DCIT 5(2)(1), MUMBAI V. INDIA NIVESH LTD, MUMBAI

ITA 3789/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0596 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: ACHAL BANGANI
• Keywords: Earning of tax free income
• Section: 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI R.C. SHARMA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3789/MUM/2016 ASSESSMENT YEAR: 2012 - 13 THE DY. COMMISSIONER OF INCOME - TAX, 5(2)(1), ROOM NO. 571, AAYKAR BHAVAN, M.K. ROAD, M UMBAI - 400020 VS. M/S INDIA NIVESH LIMITED, 601/602 SUKHSAGAR, N.S. PATKAR MARG, GIRGAUM CHOWPATTY, MUMBAI - 400007 PAN: AABCI 6743E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. JUSTIN (DR) ASSESSEE BY : SHRI ACHAL BANGANI (AR) DATE OF HEARING: 08 /11 /201 7 DATE OF PRONOUNCEMENT: 07 / 02 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 16/02/2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI , FOR THE A S S ESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , A BSE LIST ED NON - BANKING FINANCE COMPANY ENGAGED IN THE BUSINESS OF SETTLEMENT/ACQUISITION OF STRESSED ASSETS ALONG WITH INVESTMENT IN SHARES AND CONSULTANCY SERVICES , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 63,06,940/ - . THE RETURN WAS PROCESSED U/S 143 (1). SINCE, THE CASE WAS SELECTED FOR SCRUTINY NOTICE U/S 143(2) AND 142(1) WERE ISSUED CALLING FOR VARIOUS DETAILS. IN RESPONSE THEREOF THE AUTHORIZED REPRESEN TATIVE 2 ITA NO. 3789 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 ATTENDED AND FILED THE DETAILS. DURING THE COURSE OF ASSESSMENT, IT WAS NOTICED THAT ASSESSEE HAD SHOWN DIVIDEND INCOME OF RS. 4,92,117/ - AND CLAIMED THE SAME AS EXEMPT U/S 10(34) OF THE ACT. THE ASSESSEE HAD MADE DISALLOWANCE OF RS . 98,423/ - I.E. 20 % OF THE DIVIDEND EARNED, TOWARDS EXPENSES INCURRED FOR EARNING EXEMPT INCOME. THE ASSESSEE WAS ACCORDINGLY ASKED TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES SHOULD NOT BE APPLIED. THE AUTHORIZED REPRESENT ATIVE SUBMITTED THAT THE ASSESSEE COMPANY HAVING SUFFICIENT FUNDS AND RESERVES , INVESTED MONEY IN SUBSIDIARY COMPANIES AND OTHER SHARES. THE INTEREST INCOME IS DIRECTLY RELATED TO INTEREST PAYMENT AND THEREFORE NET INTEREST ONLY MAY BE CONSIDERED U/S 14A. THE AO REJECTING THE CONTENTION OF THE ASSESSEE COMPUTED THE DISALLOWANCE U/S 14A READ WITH RULE 8D AT RS. 1,14,84,350/ - AND AFTER DEDUCTING THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE, MADE ADDITION OF RS. 1,13,85,927/ - . 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) FOLLOWING THE DECISION OF ITAT RENDERED IN ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND RESTORE D THE ISSUE TO THE FILE OF AO WITH DIRECTION TO RE - COMPUTE THE DISALLOWANCE AFTER REDUCING THE INVESTMENTS MADE IN THE SISTER CONCERN WHILE ARRIVING AT THE AVERAGE INVESTMENT FOR THE FORMULA ENVISAGED IN RULE 8D(2). 4 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TR IBUNAL ON THE FOLLOWING EFFECTIVE GROUND S : - 1. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING THE AO TO REWORK THE DISALLOWANCE U/S 14A READ WITH RULE 8D AFTER REDUCING THE INVESTMENTS MADE IN THE SISTER CONCERNS WHILE ARRIVING AT THE AVERAGE INVESTMENT FOR THE FORMULA ENVISAGED IN RULE 8D(2). 1. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) FAILED TO APPRECIATE THAT THERE IS NO PROVISION IN RULE 8D (2) TO EXCLUDE INVEST MENTS IN SISTER 3 ITA NO. 3789 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 CONCERNS FOR THE PURPOSE OF ARRIVING AT THE AVERAGE OF VALUE OF INVESTMENT. 5. BEFORE US, T HE LD. DEPARTMENTAL REPRESENTATIVE (DR) HAS SUBMITTED THAT THE LD. CIT (A) HAS WRONGLY DIRECTED THE AO TO REWORK THE DISALLOWANCE U/S 14A READ WITH RULE 8D AFTER REDUCING THE INVESTMENTS MADE IN THE SISTER CONCERN IN ORDER TO ARRIVE AT THE AVERAGE INVESTMENTS FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D (2) AS THERE IS NO PROVISION UNDER THE SAID RULE TO EXCLUDE INVESTMENTS MADE IN THE SIS TER CONCERNS. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF ITAT, MUMBAI PASSED IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 DATED 13.08.2014, WHEREBY THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE AO WITH THE DIRECTION TO REWORK THE AVERAGE INVESTMENTS BY REDUCING THE INVESTMENTS MADE IN THE SISTER CONCERNS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE CIT (A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL AND ALLO WED THE IDENTICAL CLAIM OF THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2011 - 12. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL ON RECORD. THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE AO AND THE LD. AR. AS SEEN FROM THE FACTS OF THE CASE, THERE IS NO DISPUTE WITH REGARD TO APPLICABILITY OF SECTION 14A AS THE APPELLANT ITSELF HAS MADE AN AD HOC DISALLOWANCE OF EXPENSES OF RS. 98,423. THE ONLY DISPUTE IS WITH REGARD TO WORKING OF QUANTUM IN THE LIGHT OF RULE 8D. THE LEARNED AR HAS BROUGHT TO MAY NOTICE THE DECISION O THE ITAT, IN APPELLANTS OWN CASE, WHICH HAS SET ASIDE THE ORDER OF ASSESSMENT YEAR 2009 - 10 FOR REDOING AFTER REDUCING THE INVESTMENTS MADE IN SISTER CONCERNS AS THE INVESTMENT MADE IN THE 4 ITA NO. 3789 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 SISTER CONCERNS NEED NOT FORM PART OF THE AVERAGE INVESTMENT. FOR ASSESSMENT YEAR 2011 - 12 ALSO MY LEA RNED PREDECESSOR HAS ALLOWED THE CLAIM OF THE APPELLANT. RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT AND MY LEARNED PREDECESSOR, I HEREBY DIRECT THE AO TO REWORK THE DISALLOWANCE AFTER REDUCING THE INVESTMENTS MADE IN THE SISTER CONCERNS WHILE ARRIVING AT THE AVERAGE INVESTMENT FOR THE FORMULA ENVISAGED IN RULE 8D(2). ALL OTHER FACTORS, HOWEVER, WILL REMAIN INTACT AS PER THE ORIGINAL WORKING OF THE AO. THE GROUND IS PARTLY ALLOWED. 8. SINCE, THE LD. CIT (A) HAS PASSED THE ORDER IN ACCORDANCE WITH TH E ORDER OF THE COORDINATE BENCH PASSED IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 AND SINCE THE CIT (A) HAS FOLLOWED THE ORDER OF THE COORDINATE BENCH IN ASSESSEES APPEAL FOR THE A.Y. 2011 - 12, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE L D. CIT (A) TO INTERFERE WITH THE SAME . HENCE, WE DISMISS THE APPEAL OF THE REVENUE AND DIRECT THE AO TO RE - COMPUTE THE DISALLOWANCE IN TERMS OF ORDER PASSED BY THE LD. CIT (A). IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2012 - 2013 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY, 2018 . SD/ - SD/ - ( R.C. SHARMA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 07 / 02 / 2018 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5 ITA NO. 3789 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI