APPLICOMP (INDIA) LTD, MUMBAI V. DCIT RG 3(1), MUMBAI

ITA 3516/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0622 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 142(1); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 3516 / MUM/ 20 1 2 ( / AS SESSMENT YEAR: 2008 - 09 ) M/S APPLICOMP (INDIA) LTD., 171 - C, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021 / VS. DCIT RANGE - 3(1), MUMBAI ./ ./ PAN/GIR NO. : AACCA 9547 R ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 09 - 02 - 2018 / DATE OF PRONOUNCEMENT : 09.02 . 201 8 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 27.02 .201 2 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] . R ELEVAN T TO THE ASSESSMENT YEAR 2008 - 09 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - THE GROUNDS OF APPEAL SET OUT BELOW ARE WITHOUT PREJUDICE TO EACH OTHER: ASSESSEE BY : SHRI MAYANK CHAUHAN (AR) REVENUE BY: SHRI RAJESH KUMAR YADAV (DR) ITA. NO.3516 /M/2012 A.Y. 2008 - 09 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF THE SUM OF RS.55,90,110/ - MADE UNDER THE PROVISIONS OF SECT ION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 AND TREATING THE SAME AS EXPENSES INCURRED FOR EARNING EXEMPT INCOME BY REJECTING THE EXPLANATION GIVEN BY THE APPELLANT WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF IN COME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. 2.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LD. AOS ACTION OF ADDING A SUM OF RS.55,90,110/ - BEING THE AMOUNT O F EXPENSE DISALLOWED BY HIM U/S 14A R.W.R. 8D, TO THE BOOK PROFIT FOR THE PURPOSE OF S.115JB OF THE INCOME TAX ACT, 1961 WHICH IS WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 14A(2), 14(A)(3) AND RULE 8D ARE DEEMING PROVISIONS AND THE SAME CANNOT BE EXTENDED TO PROVISIONS OF SECTION 115JB OF THE ACT. THE APPELLANT CRA VES LEAVE TO ADD, AMEND, SUPPLEMENT, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE FILED ITS RETURN OF INCOME ON 28 .09.20 08 DECLARING TOTAL TAXABLE INCOME TO THE TUNE OF RS. 9,41,62,411/ - BEFO RE SET - OFF OF BROUGHT FORWARD UNABSORBED LOSSES/UNABSORBED DEPRECIATION. THE CASE WAS SELECTED FOR SCRUTINY , THEREAFTER, THE NOTICE U/S 143(2) OF THE I.T. ACT, 1961 DATED 12.08.2009 WAS ISSUED AND SERVED UPON THE ASSESSEE. A NOTICE U/S 142(1) OF THE ACT WA S ALSO ISSUED. THE ASSESSEE HAS SHOWN THE INVESTMENT TO THE TUNE OF RS.36,24,73,620/ - AS ON 31.03.2008. THERE WAS NO DIVIDEND INCOME DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE UTILIZED INTEREST BEARING FUNDS FOR MAKING INVESTMENT. THE ASSESSEE HAS SHOWN THE INVESTMENT TO THE TUNE OF RS.44,45,72,220/ - AND ITA. NO.3516 /M/2012 A.Y. 2008 - 09 3 36,24,73,620 AS ON 01.04.2007 & 31.03.2008 RESPECTIVELY. THE SAID INVESTMENT WAS IN THE NATURE OF INVESTMENT IN THE SHARES WHICH GIVE RISE TO EXEMPT INCOME. T HE ASSESSEE WAS HAVING THE INTEREST FREE FUND TO THE TUNE OF RS.140.7 CRORES AS ON 31.03.2008 AS AGAINST THE INTEREST BEARING SECURED LOAN TO THE TUNE OF RS.366.2 CRORES. THE FUND TO THE TUNE OF RS.519.6 CRORES WAS USED IN THE FIXED ASSETS AS ON 31.03.200 8. IN VIEW OF THE SAID DATA AND TOTAL INVESTMENT TO THE TUNE OF RS. 40,35,22,920 / - WAS CONSIDERED FOR APPLICATION OF PROVISION U/S 14A R.W. RULE 8D OF THE ACT . A CCORDINGLY , T HE AO DISALLOWED AN AMOUNT OF RS. 55,90,110/ - IN VIEW OF THE PROVISION U/S 14A OF TH E ACT AND ACCORDINGLY, THE BOOK PROFIT U/S 115JB OF THE ACT WAS ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 