TATA ADVANCED SYSTEMS LIMITED, HYDERABAD V. DCIT-1(3), MUMBAI

ITA 5353/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4719 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Period of limitation; Unabsorbed depreciation; Rule 8D; Set aside
• Section: 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI SHAMIM YAHYA ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5353 /MUM/2015 ASSESSMENT Y EAR: 2012 - 13 TATA ADVANCED SYSTEMS LIMITED, PLOT NO. 1/A IN SY NO. 656, ADITYA NAGAR, ADIBATLA, I BRAHIMPATNAM MANDAL, HYDERABAD, RANGA REDDY DIST, TELANGANA, INDIA - 501510 PAN: AACCT5245K VS. THE DY. COMMISSIONER OF INCOME TAX 1(3)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. ARATI VISSANJI (A R) REVENUE BY : SHRI D.G. PANSARI (D R) DATE OF HEARING: 28/11 /201 8 DATE OF PRONOUNCEMENT: 22 / 02 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 24.04.2017 PASSED BY THE COMMISS IONER OF INCOM E TAX (APPEALS) - 3 (FOR SHORT THE CIT (A)) , MUMBAI, FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PA SSED U/S 143 (3 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF ASSEMBLIN G AND SUPPLY OF H ELICOPTER CABINS AT AEROSPACE AND PRECISION E NGINEERING SPECIAL ECONOMIC ZONE AT AD IBATLA, HYDERABAD AND SALE OF DEFENSE EQUIPMENT , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE LOSS OF RS. 16,87,47,590/ - . SINCE, THE CASE WAS 2 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 SELECTED FOR SCRUTINY, THE AO ISSUED NOTICES U/S 143 (2) AND 142 (1) OF T HE ACT AND IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND SUBMITTED THE DETAILS CALLED FOR. IT WAS NOTICED THAT THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT I N RELATION TO THE INVESTMENTS MADE BY IT IN THE EQUITY SHARES SUBSIDIARY COMPANIES. ACCORDINGLY, THE AO ASKED TO JUSTIFY AS TO WHY EXPENDITURE SHOULD NOT BE DISALLOWED U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES (RULES). IN RESPONSE THEREOF THE ASSES SEE SUBMITTED THAT IT HAS MADE INVESTMENT IN ITS SUBSIDIARY COMPANIES AND THE SAID COMPANIES HAVE NOT DECLARED ANY DIVIDEND . O UT OF THE TOTAL EXPENDITURE OF RS. 51.10 CRORE, EXPENDITURE OF RS. 17.59 CRORE AND 14.40 CRORE RELATE TO HELICOPTER CABINS AND DEF ENSE AND SECURITY SOLUTIONS SALES BUSINESS SEGMENT. THEREFORE, THE AGGREGATE IN THESE EXPENSES AMOUNTING TO RS. 32.3 CRORE CANNOT ENTER INTO QUANTIFICATION OF EXPENDITURE U/S 14A READ WITH RULE 8D(2)(III) . AS REGARDS THE BALANCE EXPENDITURE OF RS. 19.07 CR ORE, THE ASSESSEE SUBMITTED THAT NO PART OF THE SAID EXPENDITURE WAS INCURRED FOR ACQUIRING AND HOLDING EQUITY SHARES OF THE SUBSIDIARY COMPANIES. HOWEVER, THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND INVOKING RULE 8D(2)(III) OF THE INCOME TAX RULES , DISALLOWED THE EXPENDITURE OF RS. 1,01,24,970/ - . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE CONFIRMED THE DISALLOWANCE MADE BY THE AO. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAI NST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT: 2. IN ABSENCE OF ANY DIVIDEND INCOME RECEIVED DURING THE YEAR, THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WERE NOT APPLICABLE AND HENCE NO DISALLOWANCE WAS REQUIRED TO BE MADE THEREIN. 3 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 3. WITHOUT PREJUDICE TO THE ABOVE, THE STRATE GIC INVESTMENTS MADE BY THE APPELLANT IN SUBSIDIARIES AND OTHER ASSOCIATE COMPANIES WERE NOT BE INCLUDED IN COMPUTING DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D. 4. DISALLOWANCE OF RS. 1,01,24,970/ - SO MADE UNDER SECTION 14A R.W. RULE 8D (2 )(III) WAS REQUIRED TO BE DELETED IN ITS ENTIRETY. 5. OUGHT TO HAVE DECIDED THE GROUND NO. 2 AS REGARDS UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION ALLOWANCE OF RS. 9,05,11,607/ - AND RS. 7,82,29,983/ - FOR THE ASSESSMENT YEAR UNDER REFERENCE WHICH WE RE AVAILABLE FOR CARRY FORWARD AND FUTURE SET - OFF AS PER THE APPLICABLE PROVISIONS OF THE ACT. 4. SINCE, THERE IS A DELAY OF 25 DAYS IN FILING THE PRESENT APPEAL, THE LD. CIT (A) AT THE OUTSET SUBMITTED THAT THE ASSESSEE COULD NOT FILE THE PRESENT APP EAL WITHIN THE PRESCRIBED PERIOD OF LIMITATION DUE TO CERTAIN MISUNDERSTANDING BETWEEN THE CONCERNED OFFICIALS OF M A PARIKH AND COMPANY, CHARTERED ACCOUNTANTS . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE DELAY HAS BEEN CAUSED DUE TO THE CIRCUMSTAN CES BEYOND CONTROL, THE SAME MAY BE CONDONED AND THE ASSESSEE MAY BE ALLOWED TO ARGUE ITS CASE ON MERITS. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) OPPOSED THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE ON THE GROUND THAT TH E REASON STATED BY THE ASSESSEE FOR NOT FILING THE APPEAL WITHIN THE PRESCRIBED PERIOD IS NOT SUFFICIENT TO CONDONE THE DELAY. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SHRI DHAVAL BHAMAR SELVADIA, PARTNER OF MA PARIKH AN D COMPANY, CHARTERED ACCOUNTANTS HAS FURNISHED THE AFFIDAVIT STATING AS UNDER: - 4 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 2. WE HAVE BEEN ATTENDING TAX WORK OF TATA ADVANCED SYSTEMS LIMITED (THE COMPANY) SINCE SOMETIME PAST. THE COMPANY HAD FILED APPEAL AGAINST ORDER PASSED U/S 143 (3) OF THE ACT IN RESPECT OF ASSESSMENT YEAR 2012 - 13. THEREAFTER, THE APPELLATE ORDER WAS RECEIVED ON 23.05.2017 BY THE COMPANY WHICH WAS COMMUNICATED TO US ON 23.05.2017. THE SAID MATTER WAS BEING ATTENDED BY OUR ASSISTANT MR. HEMAN CHHEDA. DUE TO CERTAIN MISUNDERS TANDING AS TO WHO WILL BE PREPARING THE APPEAL PETITION TO BE FILED WITH HON. TRIBUNAL FOR ASSESSMENT YEAR 2012 - 13, THE SAID APPEAL REMAINED TO BE PREPARED AND SENT TO THE CLIENT FOR BEING VERIFIED AND SIGNED BY THEIR DIRECTOR. THIS RESULTED INTO DELAY OF 25 DAYS IN FILING THE SAID APPEAL BEFORE THE HON. TRIBUNAL. 7 . SUB - SECTION 5 OF SECTION 253 OF THE INCOME TAX ACT PROVIDES THAT THE TRIBUNAL MAY ADMIT APPEAL OR PERMIT FILING OF MEMORANDUM OF CROSS - OBJECTION OF RESPONDENT AFTER EXPIRY OF RELEVANT PERI OD OF LIMITATION REFERRED TO IN SUB - SECTION 3 AND 4 SECTION 253, IF IT IS SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR NOT PRESENTING IT WITHIN THAT PERIOD. EXPRESSION SUFFICIENT CAUSE APPEARING IN THIS SECTION HAS ALSO BEEN USED IN SECTION 5 OF INDIAN LIMITATION ACT, 1961. THIS EXPRESSION HAS FALLEN FOR CONSIDERATION BEFORE THE HONBLE HIGH COURTS AS WELL AS BEFORE THE HONBLE SUPREME COURT, AND THE HONBLE COURTS ARE UNANIMOUS IN OBSERVING THAT WHENEVER SUCH ISSUE COME FOR CONSIDERATION BEFORE ADJUDICA TING AUTHORITY, THEN ALLEGED SUFFICIENT CAUSE SHOULD BE CONSIDERED WITH JUSTICE ORIENTED APPROACH. 8 . HENCE, FOLLOWING THE PRINCIPLES OF LAW LAID DOWN BY THE VARIOUS HIGH COURTS AND THE HONBLE SUPREME COURT ON THE POINT OF CONDONATION OF DELAY, WE ALLOW THE REQUEST OF THE ASSESSEE AND CONDON E THE DELAY OF 25 DAYS AND ALLOWED THE LD. COUNSEL TO ARGUE THE CASE OF THE ASSESSEE ON MERITS. 9 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND DURING T HE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO UNDER THE PROVISIONS OF SECTION 14A READ WITH 5 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 RULE 8D OF THE INCOME TAX RULES. THE LD. COUNSEL RELIED ON THE DECISION OF THE HON BLE DELHI HIGH COURT PASSED IN THE CASE OF CHEMINVEST LTD. VS. COMMISSIONER OF INCOME TAX (2015) 61 TAXMANN.COM 118 (DELHI), SUBMITTED THAT THE FINDINGS OF THE LD. CIT (A) ARE CONTRARY TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE SAID CASE. SI NCE, THE AO HAS MADE DISALLOWANCE U/S 14 A READ WITH RULE 8D OF THE INCOME TAX RULES (RULES) IN A MECHANICAL MANNER, THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION MADE BY THE AO. 10 . ON THE OTHER HAND, THE LD. DR RELYING ON THE FINDINGS OF THE LD. C IT (A) SUBMITTED THAT SINCE THE AO HAD MADE ADDITION U/S 14A IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE U/S 14A READ WITH RULE 8D OF THE RULES. 11 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENTIONS. THE HONBLE DELHI HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF CHEMINVEST LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) HOLDING AS UNDER: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE 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 RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 24. CONSEQUENTLY, THE IMPUGNED ORDER OF THE ITAT IS SET ASIDE AND THE APPEAL IS ALLOWED IN THE ABOVE TERMS. THIS COURT SHOULD NOT BE UNDERSTOOD TO HAVE EXPRESSED ANY OPINION ON THE ISSUE OF WHETHER FOR THE AY IN QUESTION THE IN TEREST EXPENDITURE INCURRED BY THE ASSESSEE WOULD BE 6 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 36 (1)(III) OF THE ACT. 12 . IN THE CASE OF PCIT VS. BALLARPUR INDUSTRIES LTD. INCOME TAX APPEAL NO. 51 OF 2016 , THE HONBLE JURISDICTIONAL HIGH COURT HAS H ELD THAT T HE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME. IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT P REVIOUS YEAR, NO DISALLOWANCE U/S 14A CAN BE MADE. A S POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE IN THE PRESENT CASE, THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. SINCE, THE ISS UE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT AND THE HONBLE BOMBAY HIGH COURT DISCUSSED ABOVE, THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO. HENCE, WE SET ASIDE THE IMPUGNED ORD ER PASSED BY THE LD. CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE U/S 14A READ WITH RULE 8D. 13 . SINCE, WE HAVE DECIDED THE MAIN GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE, THE REMAINING GROUNDS, WHICH HAS BECOME ACADEMIC DO NOT REQUIRE ANY ADJUD ICATION. HENCE, WE DISMISS THE REMAINING GROUNDS. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012 - 13 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 22 / 02 / 201 9 ALI NDRA, PS 7 ITA NO. 5353/MUM/2017 ASSESSMENT YEAR: 2012 - 13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI