DCIT CEN CIR 5(2), MUMBAI V. PRIME PROEPRTY DEVELOPMENT CORPORATION LTD, MUMBAI

ITA 4081/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8456 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Earning of tax free income; Tax effect
• Section: 5(2); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 4079 /MUM/20 1 6 (ASSESSMENT YEAR 20 1 0 - 11 ) I.T.A. NO. 4080/MUM/2016 (ASSESSMENT YEAR 2011 - 12) I.T.A. NO. 4081/MUM/2016 (ASSESSMENT YEAR 2012 - 13) DCIT CC - 5(2) ROOM NO. 1908 AIR INDIA BUILDING 19 TH FLOOR NAIRMAN POINT MUMBAI - 400 021. VS. M/S. PRIME PROPERTY DEVELOPMENT CORPORATION LTD. 101, SONI HOUSE PLOT NO. 34, JUHU SCHEME VILE PARLE (WEST) MUMBAI - 400 021. PAN : AAECS8014P ( APPE LLANT ) ( RESPONDENT ) ASSESSEE BY SHRI VIPUL JOSHI DEPARTMENT BY MS. POOJA SWAROOP DATE OF HEARING 2 . 1 1 . 201 7 DATE OF PRONOUNCEMENT 8 . 1 1 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - ALL THE THREE APPEALS, FILED AT THE INSTANCE OF THE REVEN UE, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY LD CIT(A) - 53, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2010 - 11 TO 2012 - 13. SINCE IDENTICAL ISSUES ARE URGED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON OR DER, FOR THE SAKE OF CONVENIENCE. 2. IN ALL THE YEARS, THE SOLITARY ISSUE CONTESTED BY THE REVENUE RELATES TO THE RELIEF GRANTED BY LD CIT(A) IN RESPECT OF DISALLOWANCE MADE U/S 14A OF THE ACT. 3. THE ASSESSEE IS A REAL ESTATE DEVELOPER AND DURIN G THE YEARS UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED DIVIDEND INCOME, WHICH WAS CLAIMED AS EXEMPT. HOWEVER, THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE AS PER REQUIREMENTS OF SEC. 14A OF THE ACT. ACCORDINGLY, THE AO COMPUTED DISALLOWANCE U/S 14A OF THE ACT IN EACH OF THE YEARS AS PER RULE 8D AS DETAILED BELOW: - M/S. PRIME P ROPERTY DEVELOPMENT CORPORATION LTD. 2 ASSESSMENT YEAR 2010 - 11 - RS.18,24,335/ - ASSESSMENT YEAR 2011 - 12 - RS.66,89,431/ - ASSESSMENT YEAR 2012 - 13 - RS.20,56,916/ - . 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A), REDUCED THE DISALLOWANCES BY FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CHEMVEST LTD AND BY HOLDING THAT ONLY THOSE SHARES WHICH HAD EARNED DIVIDEND INCOME SHOULD BE CONSIDERED FOR THE PURPOSE OF WORKING OUT DISALLOWANCE U/S 14A OF THE ACT. ACCORDINGLY THE LD CIT(A) SUSTAINED DISALLOWANCE TO THE EXTENT AS DETAILED BELOW: - ASSESSMENT YEAR 2010 - 11 - RS.1,45,658/ - ASSESSMENT YEAR 2011 - 12 - RS.3,54,441/ - ASSESSMENT YEAR 2012 - 13 - RS.2,84,730/ - AGGRIEVED , THE REVENUE HAS FILE D THESE APPEALS. 5. AT THE TIME OF HEARING, THE LD D.R FAIRLY ADMITTED THAT THE TAX EFFECT INVOLVED IN THE APPEALS RELATING TO AY 2010 - 11 AND 2012 - 13 IS LESS THAN RS.10.00 LAKHS AND HENCE THESE TWO APPEALS ARE LIABLE TO BE DISMISSED IN VIEW OF THE CIRC ULAR NO.21 OF 2015 DATED 10 - 12 - 2015 ISSUED BY CBDT. ACCORDINGLY WE DISMISS THE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2010 - 11 AND 2012 - 13. 6. WITH REGARD TO THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2011 - 12, THE LD D.R SUPPORTED T HE ORDER PASSED BY THE AO. ON THE CONTRARY, THE A.R SUBMITTED THAT THE DIVIDEND INCOME EARNED BY THE ASSESSEE WAS ONLY RS.1,18,155/ - AND THE LD CIT(A) HAS SUSTAINED ADDITION U/S 14A TO THE EXTENT OF RS.3,54,441/ - . HE SUBMITTED THAT THE HONBLE DELHI HIGH COURT HAS HELD IN THE CASE OF JOINT INVESTMENT P LTD VS. CIT (372 ITR 694) THAT THE DISALLOWANCE U/S 14A OF THE ACT SHOULD NOT EXCEED THE EXEMPT INCOME. HE SUBMITTED THAT THE LD CIT(A) HAS SUSTAINED DISALLOWANCE U/S 14A IN EXCESS OF DIVIDEND INCOME. HE SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE DECISION OF LD CIT(A) M/S. PRIME P ROPERTY DEVELOPMENT CORPORATION LTD. 3 AND THE REVENUE SHOULD ALSO NOT HAVE ANY GRIEVANCE. HE FURTHER SUBMITTED THAT THE MAJORITY OF INVESTMENTS MADE BY THE ASSESSEE ARE STRATEGIC INVESTMENTS. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE AVERAGE VALUE OF INVESTMENTS WAS RS.31.78 CRORES, OUT OF WHICH A SUM OF RS.30.10 CRORES REPRESENT STRATEGIC INVESTMENT MADE IN ITS SUBSIDIARY COMPANY. FURTHER A SUM OF RS.1.40 CRORES WAS INVESTED IN 2005 AND HENCE THE SAME HAS BEEN BROUGHT FORWARD FROM EARLIER YEARS. THE CO - ORDINATE BENCH HAS HELD IN THE CASE OF GARWARE WALL ROPES (ITA NO.7899/M/2011) THAT THE STRATEGIC INVESTMENTS ARE REQUIRED TO BE EXCLUDED WHILE COMPUTING AVERAGE VALUE OF INVESTMENTS. IF WE EXCLUD E THE STRATEGIC INVESTMENTS FROM THE VALUE OF INVESTMENTS, THE DISALLOWANCE OF RS.3,54,441/ - MADE U/S 14A OF THE ACT BY LD CIT(A) WOULD WORK OUT TO MORE THAN REASONABLE AMOUNT. HENCE, HAVING REGARD TO THE SUBMISSIONS MADE BY LD A.R AND CONSIDERING THE FAC TS PREVAILING IN THE CASE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY LD CIT(A) FOR AY 2011 - 12 DOES NOT REQUIRE ANY INTERFERENCE. 8. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 8 . 1 1 .201 7. SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 8 / 11 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. T HE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBA