DCIT CEN CIR 5(2), MUMBAI V. SATRA PROPERTIES (INDIA) LTD, MUMBAI

ITA 5528/MUM/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8067 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 01-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA NO.5528/MUM/2018 (ASSESSMENT YEAR 2014-15) DCIT, CENTRAL CIRCLE- 5(2), ROOM NO.1908, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. VS. M/S SATRA PROPERTIES (INDIA) LTD. DEV PLAZA, 2 ND FLOOR, OPP. ANDHERI FIRE STATION, S.V. ROAD, ANDHERI (E), MUMBAI- 400058. P AN: AAACE1835C APPELLANT RESPONDENT APPELLANT BY : SHRI T. S. KHALSA (SR. DR) RESPONDENT BY : NONE DATE OF HEARING : 19.11.2020 DATE OF PRONOUNCEMEN T : 11.01.2021 ORDER PER MAHAVIR SINGH, VICE-PRESIDENT; 1. THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-53, MUMBAI [FOR SHORT THE LD. CIT(A)] IN APPEAL NO. CIT(A)-53/IT-299/DCCC-5(2)/2016-17 ORDER DATED 16.07.2018. ASSESSMENT WAS FRAMED BY DCIT CC-5(2), MUMBAI UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) FO R THE ASSESSMENT YEAR 2014-15 VIDE HIS ORDER DATED 27.12.2016. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF EXPENSES RELATABLE TO EXEMPT INCOME BY HOLDING THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. FOR THIS REVENUE HAS RAISED FOLLOWING THREE EFFECTIVE GROUND S: ITA NO. 5528 MUM 2018-M/S SATRA PROPERTIES (INDIA) LTD. 2 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,4 3,25,406/- U/S 14A OF THE INCOME TAX ACT, 1961 IGNORING THAT THE PROVISIONS O F SECTION 14A WHICH APPLY EVEN IF NO EXEMPT INCOME HAS ACTUALLY BEEN EARNED O R RECEIVED DURING THE YEAR IN ANY FORM WHATSOEVER. ?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION U/S 14A O F THE INCOME TAX ACT, 1961 BY IGNORING THE PROVISIONS OF CBDT CIRCULAR NO. 5/2 014 DATED 11.02.2014 WHEREIN, IT HAS BEEN CLARIFIED THAT THE RULE 8D R.W .S.14A PROVIDES FOR DISALLOWANCE OF EXPENDITURE EVEN WHERE THE ASSESSEE IN PARTICULAR HAS NOT EARNED EXEMPT INCOME?' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION U/S 14A O F THE INCOME TAX ACT, 1961 RELYING UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMIN VEST LTD. OVERLOOKING THE FACT THAT THE DECI SION HAS BEEN SUPERSEDED BY THE HON'BLE SUPREME COURT IN ITS ORDER IN THE CASE OF MAXOPP INVESTMENT LTD. VS CIT(20 18) 402 ITR 640.?' 3. WE HAVE HEARD THE CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THIS CASE. WE NOTED THAT THAT THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT HAS MADE DISALLOWANCE BY INVOKIN G THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R 8D OF THE INCOME TAX R ULES, 1962 (HEREINAFTER THE RULES). HE INVOKED RULE 8D (2)(II) OF THE RUL ES AND DISALLOWED INTEREST EXPENDITURE OF RS. 2,22,32,390/-. UNDER RULE 8D(2) (III) OF THE RULES I.E. ADMINISTRATIVE EXPENSES AT RS. 20,93,016/-. THEREBY THE ASSESSING OFFICER DISALLOWED TOTAL EXPENDITURE AT RS. 2,43,25,406/-. BEFORE THE CIT(A), THE ASSESSEE CLAIMED THAT THERE IS NO EXEMPT INCOME DUR ING THE YEAR AND HENCE, NO DISALLOWANCE SHOULD BE MADE. WE NOTED THAT THE C IT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING IN PARA-5.9 AS UNDER: ITA NO. 5528 MUM 2018-M/S SATRA PROPERTIES (INDIA) LTD. 3 5.9. I HAVE CONSIDERED THE SUBMISSIONS CAREFULLY. I AM INCLINED TO ACCEPT THE ALTERNATIVE PLEA OF THE APPELLANT BASED ON THE JUDG MENT OF THE HON'BLE DELHI HIGH COURT DATED 02.09.2015 IN THE CASE OF M/S. CHE MINVEST LTD. V. CIT (ITA 749/2014) WHEREIN IT HAS BEEN HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. WHILE SETTING ASIDE THE DECISION OF HON'BLE SPECIAL BENCH IN THAT CASE, IT HAS BEEN HELD THAT THE EXPRESSION 'DOES NOT FORM PART O F THE TOTAL INCOME' IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN AC TUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE IN RELAT ION TO THE SAID INCOME. IT IS A MATTER OF RECORD THAT THE APPELLANT HAS NOT RECEI VED ANY EXEMPT INCOME DURING THE RELEVANT PERIOD. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF ABOVE DECISION, IT IS HELD THAT THE A.O. WAS NOT JU STIFIED IN MAKING DISALLOWANCE U/S.14A R.W. RULE 8D(2). THE DISALLOWA NCE SO MADE BY THE A.O. IS DIRECTED TO BE DELETED. ACCORDINGLY, GROUND OF A PPEAL NO.3 IS PARTLY ALLOWED. 4. WHEN THIS FACT WAS CONFRONTED TO LD. SR. DR, HE COU LD NOT CONTROVERT THE ABOVE FACT. ONCE THERE IS NO EXEMPT INCOME, THE ISS UE IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF MAXOPP INVESTMENT LTD. VS. CIT (2018) 402 ITR 640 (SC). 5. AS THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (SUPR A), WE FIND NO INFIRMITY IN THE ORDER OF CIT(A), HENCE, THE APPEAL OF REVENU E IS DISMISSED. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY 2021. SD/- SD/- M.BALAGANESH MAHAVIR SINGH ACCOUNTANT MEMBER VICE-PRESIDENT ITA NO. 5528 MUM 2018-M/S SATRA PROPERTIES (INDIA) LTD. 4 MUMBAI, DATE: 11.01.2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT, MUMBAI