ITO 11(1)(3), Mumbai V. M/S SATGURU CORPORATES SERVICES PVT LTD., Mumbai

ITA 4537/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6326 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 04-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! .#$% , ( ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER. . 4537 / / 2019 (. .2013-14 ) ITA NO. 4537/MUM/2019 (A.Y.2013-14) THE INCOME TAX OFFICER -11(1)(3), ROOM NO.201, 2 ND FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 / VS. : / APPELLANT M/S. SATGURU CORPORATES SERVICES PVT. LTD., 5 TH FLOOR, SUNTECK CENTRE,37/40, SUBHASH ROAD, VILE PARLE(E), MUMBAI 400 057, PAN: AAPCS 2160R : / RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI SANJAY J. SETHI / DATE OF HEARING : 11/01/2021 / DATE OF PRONOUNCEMENT : 18/01/2021 / ORDER PER VIKAS AWASTHY:JM THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI ( IN SHORT THE CIT (A)) DATED 15/04/2019 FOR THE ASSESSMENT YEAR 2013-14. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM TH E RECORDS ARE: THE ASSESSEE COMPANY IS A BUILDER AND DEVELOPER. DURIN G THE COURSE OF SCRUTINY 2 ITA NO. 4537/MUM/2019 (A.Y.2013-14) ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAD PURCHASED 20,000 SHARES OF M/S. SOMANI & CO. PVT. L TD. THE SHARES WERE PURCHASED BY UTILIZING INTEREST BEARING FUNDS. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE INCO ME TAX ACT, 1961 ( IN SHORT THE ACT) AND MADE TOTAL DISALLOWANCE OF RS.17,50, 31,966/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30/3/2016 PASSED UNDER SECTI ON 143(3) OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT HOLDING SINCE, T HE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, NO DISALLOWANCE UNDER SECTION 14 A OF THE ACT COULD HAVE BEEN MADE. THE CIT(A) PLACED RELIANCE ON THE D ECISION OF HON'BLE SUPREME COURT OF INDIA DISMISSING SLP OF THE REVENUE IN THE CASE OF CIT VS. CHETTINAD LOGISTICS PVT. LTD. REPORTED AS 80 TAXAMANN.COM 22 1(MAD). AGAINST THE FINDINGS OF CIT(A) REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 3. SHRI SANJAY J. SETHI, REPRESENTING THE DEPARTMENT VEHEMENTLY CONTESTED THE FINDING OF CIT(A) IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THE LD.DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF M/S. SOMANI & CO. P VT. LTD. BY UTILIZING BORROWED FUNDS. THE ASSESSEE INCURRED INTEREST EXP ENDITURE OF RS.16,58,91,016/- TOWARDS THE LOAN TAKEN EXCLUSIVE LY FOR THE PURPOSE OF INVESTMENT IN THE SHARES. THEREFORE, THE PROVISION S OF SECTION 14A OF R.W.R. 8D ARE ATTRACTED. THE LD.DEPARTMENTAL REPRESENTATIVE PRAYED FOR RESTORING THE DISALLOWANCE UNDER SECTION 14A R.W.R. 8D OF THE ACT . 4. SUBMISSIONS MADE BY LD.DEPARTMENTAL REPRESENTATI VE HEARD, ORDERS OF AUTHORITIES BELOW EXAMINED. IN THE PRESENT CASE UN DISPUTEDLY THE ASSESSEE MADE INVESTMENT OF RS.182,81,90,016/- FOR PURCHASE OF 20,000 SHARES OF 3 ITA NO. 4537/MUM/2019 (A.Y.2013-14) SOMANI & CO. PVT. LTD. THE SAID COMPANY WAS SUBSEQ UENTLY MERGED WITH THE ASSESSEE COMPANY UNDER THE SCHEME OF MERGER APPROV ED BY HON'BLE BOMBAY HIGH COURT VIDE JUDGMENT DATED 12/12/2014. THE AS SESSEE FOR ACQUIRING THE SHARES OF SOMANI & CO. PVT. LTD. HAD RAISED INTERE ST BEARING FUNDS IN THE FORM OF NCD/ICD. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAD NOT EARNED ANY DIVIDEND INCOME ON THE SHARES ACQUIRED DURING THE P ERIOD RELEVANT TO THE ASSESSMENT YEAR 2013-14. 5. THE DISALLOWANCE UNDER SECTION 14A IS REQUIRED TO BE MADE WHERE EXPENDITURE IS INCURRED IN RELATION TO EARNING OF INCOME WHICH DOES NOT FORM PART OF THE TAXABLE INCOME UNDER THE ACT. THUS, FR OM PLAIN READING OF PROVISIONS OF SECTION 14A OF THE ACT IT CAN BE SAFE LY DEDUCED THAT EARNING OF INCOME EXEMPT FROM TAX IS A PRECONDITION FOR MA KING DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF DCIT VS. STATE BANK OF PATIALA, REPORTED AS 99 TAXMANN. COM286 HAS HELD THAT DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED EXEMPT INCOME EARNED. THE HONBLE APEX COURT IN THE CASE OF PCIT VS. OIL INDU STRY DEVELOPMENT BOARD REPORTED AS 262 TAXMAN 102 DISMISSED THE APPEAL OF REVENUE AGAINST THE JUDGMENT OF HONBLE DELHI HIGH COURT, WHEREIN IT WAS HELD THAT IN ABSENCE OF ANY EXEMPT INCOME NO DISALLOWANCE UNDER SECTION 14A OF THE ACT IS PERMISSIBLE. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CHETTINAD LOGISTICS (SUPRA) HAS HELD THAT WHERE NO EXEMPT INCOME IS EAR NED NO DISALLOWANCE UNDER SECTION 14A OF THE ACT BE MADE. THE REVENUE CARRIED THE ISSUE TO HONBLE APEX COURT. THE SLP OF REVENUE WAS DISMI SSED BY HON'BLE SUPREME COURT . THUS, THE ISSUE IS NOW SETTLED THAT WHERE NO EXEMPT INCOME IS EARNED BY THE ASSESSEE FROM INVESTMENTS MADE, NO DISALLOWA NCE UNDER SECTION 14A OF 4 ITA NO. 4537/MUM/2019 (A.Y.2013-14) THE ACT IS WARRANTED. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER, THE SAME IS UPHELD AND THE APPEAL BY REVENUE IS DISMISS ED. 6. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 18 TH DAY OF JANUARY, 2021. SD/- SD/- (S.RIFAUR RAHMAN) (VIKAS AWASTHY) ( / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, -'/ DATED: 18/01/2021 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. . / THE APPELLANT , 2. /0 / THE RESPONDENT. 3. 10 ( )/ THE CIT(A)- 4. 10 CIT 5. 23/0' , . . . , / DR, ITAT, MUMBAI 6. 345$6 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI