ESSAR PROPERTIES LTD, MUMBAI V. DCIT 5(1), MUMBAI

ITA 423/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2669 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2015
• Court: TRIBUNAL
• Department Lawyers: K RAVI KIRAN SR
• Assessee Lawyers: VIJAY MEHTA ANUJ KISNADWALA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.423/M/2015 (ASSESSMENT YEAR: 2009 - 2010 ) ESSAR PROPERTIES LTD, ESSAR HOUSE, 11 KESHAVRAO, KHADYA MARG, MAHALAXMI, MUMBAI 400 034. / VS. DCIT - 5(1), AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AABCP9640D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / ANUJ KISNADWALA / RESPONDENT BY : SHRI K. RAVIKIRAN, SR. AR / DATE OF HEARING : 19 .07.2016 / DATE OF PRONOUNCEMENT : 1 9 .07.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 16.01.2015 IS AGAINST THE ORDER OF THE CIT (A) - 9, MUMBAI DATED 28.10.2014 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: - THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A READ WITH RULE 8D MADE BY THE AO OF RS. 12,28,308/ - . 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL RELATES TO THE DISALLOWANCE OF EXPENDITURE U/S 14A R.W. RULE 8D2(III) OF THE IT RULES, 1962. NARRATING THE FACTS OF THE CASE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE EARNED EXEMPT INCOME AMOUNTING TO RS. 1,32,433/ - . HE SUBMITTED THAT THE ASSESSING OFFICER QUANTIFIED THE DISALLOWANCE UNDER THE SAID PROVISIONS OF RULE 8D AT RS. 12,28,308/ - , WHICH IS EQUIVALE NT OF ALL THE DEBITS IN P & L ACCOUNT. BRINGING OUR ATTENTION TO VARIOUS BINDING DECISIONS ON THE SUBJECT, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE DISALLOWANCE U/S 14A OF THE ACT UNDER THE ABOVE FACTUAL MATRIX SHOULD NOT EXCEED THE FORESAID EXEM PT INCOME OF RS. 1,32,433/ - . IN SUPPORT 2 OF HIS ARGUMENT, LD COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS DECISIONS VIZ (I) JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT LTD VS. CIT (372 ITR 694); (II) DECISIONS OF THE ITAT, D ELHI IN THE CASE OF INDUS VALLEY INVESTMENTS & FINANCE P LTD VS. DCIT IN ITA NO.3763/DEL/2013, DATED 29.4.2015 AND IN THE CASE OF DCM LTD VS. DCIT IN ITA NO.4467/DEL/2012, DATED 1.9.2015; (III) DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF AARTI STE EL LTD VS. DCIT IN ITA NO.268/CHD/2015, DATED 30.11.2015; (IV) DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF DAGA GLOBAL CHEMICALS P LTD VS. ACIT IN ITA NO.5592/MUM/2012, DATED 1.1.2015 AND (V) DECISION OF THE ITAT, AMRITSAR BENCH IN THE CASE OF K. KIS HORE OVERSEAS VS. JCIT IN ITA NO.656/ASR/2014, DATED 18.3.2016, COPIES OF WHICH ARE PLACED ON RECORD FROM PAGES 1 - 45 OF THE PAPER BOOK. 3. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT LTD (SUPRA)AND THE CITED DECISIONS OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE CITED D ECISIONS, WE FIND THE SAME ARE RELEVANT FOR THE PROPOSITION THAT THE EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AND THE DISALLOWANCE U/S 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INCOME [PARA 2.2 OF THE TRIBUNALS ORDER IN THE CASE OF DAGA GLOBAL CHEMICALS P LTD (SUPRA) IS RELEVANT IN THIS REGARD]. CONSIDERING THE SETTLED LEGAL POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE DISALLOWANCE UNDER THE SAID PROVISIONS OF 14A READ WITH RULE 8D SHOULD BE RESTRICTED TO THE EXEMPT INCOME. WE DIRECT THE AO ACCORDINGLY. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JULY, 2016. SD/ - SD/ - ( SANJAY GARG ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 19.07.2016 3 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI