WESTEX INFOTECH P.LTD, MUMBAI V. ACIT 11(3)(2), MUMBAI

ITA 514/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3095 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Earning of tax free income; Tax effect; Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ITA NO. 514 / MUM/20 1 8 ( ASSESSMENT YEAR : 2013 - 14 ) M/S. WESTEX INFOTECH PVT. LTD., 305, ENTERPRISE CENTRE OFF NEHRU ROAD, VILE PARLE (E) MUMBAI 400 099 VS. ACIT - 11(3)(2) AAYAKAR BHAVAN MAHARSHI KARVE ROAD CHURCHGATE, MUMBAI PAN/GIR NO. AAACW5913B ( APPELLANT ) .. ( RESPONDENT ) ITA NO.1749/MUM/2018 ( ASSESSMENT YEAR :2013 - 14 ) ACIT - 11(3)(2) ROOM NO.427, AAYAKAR BHAVAN MAHARSHI KARVE ROAD CHURCHGATE, MUMBAI - 400020 VS. M/S. WESTEX INFOTECH PVT. LTD., 305, ENTERPRISE CENTRE OFF NEHRU ROAD, VILE PARLE (E) MUMBAI 400 099 PAN/GIR NO.AAACW5913B (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI KIRIT SHETH REVENUE BY SHRI CHAUDHARY ARUNKUM AR SINGH DATE OF HEARING 05 / 03 /201 9 DATE OF PRONOUNCEMENT 05 / 03 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 18 [HEREINAFTER REFERRED TO AS THE LD CITA] , MUMBAI DATED 07/12/2017 FOR ITA NO.514/MUM/2018 & 1749/MUM/2018 M/S. WESTEX INFOTECH P. LTD 2 A.Y.2013 - 14 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961. 2. AT THE OUTSET, WE FIND THAT THE TAX EFFECT ON THE ISSUE UNDER DISPUTE INVOLVED IN THE APPEAL OF THE REVENUE IS LESS THAN RS.20 LAKHS AND IS FAIRLY COVERED BY THE RECENT CBDT CIRCU LAR NO. 3/2018 DATED 11.07.2018 . ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. WE FURTHER STATE THAT LIBERTY IS HEREBY GIVEN TO THE REVENUE TO PREFER MISCELLANEOUS APPLICATION BEFORE US , IN CASE , IF THE CASE FALLS UNDER ANY OF THE EXCEPTIONS COVERED IN THE AFORESAID CBDT CIRCULAR. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 3. NOW LET US COME TO THE ASSESSEES APPEAL IN ITA NO.514/MUM/2018. 3.1. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A ) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE U/S.14A OF THE ACT TO THE TUNE OF RS.10,62,727/ - IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.10,62,727/ - DURING THE Y EAR. NO DISALLOWANCE OF EXPENSES WERE MADE BY THE ASSESSEE FOR INCURRING SUCH EXEMPT INCOME . A CCORDINGLY, THE LD. AO PROCEEDED TO MAKE DISALLOWANCE BY APPLYING THE COMPUTATION MECHANISM PROVIDED UNDER RULE 8D (2) AND MADE DISALLOWANCE UNDER ALL THE THREE LI MBS AS UNDER: - A) UNDER RULE 8D (2) (I) - RS. 6,516/ - B) UNDER RULE 8D (2) (II) - RS.28,08,752/ - C) UNDER RULE 8D (2) (III) - RS.41,83,022/ - =========== TOTAL RS.69,98,290/ - =========== 4.1. THE LD. AO MADE DISALLOWANCE OF RS.69,98,290/ - U/S.14A OF THE ACT R.W.RULE 8D OF THE RULES. THE LD. CIT(A) OBSERVED THAT ASSESSEES OWN ITA NO.514/MUM/2018 & 1749/MUM/2018 M/S. WESTEX INFOTECH P. LTD 3 FUNDS IS MUCH MORE THAN THE INVESTMENTS MADE IN SHARES AND MUTUAL FUNDS AND ACCORDINGLY BY PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK VS. DCIT REPORTED IN 366 ITR 505 (BOM) HELD THAT NO DISALLOWANCE UNDER SECOND LIMB OF RULE 8D(2) TOWARDS INTEREST NEED TO BE MADE IN THE FACTS OF THE INSTANT CASE . THE ASSESSEE BEFORE THE LD. CIT(A) PLACED RELIANCE ON T HE DECISION OF THIS TRIBUNAL FOR A.Y.2010 - 11 WHEREIN DISALLOWANCE UNDER THIRD LIMB OF RULE 8D(2) WAS RESTRICTED TO 10% OF TOTAL ADMINISTRATIVE EXPENSES CLAIMED. THE LD. CIT(A) HOWEVER, OBSERVED THAT THE DECISION RENDERED BY THE TRIBUNAL IN A.Y.2010 - 11 SHAL L NOT ACT AS A PRECEDENT FOR SUBSEQUENT YEARS WHICH FACT HAS BEEN CLEARLY MENTIONED IN THE TRIBUNAL ORDER ITSELF. ACCORDINGLY, HE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF DIVIDEND INCOME RECEIVED BY THE ASSESSEE IN THE SUM OF RS.10,62,727/ - . THERE IS N O DISPUTE WITH REGARD TO DISALLOWANCE OF RS.6,516/ - UNDER FIRST LIMB OF RULE 8D(2). 5. AGGRIEVED, BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS. THE REVENUE APPEAL HAD ALREADY BEEN DISMISSED DUE TO LOW TAX EFFECT B Y PLACING RELIANCE ON THE CBDT CIRCULAR STATED SUPRA. WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO DISALLOWANCE MADE UNDER FIRST LIMB OF RULE 8D(2) TO THE TUNE OF RS.6,516/ - . THE ONLY DISPUTE IS WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S .14A OF THE ACT. WE FIND THAT ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.10,62,727/ - DURING THE YEAR. WE DIRECT THE LD. AO TO CONSIDER THOSE INVESTMENTS WHICH HAD YIELDED DIVIDEND INCOME TO THE ASSESSEE AND APPLY 0.5% OF SUCH INVESTMENTS AND MAKE DISALLOWAN CE UNDER THIRD LIMB OF RULE 8D(2) WHICH , IN ANY CASE, SHOULD BE RESTRICTED TO THE MAXIMUM OF DIVIDEND INCOME EARNED BY THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.514/MUM/2018 & 1749/MUM/2018 M/S. WESTEX INFOTECH P. LTD 4 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 03 /201 9 SD/ - ( MAHAVIR SINGH) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 05 / 03 /201 9 KARUNA SR. PS 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//