ITO 6(3)(2), MUMBAI V. INDOKEM LTD, MUMBAI

ITA 5259/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3893 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Assessee Lawyers: NITESH S JOSH I
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA , HON'BLE ACCOUNTANT MEMBER ITA NO. 5259 /MUM/201 7 (A.Y: 2010 - 11) INCOME TAX OFFICER 6(3)(2 ) R.NO. 503, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. INDOKEM LTD., 410/411, KHATAU HOUSE, GROUND FLOOR, MOGUL LANE, MAHIM MUMBAI 400 016 PAN: AAACI 2959 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NITESH S. JOSHI DEPARTMENT BY : SHRI ABI RAMA KARTIK E YAN DATE OF HEARING : 1 5 .11.2018 DATE OF PRONOUNCEMENT : 30 .01.2019 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 01.05.2017 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 64,82,047/ - BEI NG DISALLOWANCE U/S. 14A R.W.R.8 D OF THE ACT WITHOUT APPRECIATING THE FACT THAT DISALLOWANCE OF EXPENDITU RE U/S.14A R.W.R.8 D OF THE ACT HAS BEEN CONFIRMED BY HERSELF IN THE ASSESSEE'S OWN CASE FOR 2 ITA NO. 5259/MUM/2017 (A.Y: 2010 - 11) M/S. INDOKEM LTD., A.Y.2011 - 12 WHEREIN THE FACTS REGARDING INVE STMENT AND FUNDS AVAILABLE ARE IDENTICAL TO THE YEAR UNDER CONSIDERATION. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 64,82,047/ - BEI NG DISALLOWANCE U/S. 14A R.W.R.8 D OF THE ACT WIT HOUT APPRECIATING THE FACT THAT DISALLOWANC E OF EXPENDITURE U/S.14A R.W.R.8 D OF THE ACT IS APPLICABLE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME.' 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE WHEREIN IT HAS BEEN HELD THAT WHEN THERE IS NO EXEMPT INCOME THERE CANNOT BE ANY DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE ACT. 4. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. 5. WE HAVE CAREFULLY PERUSED THE ORDERS PASSED BY THE COORDINATE BENCH IN ASSESSEE S OWN CASE IN ITA.NO.1414/MUM/2016 DATED 15.06.2018 FOR THE A.Y. 2011 - 12 AND FIND THAT THE ISSUE HAS BEEN DECIDE IN FAVOUR OF THE ASSESSEE, OBSERVING AS UNDER: - 10. WE HAVE HEA RD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING, THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LT D [2015] 378 ITR 33 (DEL), WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. ALTHOUGH THE ASSESSEE HAS CLAIMED EXEMPTION U/S. 10(34) FOR DIVIDEND INCOME RECEIVED FROM CO - OPERATIVE BANK, SUCH CLAIM HAS BEEN WITHDRAWN BEFORE THE ASSESSING OFFICER BY STATING THAT DIVIDEND RECEIVED FROM CO - OPERATIVE BANK IS NOT EXEMPTED U/S. 10(34) AND THE CLAIM MADE IN THE RETURN OF INCOME BY MISTAKEN FACTS HAS BEEN WITHDRAWN. WE FURTHER OBSERVED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD (SUPRA), IN PARA 23 OBSERVED THAT THE E XPRESSION DOES NOT PART OF TOTAL INCOME IN SECTION 14A ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN R ELATION TO SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IN THIS CASE, ON PERUSAL OF FACTS, WE FIND THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT 3 ITA NO. 5259/MUM/2017 (A.Y: 2010 - 11) M/S. INDOKEM LTD., INCOME, WHICH FORM PA RT OF TOTAL INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS ERRED IN COMPUTING DISALLOWANCE U/S. 14A BY INVOKING RULE 8D(2)(II) OF THE INCOME TAX RULE, 1962. HENCE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITIONS MAD E U/S. 14A OF THE INCOME TAX ACT, 1961. 6. IT IS NOT IN DISPUTE THAT DURING THIS ASSESSMENT YEAR ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THUS, RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE LD.CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH JANUARY, 2019 SD/ - SD/ - ( G. MANJUNATHA ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 30 / 0 1/2019 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM