ACUTIY HOLDINGS P.LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 5232/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0435 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5232//MUM/2015 (ASSESSMENT YEAR-2011-12) M/S ACUITY HOLDINGS PVT. LTD. C-1-5, SARATHI CHS LTD., KHIRA NAGAR, S.V. ROAD, SANTACRUZ(W), MUMBAI-400016. PAN: AAFCM3366D VS. DCIT 8(1), (NOW DCIT, CIRCLE-12(1)(1), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAKASH K. JOTWANI (AR REVENUE BY : SHRI RAJESH KUMAR YADAV (DR) DATE OF HEARING : 30.11.2017 DATE OF PRONOUNCEMENT : 13.02.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER LD. CIT(A)-16, MUMBAI DATED 17.08.2015 FOR ASSESSMENT YEAR (AY) 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE MADE BY LD. DCIT OF A SUM OF RS. 1,56,93,509/- U/S 14A OF THE I NCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. 2. THE LEARNED CIT(A) FAILED TO TAKE INTO CONSIDERA TION FOURTH GROUND OF APPEAL MADE VIDE OUR LETTER DATED 08.08.2015 ABOUT A MISTAKE APPARENT FROM THE RECORDS FOR A SUM OF RS. 43,38,797/- WHICH HAS BEEN INCLUDED TWICE BY THE LD. DCIT ONCE UNDER THE INCOME FROM OTHER SOUR CES AND AGAIN UNDER THE HEAD BUSINESS INCOME ITA NO. 5232/M/ 2015- M/S ACUITY HOLDINGS PVT. LTD. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PVT LTD COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES, SECURITIES AN D DERIVATIVES, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 27 .09.2011. THE ASSESSMENT WAS COMPLETED ON 12.03.2014 UNDER SECTIO N 143(3) OF THE ACT. THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESS MENT ORDER DISALLOWED A SUM OF RS. 1,56,93,509/- UNDER SECTION 14A AND AD DITION OF RS. 43,38,797/- ON ACCOUNT OF MISMATCH OF AIR DATA. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS CONFIRM ED. THUS, FURTHER AGGRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEA L BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 14A R.W.RULE 8D OF THE ACT. THE LD. AR OF T HE ASSESSEE ARGUED THAT DURING THE RELEVANT FINANCIAL YEAR THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 3,05,125/- ON SHARES AND MUTUAL FUNDS. THE A SSESSING OFFICER INVOKED THE PROVISION OF RULE 8D FOR MAKING DISALLO WANCE UNDER SECTION 14A. THE AO DISALLOWED RS. 66,904/- UNDER RULE 8D2( I), RS. 1,48,30,277/- UNDER RULE 8D2(II) AND RS. 7,96,328/- UNDER RULE 8D 2(III). THUS, THE ASSESSING OFFICER MADE TOTAL DISALLOWANCE OF RS. 1, 56,93,509/-. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE DISALLOWANCE MADE BY ASSESSING OFFICER UNDER SECTION 14A SHOULD NOT EXCEED THE DIVIDEND IN COME. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE ITA NO. 5232/M/ 2015- M/S ACUITY HOLDINGS PVT. LTD. 3 DELHI HIGH COURT IN JOINT INVESTMENT PVT. LTD. VS. CIT (372 ITR 694) AND THE DECISION CO-ORDINATE BENCH IN DAGA GLOBAL CHEMI CALS PVT LTD. ITA NO. 5658/MUM/13 DATED 09.12.2016. ON THE OTHER HAND, T HE LD. DR FOR THE REVENUE SUBMITTED THE ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 3,05 ,124/- ONLY. NO VOLUNTARY DISALLOWANCE UNDER SECTION 14A WAS OFFERE D BY ASSESSEE. THE ASSESSING OFFICER DISALLOWED RS. 66,904/- UNDER RU LE 8D2(I), RS. 1,48,30,277/- UNDER RULE 8D2(II) AND RS. 7,96,328/- UNDER RULE 8D2(III). THUS, THE ASSESSING OFFICER MADE TOTAL DISALLOWANCE OF RS. 1,56,93,509/-. THE LD CIT (A) CONFIRMED THE ACTION OF ASSESSING OF FICER HOLDING THAT THE ASSESSING OFFICER HAS TO FOLLOW THE FORMULA PROVIDE D UNDER RULE 8D. THE HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMEN T PVT. LTD. (SUPRA) HOLD THAT BY NO STRETCH OF IMAGINATION HELD THAT BY NO S TRETCH OF IMAGINATION SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOW ANCE IS INDICATED IN SECTION 14A IS ONLY TO THE EXTENT OF DISALLOWING EX PENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME . THE PROPORTIONATE OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWAL LOW THE ENTIRE AMOUNT. THUS, CONSIDERING THE FACTS OF THE PRESENT CASE AND THE SUBMISSION MADE BY LD. AR OF THE ASSESSEE, WE DIRECT THE ASSESSING OFF ICER TO RESTRICT THE ITA NO. 5232/M/ 2015- M/S ACUITY HOLDINGS PVT. LTD. 4 DISALLOWANCE UNDER SECTION 14A FOR TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. IN THE RESULT, GROUND NO.1 OF THE APPEAL IS ALLOWED. 5. GROUND NO.2 RELATES TO NON-CONSIDERATION OF GROUND OF APPEAL BY LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS MADE THE DOUBLE DISALLOWANCE OF RS. 43,38,979/- ONCE UNDER T HE HEAD INCOME FROM OTHER SOURCES AND AGAIN FROM BUSINESS INCOME. TH E LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE VIDE ITS APPLICATION DATED 08.08.2015 FILED BEFORE THE LD. CIT(A), BROUGHT THIS FACTS IN HIS NO TICE THAT DESPITE INFORMING THE AO VIDE ITS LETTER DATED 11.11.2014, THE ASSES SING OFFICER NOT RECTIFIED THE MISTAKE APPARENT ON RECORD. ON THE CONTRARY, TH E LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO V ERIFY THE FACT ABOUT THE CLAIM OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE RECORD. WE HAVE NOTED THAT THE ASSESSEE VIDE ITS AP PLICATION DATED 08.08.2015 (PER PAGE NO.23 TO 26 OF PB) FILED BEFOR E THE LD CIT(A), HOWEVER NO DIRECTION WAS GIVEN TO ASSESSING OFFICER TO RECTIFIED THE SAID MISTAKE. HAVING CONSIDERED THE SUBMISSION OF LD AR FOR THE ASSESSEE, WE ACCEPT THE SUBMISSION OF LD. AR OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO VERIFY THE FACT, IF THERE IS DOUBLE DISA LLOWANCE OF INCOME OF RS. 43,38,797/- AND PASS APPROPRIATE ORDER TO DELETE TH E DOUBLE DISALLWANCE IN ACCORDANCE WITH LAW. NEEDLESS TO ORDER THAT THE AS SESSING OFFICER SHALL GRANT ITA NO. 5232/M/ 2015- M/S ACUITY HOLDINGS PVT. LTD. 5 OPPORTUNITY TO THE ASSESSEE IN CASE THE ASSESSING O FFICER FINDS THE FACTS OTHERWISE. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF FEBRUARY, 2018. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 13/02/2018 S.K.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. //TRCOPY/