SHOPPERS STOP LTD., MUMBAI V. DCIT CENT. CIR. 4(2), MUMBAI

ITA 5246/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8499 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5246/MUM/2016 (ASSESSMENT YEAR- 2012-13) SHOPPERS STOP LTD. EUREKA TOWERS, HON'BLE BOMBAY HIGH COURT WING, 9 TH FLOOR, MINDSPACE, LINK ROAD, MALAD (WEST), MUMBAI 400 064. PAN: AABCS4383A VS. DCIT, CENTRAL CIRCLE 4(2) ROOM NO. 1918, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. AARTI SATHE (AR ) REVENUE BY : SHRI V.JUSTIN (DR) DATE OF HEARING : 01.11.2017 DATE OF PRONOUNCEMENT : 08.11.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL FILED BY THE ASSESSEE U/S.253 OF THE IN COME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSI ONER OF INCOME TAX (APPEALS)-52, MUMBAI DATED 11.07.2016 FOR ASSESSMEN T YEAR (AY) 2012- 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED BOTH IN FACTS AND IN LAW IN SUSTAINING THE DI SALLOWANCE MADE BY A.O. UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. 1.2 YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, A LTER, DELETE AND/OR MODIFY THE ABOVE GROUND OF APPEAL ON OR BEFORE THE FINAL D ATE OF HEARING OF THIS APPEAL PETITION. 2 ITA NO.5246/M/2016 SHOPPERS STOP LTD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF RUNNING RETAIL STORE/OUTLETS IN VARIOUS BIG CITIES ACROSS THE COUNTRY, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 27.09.2012 DECLARING TOTAL INCOME OF RS. 78,50,58,330/-. THE ASSESSMENT WAS COMPLETED ON 23.03.2005 UNDER SECTION 143(3) OF THE ACT. THE ASS ESSING OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER BESIDES OTHER DI SALLOWANCE, DISALLOWED RS. 6,61,94,455/- UNDER SECTION 14A OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION/DISALLOWANCE WAS CONFIRMED. TH US, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD.AR OF THE ASS ESSEE ARGUED THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING TH E PERIOD OF RELEVANT AY. THE ASSESSEE MADE INVESTMENT IN ITS ASSOCIATE C ONCERNS. THE INVESTMENT WAS MADE OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE ASSESSEE VOLUNTARILY MADE A DISALLOWA NCE OF RS. 13.10 LAKHS ON ACCOUNT OF ADMINISTRATIVE EXPENSES FOR INVESTMEN T IN ASSOCIATE COMPANY. THE ASSESSING OFFICER (AO) INVOKED THE PRO VISION OF RULE 8D HOLDING THAT DIRECT LINK BETWEEN THE INVESTMENT AND INTEREST FREE FUND IS NOT ESTABLISHED. THE AO DISALLOWED A SUM OF RS. 5,44,69 ,565/- UNDER RULE 8D 3 ITA NO.5246/M/2016 SHOPPERS STOP LTD. (II) AND RS. 1,30,35,122/- UNDER RULE 8D(III). THE LD. AR OF THE ASSESSEE FURTHER ARGUED THAT INVESTMENT IS MADE IN THE SUBSI DIARIES FOR STRATEGIC REASONS. THE LD. AR OF THE ASSESSEE ALSO FILED THE COPY OF FINANCIAL STATEMENT FOR AY 2012-13 (PAGE NO. 7 TO 10 OF PB). IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF NIMBUS COMMUNICATION LTD. VS. ACIT (ITA NO. 1424/MUM/2014) , DCIT VS. M/S EXCEL INDUSTRIES LTD. (ITA NO. 8278/MUM/2011, AND A SSESSEES OWN CASE FOR AY 2008-09 VIDE ITA NO. 1753/MUM/2012. ON THE O THER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITI ES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SE EN THAT THE ASSESSEE HAS NO EXEMPT INCOME DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE HAS NOT MADE ANY INVEST MENT DURING THE YEAR UNDER CONSIDERATION. THERE IS NO DISPUTE THAT ALL I NVESTMENT HAS BEEN MADE IN THE SUBSIDIARIES COMPANIES AS STRATEGIC INVESTME NT SO AS TO GET CONTROLLING INTEREST IN SUCH SUBSIDIARIES. THE HON BLE DELHI HIGH COURT IN CASE OF CHEMINVESTMENT LTD. VS. CIT REPORTED IN 378 ITR 272 (DEL), HELD THAT, IF THERE IS NO DIVIDEND INCOME, THEN THERE CA NNOT BE ANY CORRESPONDENCE ALLOWANCE. WE HAVE NOTED THAT THE AS SESSEE HAS VOLUNTARY DISALLOWED RS. 13.10 LAKHS AS ADMINISTRATIVE EXPENS ES FOR INVESTMENT IN ITS ASSOCIATE COMPANIES/SUBSIDIARIES. THE ASSESSEE HAS PLACED ON RECORD 4 ITA NO.5246/M/2016 SHOPPERS STOP LTD. FUND FLOW STATEMENT (PAGE 33 OF PB), WHICH CLEARLY SHOW THAT THE ASSESSEE HAS SUFFICIENT OWN INTEREST FREE FUND OF RS. 1,26,2 89.65/- LAKHS AS ON 31.03.2012 . THUS, IN OUR CONSIDERED VIEW THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE AS PER THE PROVISIONS OF SECTIO N 14A R.W. RULE 8D. FURTHER, WE HAVE NOTED THAT SIMILAR DISALLOWANCE WA S MADE IN AY 2008- 09, THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL AND THE CO-ORDINATE BENCH IN ITA NO. 1753/M/2012 PASSED THE FOLLOWING O RDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE HAD NOT CLAIMED ANY DEDUCTION IN RESPECT OF EXEMPT INCOME NOR HAS IT CLAIMED ANY EXPENDITURE AGAINST T HE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THUS, BOTH THE BASIC INGREDIENTS FOR MAKING A DISALLOWANCE U/S.14A ARE MISSING. SECONDLY, THE FUN D FLOW STATEMENT MADE AVAILABLE TO THE FAA, DURING THE APPELLATE PROCEEDI NGS, CLEARLY SHOW THAT IT HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMENTS(PG-1 O F THE PB).THE FAA HAS ADMITTED THAT FUNDS AVAILABLE TO THE ASSESSEE WERE MORE THAN THE INVESTMENTS MADE DURING THE YEAR UNDER CONSIDERATION. THEREFORE , IN OUR OPINION THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE AS PER THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE RULES. CONSIDERING ALL THESE FA CTORS WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORD ER OF THE AO. HENCE, REVERSING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 5. CONSIDERING THE FACTS OF THE CASE AND THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE, THE DISALLOWANCE MADE BY AO AND CONFIRMED BY LD. CIT(A) IS UNCALLED FOR AND THEREFORE, WE DIRECT THE AO TO RES TRICT THE DISALLOWANCE TO RS. 13.10 LAKHS, WHICH WAS VOLUNTARY DISALLOWED BY ASSESSEE. THUS, THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 5 ITA NO.5246/M/2016 SHOPPERS STOP LTD. 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF NOVEMBER, 2017. SD/- /- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 08/11/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRA R) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/