CHALET HOTELS LTD, Mumbai V. DCIT, CENTRAL CIRCLE-4(2), Mumbai

ITA 3747/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8065 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V. SREEKAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3747/MUM/2019 (ASSESSMENT YEAR 2015-16) CHALET HOTELS LIMITED, RAHEJA TOWER, PLOT NO.C-30, OPP. SIDBI, BANDRA KURLA COMPLEX, BANDRA- E, MUMBAI- 400051 P AN: AAACK0411E VS. DCIT, CC-4( 2), 1918, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY : SHRI MADHUR AGARWAL (AR REVENUE BY : SHRI V. SREEKAR (CIT-DR) DATE OF HEARING : 03.11.2020 DATE OF PRONOUNCEMEN T : 11.01.2021 ORDER PER MAHAVIR SINGH, VICE-PRESIDENT; 1. THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-52, MUMBAI [FOR SHORT THE LD. CIT(A)] IN APPEAL NO. CIT(A)-52/IT-198/DCIT-CC-4(2)/17-18 ORDER DATED 26.03.2019. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE-4(2), MUMBAI FOR THE ASSESSMENT YEAR 2015-16 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) VIDE HIS ORDER DATED 1 2.10.2017. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE SUO-MOTO COMPUTED BY A SSESSEE AT RS. 5,86,52,973/- AS AGAINST THE EXEMPT INCOME EARNED B Y ASSESSEE AT RS. 13,17,233/-. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUNDS: ITA NO. 3747 MUM 2019-CHALET HOTELS LIMITED 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE CIT(A) OUGHT TO HAVE RESTRICTED THE DISALLOWANCE UN DER SECTION 14A OF THE ACT TO THE AMOUNT OF EXEMPT EARNED DURING THE YEAR UNDER CONSIDERATION I.E. RS. 13,17,233/-, ALTHOUGH THE APPELLANT HAS SUO MOT O DISALLOWED. RS. 5,86,52,973/- IN ITS RETURN OF INCOME. THE APPELLANT HEREBY PRAYS THAT ON THE BASIS OF THE FINDINGS GIVEN BY THE LEARNED CIT(A) IN HIS ORDER, STATING THAT DISALLOWA NCE UNDER SECTION 14A CANNOT EXCEED DIVIDEND INCOME, THUS THE DISALLOWANC E UNDER SECTION 14A OF THE ACT MUST BE RESTRICTED TO RS 13,17,233/-. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH TH E FACTS AND CIRCUMSTANCES OF THIS CASE. WE NOTED THAT THAT THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT HAS MADE DISALLOWANCE BY INVOKIN G THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R 8D OF THE INCOME TAX R ULES, 1962 (HEREINAFTER THE RULES). THE ASSESSING OFFICER MADE DISALLOWAN CE UNDER RULE 8D(2)(II) AT RS. 27,15,12,687/- UNDER RULE 8D(2)(III) AT RS. 2,14,47,136/-. THEREBY THE TOTAL DISALLOWANCE MADE WAS RS. 29,29,59,823/-. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). THE CIT(A) DELETED THE DISALLOWANCE MADE BY ASSESSING OFFICER UNDER RULE 8D(2)(II) I.E. INTEREST EXPENDITURE AMOUNTING TO RS. 27,15,12 ,687/-, BUT CIT(A) CONFIRMED THE DISALLOWANCE UNDER RULE 8D(2)(III) BE ING ADMINISTRATIVE EXPENSES AT RS. 5,86,52,973/- AS AGAINST THE EXEMPT INCOME CLAIMED BY ASSESSEE AT RS. 13,17,233/-. BEFORE THE CIT(A), THE ASSESSEE CLAIMED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME ONLY TO THE EXTEN T OF RS. 13,17,233/- AND THE SAME MAY BE ADOPTED FOR MAKING DISALLOWANCE UND ER RULE 8D(2)(III) OF THE RULES. BEFORE THE CIT(A), THE ASSESSEE RELIED O N THE DECISION OF HONBLE ITA NO. 3747 MUM 2019-CHALET HOTELS LIMITED 3 SUPREME COURT IN THE CASE OF MAXOPP INVESTMENTS LTD . (91 TAXMAN.COM 154) BUT CIT(A) NOTED THAT THE ASSESSEE HAS ITSELF MADE SUO-MOTO DISALLOWANCE OF RS. 5,86,52,973/- AND THE SAME HAS TO BE ADOPTED FOR THIS THE CIT(A) GAVE HIS IN PARA-5.21 AS UNDER: 5.21. IN VIEW OF THE ABOVE DISCUSSION, THE AO IS ACCORDINGLY DIRECTED TO RE-COMPUTE THE DISALLOWANCE U/S 14A AS EXPLAINED IN PARAS 5.9 TO 5.20 ABOVE. HOWEVER, SINCE, THE ASSESSEE ITSELF HAD COMP UTED DISALLOWANCE U/S. 14A OF RS. 5,86,52,973/- WHICH IT HAD ADDED BACK IN THE COMPUTATION OF INCOME, THE DISALLOWANCE U/S 14A SO RE-COMPUTED CAN NOT BE LESS THAN THE SAID AMOUNT OF RS. 5,86,52,973/-. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE THE TRIBU NAL. 6. WE NOTED THAT THE SHORT POINT OF DISPUTE IS WHETHER THE DISALLOWANCE UNDER RULE 8D(2)(III) IS TO BE RESTRICTED TO THE EXTENT O F EXEMPT INCOME I.E. DIVIDEND INCOME EARNED BY ASSESSEE AT RS. 13,17,233 /- OR THE DISALLOWANCE AS SUO-MOTO COMPUTED BY ASESSEE AT RS. 5,86,52,973/ -. HERE, WE HAVE GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF MAXOPP INVESTMENTS LTD. (SUPRA), WHEREIN THE HONBLE SUPRE ME COURT HAS CATEGORICALLY HELD THAT THE DISALLOWANCE CANNOT EXC EED THE EXEMPT INCOME. HENCE, WE DELETE THE SUO-MOTO DISALLOWANCE MADE BY ASSESSEE AT RS. 5,86,52,973/- AND RESTRICTED THE DISALLOWANCE TO TH E EXTENT OF EXEMPT INCOME CLAIMED BY ASSESSEE AT RS. 13,17,233/-. WE DIRECT T HE ASSESSING OFFICER ACCORDINGLY. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 3747 MUM 2019-CHALET HOTELS LIMITED 4 ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY 2021. SD/- SD/- RAJESH KUMAR MAHAVIR SINGH ACCOUNTANT MEMBER VICE-PRESIDENT MUMBAI, DATE: 11.01.2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT , MUMBAI