MAHENDRA BROTHERS EXPORTS PRIVATE LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE 1(2), MUMBAI

ITA 5218/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7532 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Earning of tax free income; Rule 8D
• Section: 142(1); 153A; 14A; 143(2); 48; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL , AM / I.T.A. NO. 5218 /MUM/201 8 ( / ASSESSMENT YEAR: 20 08 - 09 ) MAHENDRA BROTHERS EXPORTS PVT. LTD. CE - 7011 - 15, 8 TH FLOOR, BHARAT DIAMOND BOURSE, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 . / VS. DCIT - CENTRAL CIRCLE - 1(2) 904, 9 TH FLOOR, OLD CGO BUILDING, M.K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AAFCM 0246E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 10 / 0 2 /20 20 /DATE OF PRONOU NCEMENT: 19 /03 / 20 20 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 20 . 0 6 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 48 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y. 20 08 - 09 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. AO U/S 14A R.W.R. 8D(2)(III) OF RS.11,85,278/ - ASSESSEE BY : SHRI KARAN LALA REVENUE BY: MS. JOTHILAKSHMI NAYAK (D R) ITA. NO. 5218 /M/201 8 A.Y. 2008 - 09 2 2. WITHOUT PREJUDICE TO GROUND NO.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE ADJUSTMENT MADE BY THE LD. AO U/S 14A R.W. RULE 8D(2)(III) OF RS.11,85,278/ - TO THE RETURNED INCOME OF THE APPELLANT, WITHOUT APPRECIATING THE FACT THAT SUCH DISALLOWANCE ADJUSTMENT IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE LD. AO IS BAD IN LAW A S THE JURISDICTION U/S 153A IS VITIATED. THE APPELLANT CRAVES LEAVE TO ADD, OMIT OR ALTER GROUNDS OF ASSESSMENT PROCEEDINGS APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL. 3 . THE BRIE F FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 OF THE I. T. ACT, 1961 WAS CONDUCTED BY DDIT(INV.) UNIT - IX(3), MUMBAI IN THE CASE OF MAHENDRA BROTHERS EXPORTS PVT. LTD. GROUP, ITS ASSOCIATED CONCERN S, DIRECTORS AND RELATED PERSONS. THE CASE OF THE ASSESSEE WAS COVERED IN THE ABOVE MENTIONED IN THE SEARC H ACTION. THE NOTICE U/S 153A OF THE A CT WAS GIVEN AND SERVED UPON THE ASSESSEE. THE ASSESSEE FILED THE RETURN OF INCOME ON 29.10.2012 DECLARING TOTAL INCOME TO THE TUNE OF RS.48,89,04,410/ - . NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UP ON THE ASSESSEE. THE ASSESSEE EARNED THE DIVIDEND INCOME AMOUNTING TO RS.62,92,640/ - WHICH WAS CLAIMED EXEMPT U/S 10(34) OF THE I. T. ACT. THE ASSESSEE ALSO EARNED THE LONG TERM CAPITAL GAIN IN SUM OF RS. 70,54,454 / - AND CLAIMED EXEMPT . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 1,33,49,094/ - . THE A O APPLIED THE PROVISIONS U/S 14A R.W. RULE 8D AND ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME IN SUM OF RS.25,85,314/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED THE ADDITION IN SUM OF RS.14 , 00 , 041 / - AS PER RULE 8D2(II) FOLLOWING THE ITAT ORDER IN COMPLIANCE OF THE CASE AND UPHELD THE ADDITION OF RS.11 , 85 , 278/ - AS PER RULE 8D2(III) ON ACCOUNT OF MAXOPP INVESTMENT LTD T HE DECISION OF HONBLE SUPREME COU RT 2018 (91 ITA. NO. 5218 /M/201 8 A.Y. 2008 - 09 3 TAXMANN.COM 154). SINCE THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 & 2 4 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ADDITION OF RS. 11,85,278/ - IN VIEW OF THE U/S 14A R.W. RULE 8D(2)(III). T HE ASSESSEE HAS RAISED THE TWO POINT VIDE WHICH ONE IS THAT THE STRATEGIC INVESTMENTS SHOULD BE EXCLUDED BY APPLYING THE PROVISIONS UNDER RULE 8D(2)(III) AND SECONDLY THE INVESTMENTS WHICH DID NOT YIELDED EXEMPT INCOME S HOULD BE EXCLUDED TO ASSESS THE EXPENDITURE TO EARN THE EXEMPT INCOME . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION IN HIS OWN CASE FOR THE A.Y. 2008 - 09 & 2004 - 05 BEARING ITA. NO.7319/M/2011 & 7449/M/2011 DATED 25.07.2016. U N DOUBTEDLY, IN THE SAID DECISION HONBLE ITAT MUMBAI BENCH HAS ORDER ED TO EXCLUDE THE STRATEGIC INVESTMENT WHILE ASSESSING THE EXPENDITURE TO EARN THE INCOME IN VIEW OF THE PROVISIONS UNDER RULE 8D(2)(III) BUT SUBSEQUENTLY THE DECISION OF THE HONBLE SUPRE ME COURT HAS COME INTO EXISTENCE IN WHICH THE STRATEGIC INVESTMENT IS NOT LIABLE TO BE EXCLUDED WHILE ASSESSING THE EXPENDITURE TO EARN THE EXEMPT INCOME IN VIEW OF THE PROVISIONS RULE 8D(2)(III). ACCORDINGLY, NO STRATEGIC INVESTMENT IS LIABLE TO BE EXCLUD ED WHILE ASSESSING THE EXPENDITURE TO EARN THE INCOME IN VIEW OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD THE DECISION OF HONBLE SUPREME COURT 2018 (91 TAXMANN.COM 154). COMING TO THE ANOTHER PLEA OF THE ASSESSEE IN WHICH THE ASSESSEE REQUESTED TO EXCLUDE THE INVESTMENT WHICH DID NOT YIELD EXEMPT INCOME , WE FIND FORCE IN THIS CONTENTION AND IN THIS REGARD THE DECISION OF ITAT MUMBAI BENCH IN ITA. NO. 5218 /M/201 8 A.Y. 2008 - 09 4 THE CASE OF PIRAMAL ENTERPRISES LTD. VS. ACIT (2018) 97 TAXMANN.COM 352 AND W ELSPUN INDIA LTD. VS. DCIT (2019) 104 TAXMANN.COM 267 ARE ON THE FILE IN WHICH IT IS SPECIFICALLY HELD THAT THE INVESTMENT WHICH DID NOT YIELDED EXEMPT INCOME IS NOT LIABLE TO BE CONSIDERED FOR THE INVESTMENT TO EARN THE EXEMPT INCOME IN VIEW OF THE PROVIS IONS RULE 8D(2)(III) . THE DELHI SPECIAL BENCH HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF VIREET INVESTMENT PVT. LTD. 82 TAXMANN.COM 415 . W HILE FOLLOWING THE ABOVE MENTIONED DECISIONS, WE ARE OF THE VIEW THAT THE INVESTMENT WHICH DI D NOT YIELDED EXEMPT INCOME IS NOT LIABLE TO BE INCLUDED IN THE INVESTMENT WHILE ASSESSING THE EXPENDITURE TO EARN THE EXEMPT INCOME IN VIEW OF THE PROVISIONS RULE 8D(2)(III) . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE . ISSUE NOS. 2 & 3 5 . THIS ISSUE HAS NOT BEEN PRESSED BY THE LD. REPRESENTATIVE O F THE ASSESSEE, THEREFORE, THESE ISSUE S ARE BEING DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED . 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 / 03 / 2020 . SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (AMA RJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 19 / 03 / 2020 V IJAY PAL SINGH/ SR. PS ITA. NO. 5218 /M/201 8 A.Y. 2008 - 09 5 / 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