1,88,85,990/ - . I N VIEW OF THE PROVISION U/S 115JB OF THE ACT AN D RS. NIL IN VIEW OF THE NOR MAL PROVISION. THE ASSESSEE FILED AN APPEAL THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO , THEREFORE, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. I SSUE NO. 1 TO 2 : - 5 . BOTH THESE ISSUES ARE INTER - CONNECTED THEREFORE ARE BEING TAKEN UP TOGETHER FOR ADJUDI CATION. UNDER THESE ISSUES, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE OF A SUM OF RS.55,90,110/ - MADE IN VIEW OF THE PROVISION OF SECTION 14A OF THE I.T. ACT , 1961 R.W. RULE 8D OF THE ACT. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGU ED THAT THE ASSESSEE DID NOT EARNED THE EXEMPT INCOME THEREFORE PROVISION OF SECTION 14A R.W. RULE 8D OF THE ACT WAS NOT APPLICABLE UPON THE INVESTMENT IN VIEW OF THE LAW SETTLED IN ITA. NO.3516 /M/2012 A.Y. 2008 - 09 4 CASE OF CHEMINVEST LIMITED VS. CIT (TAX APPEAL 749 OF 2014) (DELHI HIGH C OURT) DATED 02.09.2015 . THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE LAW SETTLED IN THE CASE OF CIT VS. DELITE ENTERPRISES (TAX APPEAL 110 OF 2009) (MUMBAI HIGH COURT), SHREE SHYAMKAMAL FINANCE & LEASING CO.(P) LTD. VS. ITO (21 SOT 42) (MUMBAI ITAT), JCI T VS. HOLLAND EQUIPMENT CO. B.V. (3 SOT 810) (MUMBAI ITAT), CIT VS. M/S. LAKHANI MARKETING INC. (49 TAXMANN.COM 257) (PUNJAB HIGH COURT), CIT VS. CORRETECH ENERGY (P.) LTD. (2014) 223 TAXMANN 130 GUJ. HIGH COURT & CIT VS. WINSOME TEXTILE INDUSTRIES LTD. 31 9 ITR 204 PUNJAB HIGH COURT . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE REVENUE HAS PLACED RELIANCE UPON THE ORDER PASSED IN CIT(A) IN QUESTION. AFTER HEARING THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSING THE RE CORD. WE NOTICED THAT THE ASSESSEE DID NOT EARN EXEMPT INCOME IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAS SHOWED THE INVESTMENT TO THE TUNE OF RS. 36,24,73,620/ - . MERELY UTILIZATION OF FUND NOWHERE ATTRACT THE PROVISION U/S 14A R.W. RULE 8D OF THE AC T. THIS ISSUE HAS DULY BEEN COVERED BY DECISION OF THE HONBLE DELHI HIGH COURT IN ITA. NO. 749/2014 TITLE AS CHEMNIVEST LIMITED VS. CIT - 6 DATED 02.09.2015 . I N THE SAID CASE THE SUBSTANTIAL Q UESTION OF LAW WAS THAT WHETHER DISALLOWANCE U/S 14A OF THE ACT C AN BE MADE IN A YEAR IN WHICH NO EXEMPT HAS BEEN EARNED OR RECEIVABLE BY THE ASSESSEE. THE MATERIAL FINDING HAS BEEN GIVEN PARA 23 OF THE JUDGMENT IN WHICH THE HON BLE HIGH COURT OF THE DELHI WAS OF THE VIEW ITA. NO.3516 /M/2012 A.Y. 2008 - 09 5 THAT THE SECTION 14A OF THE ACT WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. HOWEVER, IN THIS REGARD SOME OTHER JUDGMENT HAS ALSO BEEN PASSED WHICH HAS BEEN MENTIONED ABOVE. NO DOUBT, THE FACTUAL POSITION IS THE SAME AND THE CASE OF THE ASSESSEE HAS DU LY BEEN COVERED BY DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMNIVEST LIMITED VS. CIT (SUPRA) . THEREFORE, THE PROVISION U/S 14A R.W. RULE 8D IS NOT APPLICABLE AND THE ADDITION OF RS.55,90,110 / - IS HEREBY ORDERED TO BE DELETED , AND ACCORDING LY NO DEMAND COULD BE RAISED AS PER THE PROVISION U/S 115JB OF THE ACT ALSO . ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF ASSESSEE. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 09 . 02 . 201 8 . SD/ - SD/ - ( G.S. PANNU ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 09 . 02 . 201 8 V.P. SINGH ITA. NO.3516 /M/2012 A.Y. 2008 - 09 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPON DENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI