EWART INVESTMENTS LTD, MUMBAI V. ASST CIT 2(1)(2), MUMBAI

ITA 3623/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6799 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL E BENC H MUMBAI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3623/MUM/2017 (ASSESSMENT YEAR 2012-13) EWART INVESTMENTS LTD. ELPHINSTONE BUILDING, 1 ST FLOOR, 10, VEER NARIMAN ROAD, MUMBAI-400001. P AN: AAACE2546C VS. DCIT- 2(1)(2) ROOM NO. 561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDENT APPELLANT BY : SHRI M.M. GOLVALA (AR) RESPONDENT BY : SHRI D.G. PANSARI ( SR. DR) DATE OF HEARING : 23.01.2019 DATE OF PRONOUNCEMEN T : 28.02.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-3, MUMBAI (THE LD. CIT(A) D ATED 14.03.2017, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASS ED BY ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT DATED 23.02 .2012 FOR ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUCTION AMOUNTING TO RS. 28,14,276/-, IN RESPECT OF EXPENSES INCURRED ON PROVIDING AMENITIES TO TENANTS, WHILE COMPUTING INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 2) WITHOUT PREJUDICE, THE COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN NOT ALLOWING DEDUCTION AMOUNTING TO RS. 1,84,170/- FOLL OWING APPELLATE ORDERS IN EARLIER YEARS, IN CASES OF SEPARATE AGREEMENT FOR P ROVISION OF AMENITIES. ITA NO. 3623 MU M 2017-EWART INVESTMENTS LTD. 2 3) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N HOLDING THAT ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE UND ER SECTION 14A, IGNORING THE LEGAL CONTENTIONS RAISED BY THE APPELLANT DURIN G APPELLATE PROCEEDINGS. 4) THE APPELLANT SUBMITS THE LEARNED COMMISSIONER ( APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 66,44,444/- UNDE R SECTION 14A READ WITH RULE 8D(2)(III). 5) THE APPELLANT SUBMITS THAT BOTH THE LOWER AUTHOR ITIES ERRED IN NOT EXCLUDING INVESTMENTS, ON WHICH NO DIVIDEND WAS RECEIVED WHIL E COMPUTING THE ABOVE DISALLOWANCE UNDER SECTION 14A R.W RULE 8D. 6) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 66,44,444/- UNDER SECTION 14A, WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB. THE APPELLANT SUBMITS THE ADDITION IS HIGHLY EXCESSIVE, 7) THE APPELLANT SUBMITS THAT WHILE COMPUTING ADDIT ION UNDER EXPLANATION 1(F) BELOW SECTION 115JB, THE ASSESSING OFFICER BE DIRECTED TO EXCLUDE THOSE INVESTMENTS ON WHICH NO DIVIDEND IS RECEIVED. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2011-12. THE LD AR FOR THE ASSESSEE ALSO PLACED ON RECORD THE COPY OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2011-12 IN ITA NO. 414/MUM/2017 DATED 24.07.2017. 3. GROUND NO.1 & 2 RELATES TO DISALLOWANCE OF DEDUCTIO N IN RESPECT OF VARIOUS EXPENSES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. AR OF THE ASSESSEE SUBMITS THAT THESE GROUNDS OF AP PEAL ARE COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR ITA NO. 3623 MU M 2017-EWART INVESTMENTS LTD. 3 2011-12 IN ITA NO. 414/MUM/2017 DATED 24.07.2017, W HEREIN SIMILAR GROUNDS OF APPEAL WAS RESTORED TO THE FILE OF ASSES SING OFFICER. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUBMITS THAT HE HAS NO OBJECTION, IF THESE GROUNDS OF APPEAL ARE RESTORED TO THE FILE OF ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND FOUND THAT SIMILAR DISALLOWANCE WAS MADE BY ASSESSING OFFICER, HOWEVER, ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE RAISED CONTENTI ON THAT THE ENTIRE AMOUNT RECEIVED FROM THE TENANTS ON ACCOUNT OF VARI OUS SERVICES HAVE NOT BEEN SPENT AND PROPORTIONATE AMOUNT SPENT ON TENANT S IS REDUCED AND REMAINING WAS OFFERED FOR INCOME. ON THE CONTENTION OF THE ASSESSEE, THE LD CIT (A) DIRECTED THE ASSESSING OFFICER TO GRANT THE RELIEF TO THE ASSESSEE AFTER EXAMINING THE DETAILS. HOWEVER, ON A PPEAL BEFORE TRIBUNAL THE ASSESSING OFFICER WAS SPECIFICALLY DIRECTED TO ALLOW THE EXPENSES AS IN THE EARLIER YEAR BY CALCULATING THE SAME BY TAKING THE CURRENT YEARS FIGURE. WE HAVE NOTED THAT ON THE REQUEST OF THE AS SESSEE THE TRIBUNAL MODIFIED THE DIRECTION OF LD CIT(A) AND DIRECTED TH E ASSESSING OFFICER TO ALLOW THE EXPENSES WITH THE FOLLOWING DIRECTION: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AFTER HEARING BOTH THE PARTIES, WE FEEL THAT LD. CIT(A) HAS GIVEN A DIRECTION TO THE AO TO PROCEED IN THE MATTE R AFTER OBTAINING THE NECESSARY EVIDENCES. IN OUR OPINION, THE DIRECTION GIVEN BY LD. CIT(A) IS VAGUE AND NOT CLEAR. WE ARE, THEREFORE, MODIFY DIRE CTION GIVEN BY THE LD. CIT(A) TO AO TO ALLOW THE EXPENSES AS IN THE EARLIE R YEAR BY CALCULATING THE ITA NO. 3623 MU M 2017-EWART INVESTMENTS LTD. 4 SAME BY TAKING THE CURRENT YEARS FIGURE. THE AO IS DIRECTED ACCORDINGLY AND GROUNDS 1 & 2 ARE ALLOWED. 