PR. CIT-9 , MUMBAI V. CAPITAL FIRST LIMITED, MUMBAI

ITA 4107/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1903 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI M. BALAGANESH (ACCOUNTANT MEMBER) ITA NO. 4107 /MUM/2019 ASSESSMENT YEAR: 2008 - 09 DCIT, CORPORATE CIRCLE - 2(1), ROOM NO. 511, 5 TH FLOOR, AAYAKARBHAVAN, WANAPATHY BUILDING CHENNAI - 600034. VS. M/S IDFC FIRST BANK LTD. (PREVIOUSLY KNOWN AS M/S CAPITAL FIRST LIMITED) TOWER II, 15 TH FLOOR, INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG , ELPHINSTONE WEST MUMBAI 400 013 , MAHARASHTRA PAN NO. AACCK 6863 C APPELLANT RESPONDENT C.O. NO. 78/MUM/2020 ( ITA NO. 4107/MUM/2019) ASSESSMENT YEAR: 2008 - 09 M/S IDFC FIRST BANK LTD. (PREVIOUSLY KNOWN AS M/S CAPITAL FIRST LIMITED) TOWER II, 15 TH FLOOR, INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG , ELPHINSTONE WEST MUMBAI 400 013 , MAHARASHTRA VS. DCIT, CORPORATE CIRCLE - 2(1), ROOM NO. 511, 5 TH FLOOR, AAYAKARBHAVAN, WANAPATHY BUILDING CHENNAI - 600034. PAN NO. AACCK 6863 C APPELLANT RESPONDENT ITA NO. 4108/MUM/2019 ASSESSMENT YEAR: 2009 - 10 DCIT, CORPORATE CIRCLE - 2(1), ROOM NO. 511, 5 TH FLOOR, AAYAKARBHAVAN, WANAPATHY BUILDING CHENNAI - 600034. VS. M/S IDFC FIRST BANK LTD. (PREVIOUSLY KNOWN AS M/S CAPITAL FIRST LIMITED) TOWER II, 15 TH FLOOR, INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG , ELPHINSTONE WEST MUMBAI 400 013 , MAHARASHTRA PAN NO. AACCK 6863 C APPELLANT RESPONDENT M/S IDFC FIRST BANK LTD. ITA NO. 4107/M/2019 & ORS. 2 C.O. NO. 79/MUM/2020 ( ITA NO. 4107/MUM/2019) ASSESSMENT YEAR: 200 9 - 10 M/S IDFC FIRST BANK LTD. (PREVIOUSLY KNOWN AS M/S CAPITAL FIRST LIMITED) TOWER II, 15 TH FLOOR, INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG , ELPHINSTONE WEST MUMBAI 400 013 , MAHARASHTRA VS. DCIT, CORPORATE CIRCLE - 2(1), ROOM NO. 511, 5 TH FLOOR, AAYAKARBHAVAN, WANAPATHY BUILDING CHENNAI - 600034. PAN NO. AACCK 6863 C APPELLANT RESPONDENT REVENUE BY : MS. SHREEKALAPARDESHI, DR ASSESSEE BY : MR. KETANVED , AR DATE OF HEARING : 24/06/2021 DATE OF PRONOUNCEMENT : 01 / 07 / 2021 ORDER PER M. BALAGANESH , A.M. THESE APPEALS OF THE REVENUE AND CROSS - OBJECTIONS FILED BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16 , MUMBAI [HEREINAFTER REFERRED TO AS LD. CIT(A) ] DATED 20.03.2019 FOR ASSESSMENT YEAR S 2008 - 09 AND 2009 - 10 AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LD. ADDL. COMMISSIONER OF INCOME TAX (OSD) R ANGE - 8 ( 1 ), MUMBAI (HEREINAFTER REFERRED TO AS AO) ON 24.12.2010 AND 29.092011 FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 RESPECTIVELY U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2. WE FIND THAT THE ASSESSEE HAD EXPLAINED THAT IN VIEW OF COVID - 19 PANDEMIC, THESE CROSS - OBJECTIONS COULD NOT BE FILED IN TIME BEFORE THIS TRIBUNA L. CONSIDERING THE SAME , WE ARE INCLINED TO CONDONE THE DELAY AND M/S IDFC FIRST BANK LTD. ITA NO. 4107/M/2019 & ORS. 3 ADMIT THE CROSS - OBJECTION OF THE ASSESSEE FOR BOTH THE YEARS FOR ADJUDICATION. THE ONLY ISSUE TO BE DECIDED IN THESE APPEALS OF THE REVENUE IS WITH REGARD TO DISALLOWANCE MADE U/S 14A OF THE ACT R.W.R. 8D(2) OF THE RULES FOR THE INCOME TAX RULES (HEREINAFTER REFERRED TO AS RULES). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT ASSESSEE IS A NON - BANKING FINANCE COMPANY (NBFC) INCORPORATED O N 18.10.2005 AND ENGAGED IN INVESTMENT ADVISORY ACTIVITIES AND TREASURY AND WHOLESALE CREDIT ACTIV ITIES AND RETAIL FINANCIAL SERVICES. W ITH THE MUTUAL CONSENT OF BOTH THE PARTIES , THE APPEAL FOR ASSESSMENT YEAR 2008 - 09 OF THE REVENUE AND CROSS - OBJECTIONS O F THE ASSESSEE THEREON IS TAKEN UP FOR ADJUDICATION AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR ASSESSMENT YEAR 2009 - 10 ALSO , I N VIEW OF IDENTICAL FACTS EXCEPT WITH VARIANCE OF FIGURES. 3.1. T HE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 WAS FILED BY THE ASSESSEE DECLARING LOSS OF RS.3 , 92 ,9 7 , 426 / - , WHICH WAS DULY PROCESSED U/S 143(1) OF THE ACT. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT FOR ASSESSMENT YEAR 2008 - 09 ON 24.12.2010 DETERMINING LOSS AT RS.1,94,76, 340/ - . AGAINST THE ASSESSMENT ORDER FRAMED U/S 143(3) OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE ORDER DATED 27.01.2011 PARTLY ALLOWED THE ASSESSEES APPEAL. ON FURTHER APPEAL BY THE ASSESSEE TO THIS TRIBUNAL, T HIS TRIBUNAL IN ITA NOS 2801 AND 2137/MUM/2012 DATED 18.11.2016 SET ASIDE THE ISSUE PERTAINING TO THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS.1,99,65,779/ - TO THE FILE OF THE LD. CIT(A). M/S IDFC FIRST BANK LTD. ITA NO. 4107/M/2019 & ORS. 4 3.2. WE FIND THAT ASSESSEE HAD EARNED EXEMPT INCOME OF RS.12,27,24,681/ - . WE FIND THAT ASSESSEE HAD VOLUNTARILY DISALLOWED SUM OF RS.1,05,54,142/ - U/S 14A OF THE ACT. THE ASSESSEE ALSO PRODUCED THE WORKING S TOGETHER WITH THE BASIS FOR VOLUNTARY DISALLOWA NCE MADE BY IT BEFORE THE LD. AO . WE FIND THAT THE LD. A O OBSERVED THAT THE DISALLOWANCE VOLUNTARILY MADE BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES AND ACCORDINGLY PROCEEDED TO MAKE THE DISALLOWANCE AS UNDER: UNDER RULE 8D(2)(II) RS.43,48,646/ - UNDER RULE 8D(2)(III) RS.1,56,17,133/ - RS.1,99,65,779/ - LESS AMOUNT VOLUNTARILY DISALLOWED BY THE ASSESSEE RS.1,05,54,142/ - DISALLOWANCE U/S 14A OF THE ACT RS.9 4,11 , 637 / - . 3.3. WE FIND THAT THE LD. CIT(A) HAD PROCEEDED ON THE WRONG ASSUMPTION OF FACT THAT EXEMPT INCOME DERIVE D BY THE ASSESSEE WAS ONLY RS.9,46,325/ - AS AGAINST THE ACTUAL EXEMPT INCOME OF RS.12,27,24,681/ - . ACCORDINGLY, HE DIRECTED THE LD. AO TO RESTRICT THE DISALL OWANCE ONLY TO THE EXTENT OF EXEMPT INCOME IN THE SUM OF RS.9,46,325/ - U/S 14A OF THE ACT. WE FIND THAT LD. AR FAIRLY STATED THAT THE EXEMPT INCOME DERIVED BY THE ASSESSEE WAS MORE THAN WHAT IS INCORRECTLY STATED BY THE LD. CIT(A) IN HIS ORDER AND ACCORDIN GLY, PRAYED FOR RESTORING OF THIS MATTER TO THE FILE OF LD. AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH LAW. WE FIND THAT THE LAW ON THIS ISSUE U/S 14A OF THE ACT IS WELL SETTLED AS ON DATE. WE DIRECT THE LD. AO TO CONSIDER ONLY THOSE INVESTMENT S WHICH HAD ACTUALLY YIELDED EXEMPT INCOME TO THE ASSESSEE WHILE DOING THE DE M/S IDFC FIRST BANK LTD. ITA NO. 4107/M/2019 & ORS. 5 NOVO ASSESSMENT ON THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT IN ACCORDANCE WITH LAW. 4. IN THE RESULT, THE APPEALS OF THE REVENUE AND BOTH THE CROSS - OBJECTIONS OF THE ASSESSEE ARE AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01 / 07 /2021 SD/ - SD/ - ( MAHAVIR SINGH ) ( M. BALAGANESH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 01 / 07 /2021 RAHUL SHARMA, SR. P.S. 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./ASSISTANT REGISTRAR) ITAT, MUMBAI .