DCIT 5(2)(1), MUMBAI V. K. GIRDHARILAL INTERNATIONAL LTD., MUMBAI

ITA 4036/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2305 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 142(1); 14A; 115JB; 143(1); 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH , J M AND SHRI G. MANJUNATHA , A M / I .T.A. NO S . 4036 TO 4038 /MUM/201 8 ( / ASSESSMENT YEAR S : 2011 - 1 2, 20 12 - 13 & 2013 - 14 ) DY. COMMISSIONER OF INCOME TA X 5(2)(1) ROOM NO. 571, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 . / VS. M/S. K. GIRDHARLAL INTERNATIONAL PVT. LTD. 1011 PRASAD CHAMBERS, OPERA HOUSE, MUMBAI - 400004. ./ ./ PAN/GIR NO. : AACCK6101F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 20 / 0 8 / 201 9 / DATE OF PRON OUNCEMENT : 28 / 0 8 / 2019 / O R D E R PER AMARJIT SINGH, J M: THE ABOVE MENTIONED APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 21 .0 3 .2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2011 - 12, 2012 - 13 & 2013 - 14 . ITA. NO.4036/M/2018:- 2 . THE REVENUE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 21 . 0 3 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 0 , REVENUE BY: SHRI MANOJ KUMAR SINGH (DR) ASSESSEE BY : MS. VEENA PUROHIT (AR) ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 2 MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 11 - 12 . 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE U/S 14A R. W. RULE 8D OF THE INCOME TAX RULES. 1962. HOLDING THAT DISALLOWANCE CANNOT EXCEED EXEMPT INCOME, WITHOUT APPRECIATING THE FACT THAT C BDT AFTER ANALYZING SECTION 14A VIS - - VIS RULE 8D HAS CLARIFIED IN CIRCULAR NO.5/2014 DATED /11.02.2014 THAT RULE 8 D READ WITH SECTION 14A OF THE IN COME TAX ACT, 1961 PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME . 1 THE APPELLANT PRAYS THAT THE ORD E R OF THE LD. CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 2. T HE APPE LLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS R ETURN OF INCOME ON 29 . 11 .20 11 DECLARING TOTAL INCOME TO TH E TUNE OF RS.27,51,95,960 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CUT AND POLISHED DIAMONDS AND DIAMONDS STUDDED JEWELLERY. ON VERIFICATION, IT WAS FOUND THAT THE ASSESSEE RECEIVED THE DIVIDEND INCOME OF RS.8,20,050/ - AND CLAIMED EXEMPT U/S 10(34) OF THE I.T. ACT, 1961 . THE AO APPLIED THE PROVISIONS U/S 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES AND ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME IN SUM OF RS.2,85,72,585/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 30,60,85,625/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) W HO ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 3 RESTRICTED THE DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES TO THE EXTENT OF EXEMPT INCOME , THE REVENUE WAS NOT SATISFIED , THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 5 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE CIT(A) HAS GIVEN THE CONSOLIDATED FINDING ON THE ISSUES WHICH IS HEREBY REPRODUCED AS UNDER: - 6.3.2 AS DISCUSSED ABOVE, DURING THE YEAR A.Y.2011 - 12, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 8,20.050/ - AND HAS CLAIMED IT EXEMPT U/S. 10(34) OF THE IT ACT 1961. HOWEVER, THE APPELLANT HAS NOT ALLOCATED ANY EXPENSES TOWARDS THE ACTIVITY OF INVESTMENT IN ASSETS YIELDING INCOME EXEMPT UNDER THE ACT. DURING THE YEAR A.Y.2012 - 13, THE ASSESSEE HAS EAR NED DIVIDEND INCOME OF RS. 29,99,387/ - AND HAS CLAIMED IT EXEMPT U/S. 10(34) OF THE IT ACT 1961 AND THE APPELLANT HAS SUO - MOTO DISALLOWED AN AMOUNT OF RS. 29,99,387/ - AS EXPENSES INCURRED TOWARDS THE ACTIVITY OF INVESTMENT IN ASSETS YIELDING INCOME EXEMPT UNDER THE ACT. DURING THE YEAR A.Y.2013 - 14. