DCIT 9(3)(2), MUMBAI V. FUTURE MARKET NETWORKS LTD, MUMBAI

ITA 4470/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3808 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 12-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSHIL KUMAR PODDAR
• Keywords: Earning of tax free income
• Section: 142(1); 14A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHIR S RIFAUR RAHMAN, ACCOUNTANT MEMBER ./ I.T.A. NO.4470/MUM/2018 ( / ASSESSMENT YEARS : 2014-15 THE DCIT 9(3)(2) 418, AAYAKAR BHAVAN, 4 TH FLOOR, M.K MARG, MUMBAI. / VS. FUTURE MARKET NETWORKS LTD., KNOWLEDGE HOUSE, OFF JOGESWARI VIKHROLI LINK RD. SHYAM NAGAR JOGESWARI EAST, MUMBAI. ./ ./ PAN/GIR NO. : AABCF2006M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUSHIL KUMAR PODDAR, CIT(DR) / RESPONDENT BY : MISS. DINKLE HARIA (AR) / DATE OF HEARING 09/12/2019 !'# / DATE OF PRONOUNCEMENT 10 /01/2020 / O R D E R PER SHRI S RIFAUR RAHMAN- AM: THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-16, MUMBAI, DATED 19.04.201 8. ITA NO .4470/MUM/2018. FUTURE MARKET NETWORKS LTD., MUMBAI. - 2 - 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME ON 29.01.2014, DECLARING TOTAL LOS S AT RS. 67,01,83,597/- AND DECLARED BOOK PROFIT LOSS AT RS. 131,28,81,567/-. THE RETURN WAS PROCESSED U/S 143( 1) OF THE ACT. THE NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED AND DULY ON THE ASSESSEE. IN RESPONSE TO TH E SAID NOTICES THE ASSESSEE FILED RELEVANT INFORMATION AS CALLED FOR. A.O DISALLOWED THE DISALLOWANCE U/S 14A TO THE EXTE NT OF RS. 13,15,71,740/-, EVEN THOUGH ASSESSEE HAS NOT E ARNED ANY EXEMPT INCOME DURING THIS YEAR AND A.O HAS REDU CED THE DISALLOWANCE TO THE EXTENT OF RS. 24,15,984/-, AS THE ASSESSEE ITSELF DISALLOWED IN ITS COMPUTATION OF IN COME. ACCORDINGLY, HE DISALLOWED NET AMOUNT OF RS. 12,91,55,756/- BY RELYING ON THE CBDT CIRCULAR. 3. AGGRIEVED WITH THE ABOVE ORDER THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONSIDER ED THE SUBMISSIONS OF THE ASSESSEE THAT ASSESSEE HAS NOT E ARNED ANY EXEMPT INCOME DURING THIS YEAR BY RELYING ON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., REPORTED IN [2009] 121 ITD 318 (DE LHI SB) AND DELETED THE DISALLOWANCE MADE U/S 14A OF THE AC T. ITA NO .4470/MUM/2018. FUTURE MARKET NETWORKS LTD., MUMBAI. - 3 - 4. AGGRIEVED WITH THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS O F APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING DI SALLOWANCE U/S 14A HOLDING THAT IN ABSENCE OF ANY TAX FREE INCOME EARNED BY THE ASSESSEE, DISALLOWANCE U/S 14A COULD NOT BE MADE. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDE RING THE DECISION OF HONBLE APEX COURT IN THE CASE OF MAXOP P INVESTMENT P LTD. VS. CIT, NEW DELHI WHEREIN IT WAS HELD THAT THE DOMINANT PURPOSE FOR WHICH INVESTMENT INTO SHARES IS MADE BY THE ASSESSEE MAY NOT BE RELEVANT AS SEC. 14A OF THE ACT APPLIES IRRESPECTIVE OF WHETHER SHARES ARE HELD TO GAIN CON TROL OR AS STOCK ENTRY AND WHERE SHARES ARE HELD AS STOCK IN TRADE M AIN PURPOSE IS TO TRADE IN THOSE SHARES AND EARN PROFITS THERE FROM AND IN PROCESS CERTAIN DIVIDEND IS ALSO EARNED WHICH IS TA X EXEMPT U/S 10(34) OF THE ACT. 5. CONSIDERING THE RIVAL SUBMISSIONS AND MATERIAL P LACED ON RECORD, WE NOTICED FROM THE RECORD THAT THE ASSE SSEE HAS NOT EARNED ANY DIVIDEND INCOME DURING THIS YEAR THE DISALLOWANCE U/S 14A OF THE ACT ARE WARRANTED ONLY WHEN EXEMPT INCOME IS EARNED / DECLARED BY THE ASSESSEE. THIS FACT WAS ACKNOWLEDGED BY THE A.O AND LD. CIT(A) IN THEIR RESPECTIVE ORDERS. RESPECTFULLY FOLLOWING THE DECI SION IN CHEMINVEST LTD., (SUPRA), WE ARE INCLINED TO ACCEPT THE ITA NO .4470/MUM/2018. FUTURE MARKET NETWORKS LTD., MUMBAI. - 4 - FINDINGS OF THE CIT(A) AND GROUND NO. 1 RAISED BY T HE REVENUE IS DISMISSED. 5.1 WITH REGARD TO THE GROUND OF APPEAL NO. 2, THE APPLICATION OF DECISION IN MAXOPP INVESTMENT [2012] 347 ITR 272 (DEL), THE COORDINATE BENCH OF THIS TRIBUNA L IN ASSESSEES OWN CASE FOR THE A.Y 2013-14 HAS HELD AS UNDER:- 9. ON A THOROUGH AND CAREFUL READING OF THE AFORES AID JUDGMENT OF THE HON'BLE SUPREME COURT WE ARE UNABLE TO LOCAT E ANY OBSERVATION / RATIO LAID DOWN BY THE HON'BLE SUPREM E COURT TO INDICATE THAT EVEN IN THE ABSENCE OF EXEMPT INCOME EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR PROVISIONS OF SECTION 14A OF THE ACT CAN BE INVOKED. THE ISSUE BEFORE THE HON'BLE SUPREME COURT WAS COMPLETELY DIFFERENT AS TO WHETHE R THE DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MA DE IN RESPECT OF SHARES / MUTUAL FUND HELD BY THE ASSESSE E AS STOCK INTRADE OR STRATEGIC INVESTMENT IN SUBSIDIARY COMP ANY WOULD NOT ATTRACT THE PROVISIONS OF SECTION 14A OF THE ACT. T HEREFORE, IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT IN TH E AFORESAID DECISION HAS LAID DOWN ANY RATIO HOLDING THAT EVEN IN THE ABSENCE OF ANY EXEMPT INCOME EARNED IN THE ASSESSME NT YEAR PROVISION OF SECTION 14A OF THE ACT WOULD STILL BE ATTRACTED. IT IS WELL SETTLED PROPOSITION OF LAW THAT WHAT IS BINDIN G IS THE RATIO OF A DECISION AND NOT WHAT CAN BE INFERRED FROM THE JU DGMENT BY IMPLICATION. EVEN, OBSERVATIONS MADE BY THE COURT A S A OBITER DICTA DO NOT CONSTITUTE BINDING PRECEDENT. CONSIDER ED IN THE AFORESAID PERSPECTIVE, THE CONTENTION OF THE LEARNE D DEPARTMENTAL REPRESENTATIVE THAT THE DECISION OF THE HON'BLE SUP REME COURT ITA NO .4470/MUM/2018. FUTURE MARKET NETWORKS LTD., MUMBAI. - 5 - LAYS DOWN THE RATIO THAT EVEN IN THE ABSENCE OF EXE MPT INCOME PROVISION OF SECTION 14A OF THE ACT IS APPLICABLE, IS UNACCEPTABLE. 5.3 RESPECTFULLY FOLLOWING THE ABOVE FINDINGS, WE A RE INCLINED TO DISMISS THE GROUND OF APPEAL NO. 2 RAIS ED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 10 /01/2020 SD/- SD/- (PAWAN SINGH) ( S. RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 10/01/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. &'( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// / ( ASST. REGISTRAR) $%, / ITAT, MUMBAI