ITO - 9(3)(3), MUMBAI V. FUTURE IDEA COMPANY LTD., MUMBAI

ITA 5227/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7030 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 10-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: MANISH KOTHARI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 5227 / MUM/20 17 ( ASSESSMENT YEAR : 2013 - 14 ) ITO 9(3)(3) ROOM NO.471, 4 TH FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI MAHARASHTRA 400 020 VS. M/S. FUTURE IDEA COMPANY LTD., KNOWLEDGE HOUSE OFF. JOGESHWARI VIKHROLI LINK ROAD SHYAM NAGAR JOGESHWARI (E) MUMBAI 400 060 PAN/GIR NO. AAACF9519L APPELLANT ) .. RESPONDENT ) REVENUE BY MS. N. HEMALATHA ASSESSEE BY SH RI MANISH KOTHARI DATE OF HEARING 06/06 /201 8 DATE OF PRONOUNCEMENT 08 / 06 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 16, MUMBAI DATED 05/05/2017 FOR A.Y.2013 - 14 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT, 1961. 2. GRIEVANCE OF REVENUE RELATES TO DELETION OF DISALLOWANCE MADE BY THE AO U/S.14A R.W.RULE 8D OF THE ACT. 3. AT THE OUTSET, IT WAS SUBMITTED BY LEARNED AR THAT ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY ITA NO. 5227/MUM/2017 M/S. FUTURE IDEA COMPANY LTD., 2 PRECEDING ASSESSMENT YEAR 2012 - 13 VIDE ORDER DATED 22/11/2017. WE HAD CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN EXACTL Y SIMILAR ISSUE WAS RAISED BY THE REVENUE AND THE TRIBUNAL HAS UPHELD THE ORDER OF CIT(A) AFTER OBSERVING AS UNDER: - 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS WITH REGARD TO EARNING NO EXEMPT INCOME FOR THE RELEVANT FINANCIAL YEAR UNDER CONSIDERATION IS NOT DISPUTED BY THE REVENUE. THE AO DISALLOWED EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME BY INVOKING RULE 8D(2)(III) @0.5% OF AVERAGE VALUE OF INVESTMENTS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT EARNED ANY EXEMPT INCOME FOR THE YEAR UNDER CONSIDERATION AND ALSO ITS INVESTMENTS ARE STRATEGIC INVESTMENTS IN GROUP COMPANIES TO HAVE CONTROL OVER THE BUSINESS, BUT NOT FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE ASSESSEE FURTHER CONTENDED THA T WHEN THERE IS NO EXEMPT INCOME WHICH IS INCLUDIBLE IN TOTAL INCOME, THE QUESTION OF DISALLOWANCE U/S 14A TOWARDS EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME DOES NOT ARISE. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD VS CIT (SUPRA) OBSER VED THAT WHERE ASSESSEE HAD NOT SHOWN ANY INCOME UNDER THE HEAD EXEMPT INCOME, DISALLOWANCE U/S 14A WAS NOT JUSTIFIED. THE CO - ORDINATE BENCH OF ITAT, MUMBAI BENCH IN THE CASE OF GARW ARE WALFROPES LTD VS C1T (2014) 65 SOT 86 (MUM) OBSERVED THAT WHERE ASSESSEE MADE CERTAIN INVESTMENTS WITH AN OBJECT OF ACQUIRING CONTROLLING STAKE IN A GROUP CONCERN AND NOT FOR EARNING ANY INCOME OUT OF INVESTMENT, THE AO WAS NOT JUSTIFIED IN INVOKING PR OVISIONS OF SECTION 14A R.W.R. 8D IN ORDER TO DISALLOW A PART OF INCIDENTAL DIVIDEND INCOME EARNED ON SAID INVESTMENT. IN YET ANOTHER CASE, THE CO - ORDINATE BENCH OF ITAT, MUMBAI IN THE CASE OF S.M. ENERGY TEHCHNIQUE & ELECTRONICS LTD VS DCIT 70 SOT 324 (MU M) OBSERVED THAT WHERE ASSESSEE HAD NOT SHOWN ANY INCOME UNDER THE HEAD, 'EXEMPT INCOME' FOR WHICH IT CLAIMED EXPENDITURE, DISALLOWANCE U/S 14A WAS NOT JUSTIFIED. 6. IN THIS, VIEW OF THE MATTER ARID RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIG H COURT IN THE CASE OF CHEMINVEST LTD VS CIT -- (SUPRA) AND ALSO CONSISTENT WITH THE VIEW TAKEN BY THE CO - ORDINATE BENCHES IN NUMBER OF CASES, AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT WHEN THERE IS. NO EXEMPT INCOME EARNED DURING THE FINANCIAL YEAR, NO DI SALLOWANCE CAN BE MADE U/S 14A R.W.R. 80 OF IT. RULES, 1962. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS HAS RIGHTLY DELETED THE ADDITIONS MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ITA NO. 5227/MUM/2017 M/S. FUTURE IDEA COMPANY LTD., 3 ORDER OF CIT(A) . HENCE, WE ARE INCLINED TO UPHOLD THE ORDER O F CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 4. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME AND THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE DID NOT RECE IVE ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, ACCORDINGLY, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE U/S.14A OF THE IT ACT. 5. IN THE RESUL T, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 06 /201 8 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; D ATED 08/06 /201 8 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//