ACIT (OSD) RG. 8(1), MUMBAI V. CAPITAL FIRST LIMITED, MUMBAI

ITA 4109/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1915 (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: 2010-2011
• Appeal Filed On: 07-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH MUMBAI BEFORE : SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI M.BALAGANESH, A CCOUNTANT M EMBER ITA NO. 4109/ MUM/ 20 19 ( ASSESSMENT YEAR : 2010 - 1 1 ) DCIT, CORPORATE CIRCLE - 2(1) CHENNAI ROOM NO.5 11, 5 TH FLOOR AAYAKAR BHAVAN WANAPATHY BUILDING CHENNAI 600 034 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 ELPHINSTON WEST MUMBAI 400 013 PAN/GIR NO. AACCK6863C (APPELLANT ) .. (RESPONDENT ) CO NO.77/MUM/2020 (ARISING OUT OF ITA NO. 4109/ MUM/ 2019) ( ASSESSMENT YEAR : 2010 - 11 ) M/S. IDFC FIRST BANK LTD (PREVIOUSLY KNOWN AS M/S. CAPITAL FIRST LIMITED) TOWER II, 15 TH FLOOR INDIA BULLS FINANCE CENTRE SEN APATI BAPAT MARG ELPHINSTON WEST MUMBAI 400 013 VS. DCIT, CORPORATE CIRCLE - 2(1) CHENNAI ROOM NO.511, 5 TH FLOOR AAYAKAR BHAVAN WANAPATHY BUILDING CHENNAI 600 034 PAN/GIR NO. AACCK6863C (APPELLANT ) .. (RESPONDENT ) REVENUE BY MS. SHREEKALA PARDESHI ASSESSEE BY SHRI KETAN VED DATE OF HEARING 29 / 06 /202 1 DATE OF PRONOUNCEMENT 01 / 07 /202 1 ITA NO . 4109/MUM/2019 & CO NO.77/MUM/2020 M/S. IDFC FIRST BANK LTD 2 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 4109/MUM/2019 & CO NO.77/MUM/2020 FOR A.Y . 2010 - 11 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI IN APPEAL NO. CIT(A) - 16/IT - 10085/DCIT - 8(1)/2013 - 14 DATED 20/03/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS A CT) DATED 19/02/2013 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 8(1), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. AT THE OUTSET WE FIND THAT CROSS OBJECTION OF THE ASSESSEE IS DELAYED BY 23 DAYS. THE LD. AR STATED THAT BECAUSE OF COVID - 19 PANDEMIC, THE CROSS OBJECTION COULD NOT BE PREFERRED WITHIN TIME AND ACCORDINGLY, THE SAME WAS FILED WITH A DELAY OF 23 DAYS. HE ALSO PLACED RELIANCE ON THE PROVISIONS OF THE TAXATION AND OTHER LAWS (RELAXATION OF CERTAIN PROVISIONS) ORDINANCE, 2020 NO.2 OF 2020 DATED 3 1/03/202 1 ISSUED BY MINISTRY OF LAW AND JUSTICE WHEREIN TIME LIMITS WERE EXTENDED BY THE GOVERNMENT GRANTING RELAXATION , IN SUPPORT OF HIS CONDONATION PETITION. RESPECTFULLY FOLLOWING THE SAME, WE ARE INCLINED TO CONDONE THE DELAY OF 23 DAYS IN PREFERRING CROSS OBJECTION BEFORE US AND ADMIT THE SAME FOR OUR ADJUDICATION. 3. THE ONLY COMMON ISSUE TO BE ADJUDICATED IN THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE MADE U/S.14A OF THE ACT R.W.R. 8D(2) OF THE INCOME TAX RULES , 1962 (HEREINAFTER REFERRED TO AS THE RULES) . ITA NO . 4109/MUM/2019 & CO NO.77/MUM/2020 M/S. IDFC FIRST BANK LTD 3 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS A NON - B ANKING FINANCIAL COMPANY (NB FC) INCORPORATED ON 18/10/2005 ENGAGED IN INVES TMENT ADVISORY ACTIVITIES, TREASURY AND WHOLESALE CREDIT ACTIVITIES AND RETAIL FINANCIAL SERVICES. THE RETURN OF INCOME FOR THE A.Y.2010 - 11 WAS FILED BY THE ASSESSEE COMPANY ON 30/09/2010 DECLARING TOTAL INCOME OF RS.10,33,02,250/ - WHICH WAS DULY PROCESSED U/S.143(1) OF THE ACT. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 19/02/2013 DETERMINING TOTAL INCOME OF THE ASSESSEE UNDER NORMAL PROVISIONS OF THE ACT AT RS.13,61,71,400/ - AND BOOK PROFIT U/S.115JB OF THE ACT AT RS.21,87,01,860/ - . AG AINST THIS ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 21/03/2014 PARTLY ALLOWED THE ASSESSEES APPEAL. AGAINST THE SAID ORDER OF THE LD. CIT(A), BOTH THE ASSESSEE AS WELL AS THE REVENUE PREFERRED CROSS APPEAL S BEFORE THIS TRIBUNAL. THIS TRIBUNAL IN ITA NOS. 3789/MUM/2012, 122/MUM/2013 AND 4429/MUM/2014 DATED 24/05/2017 HAD SET ASIDE TO THE FILE OF THE LD. CIT(A) FOR DENOVO ADJUDICATION ON THE ISSUE OF DISALLOWANCE MADE U/S.14A OF THE ACT. 4.1. THE LD. CIT(A) IN SECOND ROUND OF PROCEEDINGS OBSERVED THAT EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR WAS RS.34,39,162/ - AND RESTRICTED THE TOTAL DISALLOWANCE TO THE EXTENT OF SUCH EXEMPT INCOME. HENCE, THIS IS EFFECTIVELY SECOND ROUND OF PROCEEDINGS BEFORE US . 4.2. WE FIND THAT THERE ARE CERTAIN FACTUAL DISCREPANCIES IN THE ORDER OF THE LD. CIT(A) IN CONSIDERATION OF FIGURES. FACTUALLY, WE FIND THAT ASSESSEE HAD EARNED EXEMPT INCOME OF RS.2,33,67,537/ - TOWARDS DIVIDEND. WE FIND THAT ASSESSEE HAS VOLUNTARILY M ADE DISALLOWANCE U/S.14A OF THE ACT IN THE ITA NO . 4109/MUM/2019 & CO NO.77/MUM/2020 M/S. IDFC FIRST BANK LTD 4 SUM OF RS.12 LAKHS. WE FIND THAT THE LD. AO HAD MADE THE FOLLOWING DISALLOWANCES U/S.14A OF THE ACT R.W.R. 8D(2) OF THE RULES AS UNDER: - ( I ) UNDER RULE 8D(2)(I) - RS. 12,00,000/ - ( II ) UNDER RULE 8D(2)(II) - RS.1,49,62 ,923/ - ( III ) UNDER RULE 8D(2)(III) - RS.1,67,06,234/ - TOTAL - RS.3,28,69,157/ - ========== 4.3. WHILE DOING SO WE FIND THAT THE LD. AO HAD NOT EVEN REDUCED THE VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE IN THE SUM OF RS. 12 LAKHS. WE FIND THAT ASSE SSEE IS HAVING SUFFICIENT OWN FUNDS TO THE EXTENT OF RS.753.50 CRORES WHICH IS EVIDENT FROM THE AUDITED FINANCIAL STATEMENTS ENCLOSED IN THE PAPER BOOK FILED BEFORE US. THIS FIGURE OF OWN FUNDS IS MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE . HENCE BY PLACING RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD., REPORTED IN 366 ITR 505, WE HEREBY DIRECT THE LD. AO TO DELETE THE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) OF THE RULES. 4.4. WE FIND THAT TH E LD. AO HAD TAKEN THE DISALLOWANCE OF RS.12 LAKHS UNDER RULE 8D(2)(I) OF THE RULES FROM THE VOLUNTARY DISALLOWANCE FIGURE MADE BY THE ASSESSEE ITSELF. NO SUCH DIRECT NEXUS WAS IDENTIFIED BY THE LD AO TOWARDS INCURRENCE OF SUCH DIRECT EXPENSES VIS A VIS TH E EARNING OF EXEMPT INCOME TO MAKE THIS DISALLOWANCE. HENCE, WE HEREBY DIRECT THE LD. AO TO DELETE THE DISALLOWANCE MADE U/S.8D(2)(I) OF THE RULES. 4.5. WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) OF THE RULES, WE DIRECT T HE LD. AO TO CONSIDER ONLY THOSE ITA NO . 4109/MUM/2019 & CO NO.77/MUM/2020 M/S. IDFC FIRST BANK LTD 5 INVESTMENTS WHICH HAD ACTUALLY YIELDED EXEMPT INCOME TO THE ASSESSEE AND RE - COMPUTE THE DISALLOWANCE ACCORDINGLY. THIS WOULD BE IN LINE WITH THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF ACIT VS VIREET INV ESTMENTS REPORTED IN 165 ITD 27. 4.6. ACCORDINGLY, WE DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE LD. AO TO DECIDE THE ISSUE OF DISALLOWANCE IN THE LIGHT OF THE ABOVE MENTIONED DIRECTIONS. THE LD. AO IS ALSO DIRECTED TO REDUCE RS.12 LAKHS BEING THE VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE FROM THE AMOUNT OF D ISALLOWANCE RECOMPUTED AS ABOVE. 5. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 01 / 07 /202 1 B Y WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 01 / 07 / 2021 KARUNA , SR.PS ITA NO . 4109/MUM/2019 & CO NO.77/MUM/2020 M/S. IDFC FIRST BANK LTD 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//