6. CONSIDERING THE DECISION OF TRIBUNAL, THESE GROUNDS OF APPEAL ARE RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSING OFFICER TO ALLOW THE APPROPRIATE RELIEF TO THE ASSESSEE AS PER THE DIRECTION CONTAINED IN TRIBUNALS ORDER DATED 24.07.2018. IN THE RESULT, GROUND NO. 1& 2 OF APPEAL ARE ALLOWED. 7. GROUND NO. 3 TO 5 RELATES TO DISALLOWANCE UNDER SEC TION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THAT THESE GROUNDS OF APPEA L ARE ALSO COVERED BY THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN CASE OF ACIT VS. VIREET INVESTMENT P. LTD. (165 ITD 27), WHEREIN IT WAS HELD THAT ONLY INVESTMENT YIELDING EXEMPT INCOME HAS TO BE CONSIDE RED FOR CALCULATING AVERAGE INVESTMENT FOR MAKING DISALLOWANCE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT SIMILAR ISSUE WAS RESTORED TO THE FILE OF ASSESSING OFFICER FOR AY 2011-12 TO WORK OUT THE DISALLOWANCE AFRESH BY EXCLUDING THE INVESTMENT WHICH YIELDED NO EXEMPT INCOME. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THESE GROUNDS MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER WI TH THE SIMILAR DIRECTION. 9. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND FIND THAT THE IDENTICAL ISSUE WAS RESTORED TO THE FILE OF ASSESSI NG OFFICER IN APPEAL FOR ASSESSMENT YEAR 2011-12 WITH THE FOLLOWING DIRECTIO NS: 16. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSI ONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE A O HAS INCLUDED THOSE ITA NO. 3623 MU M 2017-EWART INVESTMENTS LTD. 5 INVESTMENTS WHICH YIELDED NO EXEMPT INCOME DURING T HE YEAR FOR THE PURPOSE OF CALCULATION OF DISALLOWANCE UNDER RULE 8D(2)(III ) WHICH IN OUR OPINION IS WRONG AND AGAINST THE RATIO LAID DOWN BY THE DELHI SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET INVESTMENTS PVT. LTD. (SUPRA). I N THE SAID DECISION, THE SPECIAL BENCH HAS DECIDED THAT INVESTMENTS NOT YIEL DING ANY INCOME DURING THE YEAR HAVE TO BE EXCLUDED FOR THE CALCULATION OF AVERAGE INVESTMENTS AND ONLY THEREAFTER THE 0.5% HAS TO BE APPLIED. WE, THE REFORE, RESPECTFULLY FOLLOWING THE SPECIAL BENCH DECISION, DIRECT THE AO TO WORK OUT THE DISALLOWANCE BY EXCLUDING THE INVESTMENTS WHICH YIE LDED NO EXEMPT INCOME DURING THE YEAR. THE GROUND IS ALLOWED. 10. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE, THESE GROUNDS OF APPEAL ARE ALSO RESTORED TO THE FILE OF ASSESSING OFFICER TO PASS THE ORDER AFRESH BY FOLLOWING THE DIRECTION IN APPE AL FOR AY 2011-12. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSE. 11. GROUND NO. 6 & 7 RELATES TO MAKING ADJUSTMENT IN BO OK PROFIT UNDER SECTION 115JB OF THE ACT ON DISALLOWANCE UNDER SECT ION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THAT THESE GROUNDS OF APPEA L ARE ALSO COVERED BY THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN VIREET INVESTMENT P. LTD. (SUPRA). 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT NECESSARY DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER TO FOLLOW THE DECISION OF SPECIAL BENCH. 13. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PART IES. WE HAVE ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FI ND THAT THESE GROUNDS OF APPEAL ARE ALSO COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF VIREET ITA NO. 3623 MU M 2017-EWART INVESTMENTS LTD. 6 INVESTMENT P. LTD. (SUPRA). SPECIAL BENCH OF DELHI TRIBUNAL IN VIREET INVESTMENT P LTD HELD THAT THE COMPUTATION UNDER CL AUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WI THOUT RESORTING TO COMPUTATION AS CONTEMPLATED UNDER SECTION 14A READ WITH RULE 8D THEREFORE, WE DIRECT THE ASSESSING OFFICER TO MAKE THE FRESH COMPUTATION UNDER SECTION 115JB BY FOLLOWING THE AFORESAID DECI SION. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/ 02/2019. SD/- SD/- /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUD ICIAL MEMBER MUMBAI, DATE: 28.02.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI