARING 11.07.2019 DATE OF ORDER 19.07.2019 O R D E R PER BENCH THESE APPEALS IN RESPECT OF THREE DIFFERENT ASSESSE E S CONSIST OF TWO SETS OF CROSS APPEALS AND AN APPEAL BY THE ASSESSEE ALONE CHALLENGING THREE SEPARATE ORDERS OF EVEN DATE 12 TH MARCH 2018 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 4, MUMBAI, FOR THE ASSESSMENT YEAR 2013 14. 3 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. 2 . SINCE ALL THESE APPEALS INVOLV E COMMON ISSUE ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEA LS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. HOWEVER, FOR THE SAKE OF BREVITY, WE ARE DISCUSSING THE FACTS AS THEY APPEAR IN THE APPEAL RELATING TO ONE OF THE ASSESSEE , NAMELY , DSP ADICO HOLDINGS PVT. LTD. 3 . THE ONLY C OMMON DISPUTE IN ALL THESE APPEALS RELATES TO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D. 4 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR THE ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND ON MUTUAL FUND AND SHARES AMOUNTING TO ` 12,52,50,710. W HEREAS , IT HAS DISALLOWED ` 2,02,688, UNDER SECTION 14A OF THE ACT. THEREFORE, HE CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY DISALLOWANCE EXPENDITURE FOR EARNI NG EXEMPT INCOME SHOULD NOT BE MADE BY APPLYING THE PROVISION OF RULE 8D(2). W HILE OBJECTING TO DISALLOWANCE PROPOSED BY THE ASSESSING OFFICER THE ASSESSEE SUBMITTED , IT HAS ALREADY DISALLOWED THE DIRECT EXPENSES RELATING TO EXEMPT INCOME AS WELL AS PROPOR TIONATE DISALLOWANCE OF THE BALANCE EXPENDITURE AS A PROPORTION OF THE EXEMPT INCOME TO THE TOTAL INCOME. FURTHER, THE ASSESSEE SUBMITTED , UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE TRIBUNAL WHILE DECIDING THE ISSUE IN EARLIER 4 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. ASSESSMENT YEARS HAD RESTRI CTED THE DISALLOWANCE TO THE AMOUNT VOLUNTARILY DISALLOWED BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO COMPUTE DISALLOWANCE UNDER RULE 8D(2) AT ` 3,57,95,064. AFTER ADJUSTING THE DI SALLOWANCE ALREADY MADE BY THE ASSESSEE, THE ASSESSING OFFICER ADDED BACK AN AMOUNT OF ` 3,55,92,376. BEING AGGRIEVED WITH THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5 . THE LEARNED COMM ISSIONER (APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, GRANTED PARTIAL RELIEF TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO ` 5,34,326. 6 . SHRI MADHUR AGARWAL, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE TOTAL EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION IS ` 6,71,000. OUT OF WHICH , THE ASSESSEE APPORTIONED AN AMOUNT OF ` 2,02,688, TOWARDS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME AND DISALLOWED VOLUNTARILY UNDER SECTION 14A OF THE ACT . HE SUB MITTED, D URI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD TAXABLE INCOME OF MORE THAN ` 18 CRORE, WHEREAS , EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT IS ONLY ` 6.71 LAKH. THEREFORE, IN PROPORTION TO TAXABLE AND EXEMPT INCOME , THE ASSESSEE HAD MADE DISALLOWANCE UNDER SECTION 14A OF THE 5 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. ACT. HE SUBMITTED , FOLLOWING THE SAME METHOD OF APPORTIONING EXPENDITURE ON PROPORTION ATE BASIS BETWEEN THE TAXABLE AND EXEMPT INCOME, THE ASSESSEE HAD BEEN MAKING DISALLOWANCE UNDER SECTION 14A IN THE PAST ASSESSMENT YEAR S . HE SUBMITTED , WHILE DECIDING THE APPEAL S FOR THE ASSESSMENT YEAR 2008 09, 2010 11 AND 2011 12, THE TRIBUNAL HAS ACCEPTED THE METHOD FOLLOWED BY THE ASSESSEE AND RESTRICTED THE DISALLOWANCE TO THE AMOUNT VOLUNTARILY DISALLOWED . HE SUBMITTED , EVEN THE AFORESAID DECISION S OF THE TRIBUNAL HAS BEEN APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DISMISSING THE APPEALS PREFERRED BY THE DEPARTMENT. IN SUPPORT OF SUCH CONTENTION, HE FURNISHED BEFORE US THE DECISION S OF THE TRI BUNAL AND THE HON'BLE JURISDICTIONAL HIGH COURT. THUS, HE SUBMITTED , THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D SHOULD BE RESTRICTED TO THE QUANTUM OF DISALLOWANCE MADE BY THE ASSESSEE VOLUNTARILY. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON T HE OBSERVATIONS OF THE ASSESSING OFFICER. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THOUGH THERE IS NO DISPUTE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED BOTH TAXABLE AS WELL AS EXEMPT INCOME, HOWEVER, FACT REMAINS, THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF ALL SOURCES INCOME EARNED DURING THE YEAR IS ` 6.71 LAKH. EVEN OUT OF THE SAID AMOUNT, THE ASSESSEE HAS FURTHER 6 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. DISALLOWED ` 2,02,688, UNDER SECTION 14A, TOWARDS EARNING OF EXEMPT I NCOME. THE AFORESAID DISALLOWANCE WAS MADE BY THE ASSESSEE ON PROPORTIONATE BASIS KEEPING IN VIEW THE QUANTUM OF TAXABLE INCOME AND EXEMPT INCOME EARNED DURING THE YEAR. IT IS ALSO EVIDENT , ASSESSEE HAD BEEN FOLLOWING THE AFORESAID METHODOLOGY OF APPORTION ING EXPENDITURE BETWEEN THE TAXABLE AND EXEMPT INCOME FROM THE PAST SEVERAL YEARS AND ACCEPTING THE METHODOLOGY ADOPTED BY THE ASSESSEE, THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2008 09 IN ITA NO.7598/MUM./2011, DATED 22 ND JANUARY 2014, HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE VOLUNTARILY . THE SAME VIEW WAS EXPRESSED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL S IN ASSESSMENT YEAR S 2010 11, VIDE ITA NO. 7135/MUM./201 3 &ORS., DATED 22 ND APRIL 2016 AND IN THE ASSESSMENT YEAR 2011 12, VIDE ITA NO.5467/MUM./2014 & ANR., DATED 17 TH MARCH 2016. PERTINENTLY, THE AFORESAID DECISIONS OF THE TRIBUNAL HAVE BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 3 RD JUNE 2019 WHILE DISMISSING THE APPEAL S FILED BY THE REVENUE . IN ANY CASE OF THE MATTER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS FAR IN EXCESS OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. THEREFORE, UNDER NO CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER COULD HAVE BEEN SUSTAINED. THEREFORE, FOLLOWING THE DECISION S OF THE TRIBUNAL AND THE HON'BLE JURISDICTIONAL HIGH COURT IN THE PRECEDING ASSESSMENT 7 DSP ADIKO HOLDINGS PVT. LTD. DSP HMK HOLDINGS PVT. LTD. YEAR S , AS REFERRED TO ABOVE, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 14A R /W RULE 8D, SHOULD BE RESTRICTED TO THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE UNDER SECTION 14A OF THE ACT. THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND THOSE OF THE REVENUE ARE DISMISSED. 9 . FACTS BEING IDENTICAL, OUR AFORESAID DECISION WOULD APPLY MUTATIS MUTANDIS TO THE APPEALS RELATING TO THE OTHER TWO ASSESSEES WHICH ARE UNDER CONSIDERATION IN THE PRESENT ORDER. 10 . I N THE RESULT, ASSESSEES APPEALS ARE ALLOWED AND REVENUES APPEALS ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 19.07.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 19.07.2019 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