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 1460,078/ - AND HAS CLAIMED IT EXEMPT U/S. 10(34) OF THE IT ACT 1961 AND THE APPELLANT HAS SUO - MOTO DISALLOWED AN AMOUNT OF RS. 14.60,078/ - AS EXPENSES INCURRED TOWAR DS THE ACTIVITY OF INVESTMENT IN ASSETS YIELDING INCOME EXEMPT UNDER THE ACT. DURING THE YEAR A.Y.2014 - 15, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 76,77,552/ - AND HAS CLAIMED IT EXEMPT U/S. 10(34) OF THE IT ACT 1961 AND THE APPELLANT HAS SUO - MOTO DI SALLOWED AN AMOUNT OF RS. 76.77.552/ - AS EXPENSES INCURRED TOWARDS THE ACTIVITY OF INVESTMENT IN ASSETS YIELDING INCOME EXEMPT UNDER THE ACT. HOWEVER, THE APPELLANT HAS NOT PROVIDED ANY JUSTIFICATION AS REGARDS EXPENSES INCURRED TOWARDS THE ACTIVITY OF INV ESTMENT IN ASSETS YIELDING INCOME EXEMPT UNDER THE ACT. THE HON'BLE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX, RANGE 10(1). MUMBAI V. CITICORP FINANCE (INDIA) LTD. [2007] 12 SOT 248 (MUM.) HAS HELD THAT 'IT IS DIFFICULT TO ACCEPT THE HYP OTHESIS THAT ONE CAN EARN SUBSTANTIAL DIVIDEND INCOME WITHOUT INCURRING ANY EXPENSES WHATSOEVER INCLUDING MANAGEMENT OR ADMINISTRATIVE EXPENSES.' FURTHER, IT HAS BEEN HELD BY THE HONBLE] ITAT, CHENNAIS BENCH IN THE CASE OF SOUTHERN PETRO CHEMICAL INDUSTR IES VS. DEPUTY COMMISSIONER OF INCOME TAX (2005) 93 TTJ 0161 :(2005) 3 SOT 0157. 'WHETHER TO INVEST OR NOT TO INVEST AND WHETHER TO RETAIN THE INVESTMENTS OR TO LIQUIDATE THE SAME ARE VERY STRATEGIC DECISIONS WHICH THE MANAGEMENT IS CALLED UPON TO TAKE. TH ESE ARE MIND - BOGGLING DECISIONS ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 4 AND TOP MANAGEMENT IS INVOLVED IN TAKING THESE DECISIONS. THIS DECISION - MAKING PROCESS IS VERY COMPLICATED AND REQUIRES VERY CAREFUL ANALYSIS. MOREOVER. THE ASSESSEE HAS TO KEEP TRACK OF VARIOUS DIVIDEND INCOMES DECLARED BY THE INVESTEE COMPANIES AND ALSO TO KEEP TRACK OF THE DIVIDEND INCOME HAVING BEEN REGULARLY RECEIVED BY THE ASSESSEE. THIS ACTIVITY ITSELF CALLS FOR CONSIDERABLE MANAGEMENT ATTENTION AND CANNOT BE LEFT TO A JUNIOR CLERK. THUS, PROPORTIONATE MANAGEMENT EXPEN SES ARE REQUIRED TO BE DEDUCTED WHILE COMPUTING THE DIVIDEND INCOME. 6.3.3 IN GODREJ & BOYCE CO. LTD. (: (2010) 328 ITR 0081), THE HON'BLE BOMBAY HIGH COURT HAS EXPLAINED 8D(2)(III) AS UNDER: AS REGARDS R. 8D(2)(III), IF HAS BEEN SUBMITTED THAT SOME MECHAN ISM OR FORMULA HAD TO BE ADOPTED FOR ATTRIBUTING PART OF THE ADMINISTRATIVE /MANAGERIAL EXPENSES TO TAX EXEMPT INVESTMENT INCOME. THE ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO TAX - FREE INVESTMENT INCOME HAVE A FIXED COMPONENT AND A VARIABLE COMPONENT. A VIEW WAS TAKEN THAT THE DISALLOWANCE SHOULD ALSO BE LINKED TO THE VALUE OF THE INVESTMENT RATHER THAN THE AMOUNT OF EXEMPT INCOME. UNDER PORTFOLIO MANAGEMENT SCHEMES (PMS) THE FEE CHARGED RANGES BETWEEN 2 AND 2.5 PER CENT OF THE PORTFOLIO VALUE WHICH WOULD BE INCLUSIVE OF A PROFIT ELEMENT FOR THE PORTFOLIO MANAGER. WHILE THE FIXED ADMINISTRATIVE EXPENSES WERE EXCLUDED, ON THE GROUND THAT IN THE CASE OF A LARGE CORPORATE TAXPAYER THEY WOULD BE SPREAD OVER A LARGE NUMBER OF VOLUMINOUS ACTIVITIES, THE VARIABLE EXP ENSES WERE COMPUTED AT ONE - HALF PER CENT OF THE VALUE OF THE INVESTMENT. THE JUSTIFICATION THAT HAS BEEN OFFERED IN SUPPORT OF THE RATIONALE FOR R. 8D CANNOT BE REGARDED AS BEING CAPRICIOUS, PERVERSE OR ARBITRARY. APPLYING THE TESTS FORMULATED BY THE SUPRE ME COURT IT IS NOT POSSIBLE FOR THIS COURT TO HOLD THAT THERE IS WRIT ON THE STATUTE OR ON THE SUBORDINATE LEGISLATION PERVERSITY, CAPRICE OR IRRATIONALITY. THERE IS CERTAINLY NO 'MADNESS IN THE METHOD'. 6.3.4 IN VIEW OF THE AFORESAID, IT CAN BE HELD THAT THE AO HAS JUSTIFIABLY INVOKED RULE 8D OF THE INCOME TAX RULE 1962 FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 14A OF THE ACT AND THE ADDITION MADE BY THE AO OUGHT TO BE SUSTAINED. 6.3.5 HOWEVER, I FIND MERIT IN THE PLEA OF THE APPELLANT THAT THE DISALLOWAN CE U/S 14A CANNOT EXCEED EXEMPT INCOME. THE PLEA OF THE APPELLANT FINDS SUPPORTS FROM VARIOUS JUDICIAL PRONOUNCEMENTS. THE HON'BLE DELHI HIGH COURT, VIDE THE JUDGMENT DATED 25.02.2015, IN THE CASE OF JOINT INVESTMENT PVT. LTD VS. CIT (2015) 372 ITR 694, HA S HELD THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME AND FURTHER IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD (2014) 90 CCH 0081 DEL - HC, IT HAS BEEN HELD THAT THERE CAN BE NO DISALLOWANCE U/S 14A IN THE ABSENCE OF ANY EXEMPT INC OME. IN CIT V. ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 5 STATE BANK OF PATIALA [393 ITR 476 (P&H)]. THE AMOUNT OF DISALLOWANCE U/S 14A WAS RESTRICTED TO THE AMOUNT OF EXEMPT INCOME ONLY AND THE HON'BLE SUPREME COURT OF INDIA IN THE DECISION DATED FEBRUARY 12, 2018 IN THE CASE OF MAXOPP INVESTMENT LTD. VS COMMISSIONER OF INCOME TAX, NEW DELHI & OTHERS (SUPRA) HAS UPHELD THIS VIEW AS UNDER: 40) WE NOTE FROM THE FACTS IN THE STATE BANK OF PATIALA CASES THAT THE AO, WHILE PASSING THE ASSESSMENT ORDER, HAD ALREADY RESTRICTED THE DISALLOWANCE TO THE AMOU NT WHICH WAS CLAIMED AS EXEMPT INCOME BY APPLYING THE FORMULA CONTAINED IN RULE 8D OF THE RULES AND HOLDING THAT SECTION 14A OF THE ACT WOULD BE APPLICABLE. IN SPITE OF THIS EXERCISE OF APPORTIONMENT OF EXPENDITURE CARRIED OUT BY THE AO, CIT(A) DISALLOWED THE ENTIRE DEDUCTION OF EXPENDITURE. THAT VIEW OF THE CIT(A) WAS CLEARLY UNTENABLE AND RIGHTLY SET ASIDE BY THE ITAT. THEREFORE, ON FACTS, THE PUNJAB AND HARYANA HIGH COURT HAS ARRIVED AT A CORRECT CONCLUSION BY AFFIRMING THE VIEW OF THE ITAT. 6.3.6 THUS A N INFERENCE CAN BE DRAWN FROM THESE JUDGMENTS THAT THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT INCOME. THE AO HAS WORKED OUT THE DISALLOWANCES UNDER SECTION 14A OF THE ACT, BY INVOKING RULE 8D OF THE INCOME TAX RULE 1962 AS UNDER: 6.3.7 IT IS OBSERVED THAT APPELLANT HAS CONSIDERED THE AMOUNT TO THE EXTENT OF INCOME CLAIMED EXEMPT U/S 10(34) FOR THE PURPOSE OF DISALLOWANCE U/S 14A, FOR A.Y.2012 - 13. A.Y.2013 - 14 & A.Y.2014 - 15, THEREFORE THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED FOR A. Y.2012 - 13. A.Y.2013 - 14 & A.Y.2014 - 15 AND HENCE DELETED. 6.3.8 DURING THE YEAR A.Y.2011 - 12, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 8.20,050/ - AND HAS CLAIMED IT EXEMPT U/S. 10(34) OF THE IT ACT 1961. THEREFORE, THE ADDITION MADE BY THE AO FOR AY 201 1 - 12 IS RESTRICTED TO RS. 8,20,050/ - AND THE APPELLANT GETS A RELIEF OF RS. 2,77,52,535/ - . ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 6 6. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS RESTRICTED THE DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES TO THE EXTENT OF EXEMPT INCOME IN VIEW OF THE LAW MENTIONED IN THE ORDER I,E JOINT INVESTMENT PVT. LTD. VS. CIT (2015) 372 ITR 694 , CIT VS. HOLCIM INDIA PVT. LTD. (2014) 90 CCH 0081 (DEL), CIT VS. STATE BANK OF PATIALA (393 ITR 476 ) (P&H) & MAXOPP INVESTMENT LTD. VS. CIT 91 TAXMANN.COM 154 (SC) (2018) . THE FACTUAL POSITION IS NOT DISTINGUISHABLE AT THIS STAGE. NO LAW CONTRARY TO THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE HAS BEEN PRODUCED BEFORE US. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND COR RECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE AFFIRM THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDED TH IS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ITA. NO. 4037 /M/201 8 :- 7 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE AS NARRATED ABOVE WHILE DECIDING T HE ITA. NO.4036 /M/201 8 , THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. HOWEVER, THE FIGURE IS DIFFERENT. THE MATTER OF CONTROVERSY IS ALSO THE SAME . THE FINDING GIVEN ABOV E WHILE DECIDING THE APPEAL OF THE ASSESSEE BEARING ITA. NO.4036 /M/201 8 IS QUITE APP LICABLE TO THE FACTS OF THE PRESENT CASE AS MUTATIS MUTANDIS. ACCORDINGLY, WE CONFIRM THE FINDING OF THE CIT(A ) ON THE ISSUES RAISED THEREIN . ITA. NO.4038/M/2018:- ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 7 8 . THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 21.03.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2011 - 12. 9. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WA S JUSTIFIED IN DELETING THE ADDITION MADE U/S 14A R. W. RULE 8D OF THE INCOME TAX RULES. 1962. HOLDING THAT DISALLOWANCE CANNOT EXCEED EXEMPT INCOME, WITHOUT APPRECIATING THE FACT THAT CBDT AFTER ANALYZING SECTION 14.4 VIS - - VIS RULE 8D HAS CLARIFIED IN CI RCULAR NO.5/2014 DATED /1 1 .02.2014 THAT RULE 8 D READ WITH SECTION 14A OF THE INCOME TAX ACT, 1961 PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 2. WHETHER ON THE FACTS AND IN THE CI RCUMS TANCES OF THE CASE AND IN LAW, IN' LD. CIT(A) ERRED IN NOT CONFIRMING THE DISALLOWANCE MADE US 14A R. W.R. 8D TO BOOK PROFIT AS PER CLAUSE (F) TO EXPLANATION I U/S 115JB OF THE INCOME TAX ACT, 1961, OVERLOOKING THE JUDGEMENT OF HON BLE DELHI COURT IN THE CASE OF CIT (CENTRAL CIRCLE - II) VS. GOETZ (INDIA) LTD. IN ITA. NO.1179/2010 DATED 09.12.2013. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY . 10 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE AS NARRATED ABOVE WHILE DECIDING THE ITA. NO.4036/M/2018, THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. HOWEVER, THE FIG URE IS DIFFERENT ISSUE NO. 1 11 . THE REVENUE HAS CHALLENGED THE FINDING OF THE CIT(A) IN WHICH THE CIT(A) HAS RESTRICTED THE ADDITION U/S OF 14A OF THE ACT R.W. RULE 8D OF THE ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 8 I.T. RULES TO THE EXTENT OF DIVIDEND INCOME. IN THIS REGARD, THE FINDING HAS A LREADY BEEN GIVEN BY US ABOVE WHILE DECIDING THE ITA. NO.4036/M/2018 IN WHICH THE RESTRICTION OF EXPENSES TO EARN THE DIVIDEND INCOME U/S 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES WAS HELD TO THE EXTENT OF DIVIDEND INCOME JUSTIFEABLE , HENCE, THE FINDIN G GIVEN ABOVE IS QUITE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ALSO AS MUTATIS MUTANDIS. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO. 2 12 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE FINDING OF THE CIT(A) IN WHICH IT IS SPECIFICALLY HELD THAT THE NO DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES IS REQUIRED TO BOOK PROFIT AS PER THE CLAUSE - F TO EXPLANATION - 1 U/S 115JB OF THE ACT. THE LD. REPRESENTATIVE OF THE REVENUE H AS ARGUED THAT THE FINDING IS AGAINST THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT (CENTRAL CIRCLE - II) VS. GOETZ (INDIA) LTD. IN ITA. NO.1179/2010 DATED 09.12.2013, THEREFORE, THE FINDING IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND , THE LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 8.3.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BENGAL FINANCE & INVESTMENTS PVT. LTD IN ITA NO. 337 OF 2013 HAS HELD THAT AN AMOUNT DISALLOWED UNDER SECTION 14A OF THE ACT CANNOT BE ADDED TO ARRIVE AT BOOK PROFIT FOR PURPOSES OF SEC TION 115J8 OF THE ACT IN THE FOLLOWING WORDS: ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 9 'SO FAR AS QUESTION (B) IS CONCERNED, THE IMPUGNED ORDER OF THE TRIBUNAL FOLLOWED ITS DECISION IN M/S. ESSAR TELEHOLDINGS LTD. V/S. DC1T IN ITA NO. 3850/MUM/2010 TO HELD THAT AN AMOUNT DISALLOWED UNDER SECTION 14A OF THE ACT CANNOT BE ADDED TO ARRIVE AT BOOK PROFIT FOR PURPOSES OF SECTION 115JB OF THE ACT. THE REVENUE'S APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN M/S. ESSER TELEHOLDINGS (SUPRA) WAS DISMISSED BY THIS COURT IN INCOME TAX APPEAL NO.438 OF 2012 REND ERED ON 7TH AUGUST, 2014. IN VIEW OF THE ABOVE, QUESTION (B) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW.' 8.3.2 FURTHER THE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. 82 TAXMANN.COM 415 HAS HELD THAT THE ASS ESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115 JB AND THAT THE AMOUNT OF DISALLOWANCE COMPUTED U/S. 14A CANNOT BE ADDED TO THE B OOK PROFIT IN THE ABSENCE OF SPECIFIC MENTION TO THAT EFFECT IN THE EXPLANATION TO SECTION 115JB. 8.3.3 AS THE RATIO OF THE SAID DECISIONS IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE, THE ADDITIONS MADE TO THE BOOK PROFIT ON ACCOUNT OF THE AMOUNT DISALLOWED U/S. 14A IS HEREBY DELETED. 13 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE FIND THAT THE MATTER OF CONTROVERSY HAS BEEN ADJUDICATED BY THE CIT(A) ON THE BASIS OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BENGA L FINANCE & INVESTMENTS PVT. LTD. IN ITA. NO. 337 OF 2013 AND IN CASE OF ACIT VS. VIREET INVESTMENT PVT. LTD. 82 TAXMANN.COM 415. IT IS SPECIFICALLY HELD THAT THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS AC COUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115JB OF THE ACT AND THAT THE AMOUNT OF DISALLOWANCE COMPUTED U/S 14A OF THE ACT CANNOT BE ADDED TO THE BOOK PROFIT IN THE ABSENCE OF SPECIFIC MENTION TO THAT EFFECT IN THE EXPLANATION TO SE CTION 115JB OF THE ACT. THE FACTS ARE NOT DISTINGUISHABLE AT THIS STAGE. NO LAW CONTRARY TO THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 10 BEEN PRODUCED BEFORE US. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 1 4 . IN THE RESULT, APP EAL S FILED BY THE REVENUE ARE HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 28 /08/2019 SD/ - SD/ - ( G. MANJUNATHA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBA I DATED : 28 /08 /2019 VIJAY / SR. PS ITA. NOS. 4036 TO 4038/M/2018 A.YS. 2011 - 12, 2012 - 13 & 2013 - 14 11 / 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. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI