BLOOM PACKAGING P. LTD, MUMBAI V. ASST CIT 38, MUMBAI

ITA 4849/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8146 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A; 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4849/MUM/2016 ASSESSMENT YEAR: 2011 - 12 BLOOM PACKAGING PVT. LTD. 4 TH FLOOR, READY MONEY TERRANCE, DR. A.B. ROAD, WORLI NAKA, MUMBAI - 400018 VS. DCIT - 6(3), ROOM NO. 1926, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021. PAN NO. AA ACB1928K APPELLANT RESPONDENT ASSESSEE BY : MR. KIRIT KAMDAR , AR REVENUE BY : MR. SAURABH KUMAR RAI, DR DATE OF HEARING : 30/10 /2017 DATE OF PRONOUNCEMENT : 21/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 2 , MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2 . THE 1 ST , 2 ND , 3 RD AND 4 TH GROUND OF APPEAL FILED BY THE ASSESSEE ADDRESS A COMMON ISSUE. THE ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,18,695/ - MADE BY THE AO U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES 1962. BLOOM PACKAGING PVT. LTD. ITA NO. 4849/MUM/2016 2 3. BRIEFLY STAT ED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.3,60,313/ - WHICH IT CLAIMED AS EXEMPT U/S 10 OF THE ACT. THE ASSESSEE HAS VOLUNTARILY MADE DISALLOWANCE OF RS.9,300/ - INCLUDING DEMAT CHARGES OF RS.1,324/ - WHILE COMPUTING THE TOTAL INCOME. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAME AND WORKED OUT A DISALLOWANCE OF RS.1,18,695/ - U/S 14A R.W. RULE 8D. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APP EAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AGREED WITH DISALLOW ANCE U/S 14A R.W. RULE 8D MADE BY THE AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY (I) NOT EXCLUDING THE INVESTMENTS MADE IN GROUP C OMPANIES FOR HOLDING CONTROLLING STAKE WHICH ARE STRATEGIC IN NATURE AND DOES NOT REQUIRE DAY TO DAY M ONITORING BY THE ASSESSEE, (II) NOT APPRECIATING THAT ONLY THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME O UGHT TO BE EXCLUDED AND (III) NOT EXCLUDING I NVESTMENTS WHICH ARE CAPABLE OF YIELDING TAXABLE INCOME. THE LD. COUNSEL ALSO SUBMITS THAT THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT INVESTMENTS IN DOMESTIC COMPANIES/MUTUAL FUNDS OUGHT NOT TO BE INCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/ S 14A, SINCE DIVIDEND FROM DOMESTIC COMPANIES/MUTUAL FUNDS ARE NOT EXEMPT FROM TAX IN VIEW OF SECTION 115 - O/115R OF THE ACT. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). BLOOM PACKAGING PVT. LTD. ITA NO. 4849/MUM/2016 3 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIALS ON RECORD. WE FIND THAT IN A RECENT DECISION, THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT (2017) 81 TAXMANN.COM 111 (SC) HAS HELD THAT THE PHRASE INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME UNDER THIS ACT, APPEARING IN SECTION 14A INCLUDES WITHIN ITS SCOPE DIVIDEND INCOME ON SHARES IN RESPECT OF WHICH TAX IS PAYABLE U/S 115 - O OF THE ACT AND INCOME ON UNITS OF MUTUAL FUNDS ON WHICH TAX IS PAYABLE U/S 115 - R. WE FIND THAT THE ABOVE IS SUE HAS NOT BEEN EXAMINED EITHER BY THE AO OR THE LD. CIT(A). THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO PASS AN ORDER AFRESH, FOLLOWING THE ABOVE DECISION OF THE SUPREME COURT. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY, THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING THE ASSESSMENT ORDER. IN VIEW OF THE ABOVE, THE 1 ST , 2 ND , 3 RD AND 4 TH GROUND OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. THE 5 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE FOR COMPUTING THE DISALLOWANCE IN RESPECT OF EXPENDITURE RELATABLE TO EXEMPT INCOME WHILE COMPUTING THE BOOK PROFIT U/S 115JB. 8.1 WE FIND THAT IN THE CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD . (2017) 165 ITD 27 (DELHI - TRIB) (SB), IT HAS BEEN HELD BY THE SPECIAL BENCH OF THE TRIBUNAL THAT COMPU TATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB (2) IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED U/S 14A R.W. RULE 8D. BLOOM PACKAGING PVT. LTD. ITA NO. 4849/MUM/2016 4 THE ABOVE ORDER OF THE SPECIAL BENCH SUPPORTS THE CONTENTIONS OF THE ASSESSEE. THEREFORE, WE ALLOW THE 5 TH GROUND OF APPEAL. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/12/2017. SD/ - SD/ - (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 21/12/2017 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./ASSTT. REGISTRAR) ITAT, MUMBAI