SHEBA PROPERTIES LTD., MUMBAI V. DCIT - 2(3)(2), MUMBAI

ITA 5289/MUM/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4295 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 25-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR LD DR
• Assessee Lawyers: RAJAN R VORA LD
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.5289/MUM/2016 ( ASSESSMENT YEAR: 2013-14) SHEBA PROPERTIES LIMITED 3 RD FLOOR, NANAVATI MAHALAYA 18, HOMI MODY STREET HUTATMA CHOWK, MUMBAI-400 001 VS. DEPUTY COMMISSIONER OF INCOME TAX-2(3)(2) 5 TH FLOOR, AAYKAR BHAVAN M.K.ROAD, MUMBAI-400 020 ! ' PAN/GIR NO. AAECS-0591-F ( !# APPELLANT ) : ( $%!# RESPONDENT ) A SSESSEE BY : RAJAN R. VORA, LD.AR RE VENUE BY : CHAUDHARY ARUN KUMAR, LD. DR & DATE OF HEARING : 27/09/2018 '() / DATE OF PRONOUNCEMENT : 10/10/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-6 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-6/IT-117/2015-16 DATED 31/05/2016. THE ONLY GROUNDS AS PRESSED DURING HEAR ING BEFORE US ARE GROUND NUMBERS 1.7 & 2 WHICH READS AS UNDER:- ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 2 1.7 WITHOUT PREJUDICE TO ABOVE, THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE PROFESSIONAL CHARGES PAID TO CONSUL TANTS AND AUDITORS AS INDIRECT ADMINISTRATIVE CHARGES FOR THE PURPOSE OF MAKING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. 2. DISALLOWANCE UNDER SECTION 14A OF THE ACT UNDER SECTION 115JB OF THE ACT (MAT PROVISIONS) IT APPEARS FROM THE RECORD THAT THE NAME OF THE ASS ESSEE HAS BEEN CHANGED FROM SHEBA PROPERTIES LIMITED TO TATA MOTORS FINANCE LIMITED. HOWEVER, THE LD. AUHTORIZED REPRESENTATIVE FOR ASSE SSEE [AR] FAILED TO POINT OUT THE SAME. NO REVISED FORM NO. 36 HAS BEEN FILED TO REFLECT THE AFORE-SAID CHANGE. BE THAT AS THE CASE MAY BE, WE P ROCEED TO DISPOSE- OFF THE SAME AS ARGUED BEFORE US. 2. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2(3)(2), MUMBAI [ AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 15/02/2016 WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS.534.11 LACS UNDER NORMAL PROVISIONS AFTER CERTAIN ADJUSTMENTS AS AGAINST RET URNED INCOME OF RS.451.92 LACS E-FILED BY THE ASSESSEE ON 28/09/2013. THE BOOK PROFITS FOR THE PURPOSE OF COMPUTING MINIMUM ALTERNATIVE TAX [ MAT ] U/S 115JB HAS BEEN COMPUTED AT RS.475.44 LACS AS AGAINST RS.4 16.82 LACS COMPUTED BY THE ASSESSEE. DURING IMPUGNED AY, THE A SSESSEE BEING RESIDENT CORPORATE ENTITY EARNED INCOME FROM THE BUSINESS OF FINANCE, LEASING, LOANS, INVESTMENTS AND INCOME FROM HOUSE P ROPERTY. AS EVIDENT FROM GROUNDS OF APPEAL, THE SOLE SUBJECT MATTER OF THE PRESENT APPEAL IS DISALLOWANCE U/S 14A WHILE COMPUTING NORMAL INCOME AS WELL AS WHILE COMPUTING BOOK PROFITS FOR THE PURPOSE OF SECTION 115JB. ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 3 3. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME U/S 10(34) FOR RS.317 .66 LACS, WHICH CALLED FOR DISALLOWANCE U/S 14A. THE ASSESSEE HAD N OT MADE ANY SUO- MOTO DISALLOWANCE AGAINST THE SAME WHILE COMPUTING ITS INCOME. THE ASSESSEE DEFENDED ITS STAND VIDE REPLIES DATED 05/0 2/2016 & 11/02/2016, THE RELEVANT PORTIONS OF WHICH HAVE ALR EADY BEEN EXTRACTED IN THE QUANTUM ASSESSMENT ORDER. AS PER ASSESSEES SUBMISSIONS, NO SUCH DISALLOWANCE WAS CALLED FOR SINCE THE INVESTME NTS WERE STRATEGIC INVESTMENTS IN GROUP CONCERNS AND FURTHER NO EXPENS ES WERE INCURRED TO EARN THE EXEMPT DIVIDEND INCOME. THE ASSESSEE, IN T HE ALTERNATIVE, OFFERED DISALLOWANCE OF RS.2.79 LACS. HOWEVER, NOT CONVINCED, LD. AO, APPLYING RULE 8D, WORKED OUT EXPENSE DISALLOWANCE U /R 8D(2)(III) AS RS.58.61 LACS, BEING 0.5% OF AVERAGE INVESTMENTS HE LD BY THE ASSESSEE DURING IMPUGNED AY. THE SAID DISALLOWANCE WAS MADE WHILE ARRIVING AT THE NORMAL INCOME AS WELL AS WHILE COMPUTING BOOK PROFITS FOR THE PURPOSE OF MAT U/S 115JB. 4. AGGRIEVED, THE ASSESSEE REITERATED THE CONTENTIO NS WITH PARTIAL SUCCESS BEFORE LD. FIRST APPELLATE AUTHORITY VIDE I MPUGNED ORDER DATED 31/05/2016 WHEREIN LD. CIT(A), RELYING UPON THE ORD ER OF ITS PREDECESSORS FOR EARLIER YEARS, HELD THAT THE DISAL LOWANCE COULD NOT EXCEED THE ADMINISTRATIVE EXPENSES OF RS.5.13 LACS INCURRED BY THE ASSESSEE, THE DETAILS OF WHICH COULD BE TABULATED A S FOLLOWS:- NO. NATURE OF ADDITION AMOUNT (RS. ) 1. PROFESSIONAL CHARGES RS.4,63,374/- 2. DIRECTORS SITTING FEES RS.30,000/- 3. MISC. EXPENSES RS.19,907/- TOTAL RS.5,13,281/ - ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 4 STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD. WE FIND THE ISSUE TO BE IN VERY COMPASS I.E. WHETHER THE PROFESSIONAL EXPENSES / CHARGES WOULD FORM PART OF INDIRECT EXPENDITURE FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE U/R 8D(2)(III) OR NOT. FOR THE SAME, LD. AR HAS PLACED RELIANCE ON THE ORDERS OF TRIBUNAL IN EARLIER YEARS. THE PERUSAL OF ORDER FOR AY 2009-10 ITA NO.2 927/MUM/2013 DATED 16/06/2017 AS WELL AS COMMON ORDER FOR AYS 20 10-11, 2011-12 & 2012-13 ITA NOS. 660 TO 664/MUM/2016 DATED 20/04/20 18, AS PLACED ON RECORD, REVEAL THAT PROFESSIONAL CHARGES PAID TO CO NSULTANTS / AUDITORS ETC HAVE BEEN TREATED AS INDIRECT ADMINISTRATIVE EXPEND ITURE AND HELD TO BE INCLUDIBLE FOR THE PURPOSE OF COMPUTATION OF DISALL OWANCE U/R 8D. THE LD. AR HAS DRAWN ATTENTION TO THE FACT THAT THE ORDER F OR AY 2009-10 HAS SUBSEQUENTLY BEEN MODIFIED VIDE MA NO. 835/MUM/2017 DATED 23/05/2018 WHEREIN THESE CHARGES HAVE BEEN HELD TO BE NOT INCLUDIBLE FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE. HOW EVER, AFTER CONSIDERING BOTH THE DECISIONS, WE ARE OF THE OPINI ON THAT PROFESSIONAL CHARGES WERE PART OF INDIRECT ADMINISTRATIVE EXPEND ITURE AND INCLUDIBLE FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE U/R 8D SINCE IT COULD NOT BE SAID THAT THESE CHARGES WERE EXCLUSIVELY INCURRE D FOR THE TRUCK BUSINESS OF THE ASSESSEE. WE ORDER SO. 6. THE LD. AR HAS ALSO RAISED A PLEA THAT TOTAL OF THESE EXPENDITURE, BEING INCURRED FOR A BUSINESS AS A WHOLE, COULD NOT BE DISALLOWED IN TOTO RATHER THE SAME WAS TO BE APPORTIONED IN THE RATIO OF EXEMPT INCOME VIS- -VIS TAXABLE INCOME AS HELD BY THE TRIBUNAL IN AY 2009-10. WE FIND STRENGTH IN THIS PLEA OF LD. AR SINCE THE EXPENDITU RE UNDER QUESTION WAS ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 5 NOT EXCLUSIVELY INCURRED TO EARN THE EXEMPT INCOME. AS SUBMITTED BY LD. AR, THE PROPORTION OF EXEMPT INCOME IN TOTAL INCOME REFLECTED IN THE PROFIT & LOSS ACCOUNT WAS 37% AND THEREFORE, THE IM PUGNED DISALLOWANCE WOULD BE RESTRICTED TO 37% OF RS.5,13, 281/-, WHICH COMES TO RS.1,89,914/-. THE DISALLOWANCE TO THAT EXTENT S TAND SUSTAINED BY US. 7. GROUND NUMBER-2 IS RELATED WITH ADJUSTMENT OF DI SALLOWANCE U/S 14A WHILE ARRIVING AT BOOK PROFITS U/S 115JB. WE FIND THAT THIS ISSUE STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE J UDGMENT OF DELHI TRIBUNAL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.COM 415]. UPON PERUSAL OF THE SAME, WE FIND THAT SPECIAL BENCH, AFTER CONSIDERING TWO CONTRARY DECIS ION OF HONBLE DELHI HIGH COURT TITLED AS CIT VS. GOETZE (INDIA) LTD. [2014 361 ITR 505] & PCIT VS. BHUSHAN STEEL LTD. [ITA 593/2015 DATED 29/ 09/2015], TOOK THE VIEW FAVORABLE TO THE ASSESSEE IN TERMS OF RATIO OF DECISION OF HONBLE SUPREME COURT RENDERED IN CIT VS. VEGETABLE PRODUCTS LIMITED [1973 88 ITR 192]. THE DECISION IN PCIT VS. BHUSHAN STEEL LTD. , IN TURN, PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN APOLLO TYRES LTD. VS. CIT [255 ITR 273] WHICH HELD THAT THE ASSESSING OFFICER DID NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT EXCEPT TO THE EXTENT PROV IDED IN EXPLANATION TO SECTION 115J. SIMILAR VIEW HAS BEEN EXPRESSED BY OU R JURISDICTIONAL BOMBAY HIGH COURT RENDERED IN CIT VS. JSW ENERGY LIMITED [2015 60 TAXMANN.COM 303], CIT V. ESSAR TELEHOLDINGS LTD. [ITA NO. 438 OF 2012, DATED 07/08/2014] & CIT VS. BENGAL FINANCE & INVESTMENTS PVT. LIMITED [ITA NO. 337 OF 2013 DATED 10/02/2015]. THEREFORE, RESPECTFULLY FOLLOWING THE CATENA OF JUDGMENT IN ASSESSEES FAVOR, WE HOLD THAT ADJUSTMENT OF ITA NO.5289/MUM/2016 SHEBA PROPERTIES LTD. ASSESSMENT YEAR-2013-14 6 DISALLOWANCE U/S 14A WAS NOT REQUIRED TO BE MADE IN BOOK PROFITS FOR THE PURPOSE OF SECTION 115JB. GROUND NUMBER 2 OF THE AP PEAL STAND ALLOWED. 8. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2018. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED :10.10.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI