WARTSILA INDIA LTD, NAVI MUMBAI V. DCIT 3(3), MUMBAI

ITA 3544/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3847 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 17-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2014
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: J D MISTRI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.3544/M/2014 (ASSESSMENT YEAR: 2005 - 2006 ) WARTSILA INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS WARTSILA INDIA LIMITED), KESAR SOLITAIRE, 21 ST FLOOR, SECTOR 19, PALM BEACH ROAD, SANPADA, NAVI MUMBAI 400 705. / VS. DCIT, CIRCLE 3(3), MUMBAI. ./ PAN : AAACW0345D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI J.D. MISTRI / RESPONDENT BY : SHRI ASGHAR ZAIN, VP , DR / DATE OF HEARING : 17.02.2016 / DATE OF PRONOUNCEMENT : 17.02.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 19.5.2014 IS AGAINST THE ORDER OF THE CIT (A) - 7, MUMBAI DATED 6.2.2014 FOR THE ASSESSMENT YEAR 2005 - 06. IN THIS APPEAL, ASSESSEE RAISED TWO EFFECTIVE GROUNDS (I) DISALLOWANCE OF EXPENSES AMOUNTING TO RS.38,68,322/ - U/S 14A R.W. RULE 8D OF THE ACT AND (II) DISALLOWANCE OF SET OFF OF LONG TERM CAPITAL LOSS OF RS. 98,13,766/ - . 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE FACTS OF THE CASE AND MEN TIONED THAT UNDER IDENTICAL CIRCUMSTANCES, TRIBUNAL DECIDED THE SIMILAR ISSUE, RELATING TO THE DISALLOWANCE OF EXPENSES U/S 14A R.W. RULE 8D, RAISED IN GROUND NO.1, FOR THE AY 2007 - 2008 IN ASSESSEES OWN CASE VIDE ITA NO.6065/M/2013, DATED 22.4.2015, WHERE IN THE TRIBUNAL HELD THAT THE DISALLOWANCE OF AT 2% OF THE EXEMPT INCOME IS APPROPRIATE. PARA 12 OF THE SAID TRIBUNALS ORDER (SUPRA) IS RELEVANT IN THIS REGARD AND THE SAME IS EXTRACTED AS UNDER: - 2 12. WE HOLD ACCORDINGLY AND AS RESULT, WE SET ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE AO TO COMPUTE THE DISALLOWANCE AT 2% OF THE EXEMPT INCOME CLAIMED BY THE ASSESSEE. 3. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE SAID DECISION OF THE TRIBUNAL SHALL APPLY TO THE YEAR UNDER CONSIDERATION. ACC ORDINGLY, AO IS DIRECTED TO COMPUTE THE DISALLOWANCE AT 2% OF THE EXEMPT INCOME CLAIMED BY THE ASSESSEE. ACCORDINGLY, GROUND NO.1 IS PARTLY ALLOWED. 4. REGARDING GROUND NO.2 RELATING TO THE DISALLOWANCE OF SET OFF OF BROUGHT FORWARD LONG TERM CAPITAL LOSS AGAINST THE SHORT TERM CAPITAL GAINS, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE SPECIAL BENCH DECISION IN THE CASE OF KOTAK MAHINDRA CAPITAL CO. LTD VS. ACIT IN ITA NO. 521/MUM/2007 (AY 2 003 - 04), DATED 10.8.2012. IN THE REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 46 OF THE SAID DECISION OF THE TRIBUNAL 9SUPRA) AND THE SAME READS AS UNDER: 46. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 74 WHICH DEAL WITH CARRY FORWARD AND SET OFF OF LOSSES UNDER THE HEAD CAPITAL GAINS AS AMENDED BY FINANCE ACT, 2002, WILL APPLY ONLY TO THE UNABSORBED CAPITAL LOSS FOR THE ASSESSMENT YEAR 2003 - 04 AND ONWARDS AND WILL NOT APPLY TO THE UNABSORBED CAPITAL LOSSES RELATING TO THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2003 - 04. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO THIS SPECIAL BENCH IN FAVOUR OF THE ASSESSEE HOLDING THAT THE ASSESSEE IS ENTITLED TO SET OFF LONG TERM CAPITAL LOSS INCU RRED IN AY 2001 - 2002 AGAINST THE SHORT TERM CAPITAL GAINS MADE IT IN AY 2003 - 04. GROUND NO.2 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 5. FROM THE ABOVE, IT IS EVIDENT THAT THE SET OFF OF THE BROUGHT FORWARD LOSSES AGAINST THE GAINS IS ALLOWABLE. ONLY ISSUE IS THE ASSESSMENT YEAR TO WHICH THE SAID LOSSES RELATES, IF IT RELATES TO THE AY PRIOR TO THE AMENDMENT TO SECTION 74 OR LATER. WE DIRECT THE AO TO EXAMINE THIS ASPECT AND APPLY THE SAID SPECIAL BENCH DECISION IN THE CASE OF KOTAK MAHINDRA CAP ITAL CO. LTD (SUPRA) TO THE PRESENT CASE AND ADJUDICATE THE ISSUE AFRESH. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONO UNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17.2.2016 3 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI