DSP INVESTMENT P.LTD, MUMBAI V. DCIT 2(1)(1), MUMBAI

ITA 5947/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0331 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JOTHI LAKSHMI NAYAK SR
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5947/MUM/2018 ( ASSESSMENT YEAR: 2014-15 ) DSP INVESTMENT PVT.LTD. 11 TH FLOOR MAFATLAL CENTRE NARIMAN POINT MUMBAI-400 021 VS. DCIT,CIRCLE-2(1)(1) AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA ACB1574H APPELLANT ) .. RESPONDENT ) REVENUE BY SMT. JOTHILAKSHMI NAYAK, SR.AR (DR) ASSESSEE BY SHRI. MADHUR AGARWAL, AR DATE OF HEARING 02/12 /2019 DATE OF PRONOUNCEME NT 02 /12 /201 9 / O R D E R PER G.MANJUNATHA:ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)4, MUMBAI, DATED 31/08/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2014- 15. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1 A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE APPELLANT HAS DISALLOWED EXPENDITURE OF RS,25,85,711/- U/S 14 A ON PROPORTIONATE BASIS WHICH IS REASONABLE AS HELD BY THE HONBLE IT T 'D' BENCH IN APPEAL NO. ITA 6214/MUM./2011 DT 19/12/201 6 IN THE APPELLANT'S OWN CAGE FOR A.Y. 2008-09 ON AN IDENTIC AL ISSUE ARID OUGHT TO HAVE ACCEPTED THE SAID DISALLOWANCE. ITA NO.5947/MUM/2018 DSP INVESTMENT PVT.LTD. 2 B ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE TOTAL INCOME AS PER BOOKS AND AS PET INCOME TAX ACT IS COMPUTED DIFFERENTLY AND HAS ERRED WHILE CALCULATING THE %AG E OF EXEMPT INCOME TO TOTAL INCOME BY CONSIDERING THE NET TAXABLE INCOME AS PER IT. ACT AND NOT AS PER THE PROFIT & LOSS A/C AND THEREBY DISALLOWIN G U/S 14A RS..2,06,48076/- . C) ON THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OVERLOOKED THAT THE TOTAL AS PET INCOME TAX ACT IS COMPUTED AFTER VARIOUS DEDUCT IONS, ALLOWANCES, INDEXED COST FOR LTCG, B/F LOSSES SET OFF, ETC. AND CANNOT BE THE BASIS FOR WORKING OUT THE %AGE OF EXEMPT INCOME TO TOTAL INCO ME BY CONSIDERING THE NET TAXABLE INCOME AS PET I.T ACT AN NOT AS PER THE PROFIT & LOSS A/C AND THEREBY DISALLOWING U/S 14A RS.2,06,48,076 /-. D) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THOUGH HE HAS RESPECTFULLY FOLLOWED HON'BLE ITAT D' BENCH FN THE APPELLANT'S OWN CASE BUT HAS ERRONEOUSLY HELD THAT THERE IS A MISTAKE IN THE CA LCULATION OR CORRECTNESS OF THE EXPENSES BY THE APPELLANT AND THEREBY DISALL OWING U/S 14A RS. 2,06,48076/- AS PER THE APPELLANTS OWN CASE. B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE TEAMED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN M ISCONSTRUING THE DECISION OF THE HONBLE ITAT 'D BENCH IN APPEAL NO . ITA 62L4/MUM/2011 DT. 19/12/2016 IN THE APPELLANT'S OWN CASE FOR A.Y. 2008 - 09 AND ALSO FOR AY 2009 - 10, 2010 -11 AND AY 2011 - 12 OR AN IDENT ICAL ISSUE AND OUGHT TO HAVE ACCEPTED THE SAID DISALLOWANCE OF RS.25,85, 711/- U/S 14A AS PER THE APPELLANT. C ) ON DIE FACTS AND CIRCUIT STANCES OF THE EASE MI D IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT AS PER THE PROVISIONS OF SECTION 14A IT IS NECESSARY T O PINPOINT EXPENDITURE FOR THE PURPOSES OF DISALLOWANCE ON THE BASIS OF MA TERIAL ON RECORD AND TO PROVE THAT THE APPELLANT HAS ILL FACT INCURRED EXPE NDITURE WHICH HAS RELATION TO THE EXEMPTED INCOME AND ONLY THE EXPEN DITURE WHICH IS PROVED TO HAVE A NEXUS WITH THE EXEMPT INCOME CAN B E DISALLOWED, 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE ACTION OF T HE A.O IS UPHELD ON ACCOUNT OF DISALLOWANCE U/S 14A OF RS. 2,0648076/- DETERMINED AS PER RULE 8D, WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT WITHOUT APPRECIATING THE FACT THAT RULE 8D APPLIES ONLY TO SECTION 14A AND NOT TO SECTION 115JB OF THE INCOME TAX ACT. 3. THE APPELLANT PRAYS FOR LEAVE TO ADD TO OR DELE TE OR AMEND ANY OF THE GROUNDS OF APPEAL. 4. EACH OF THE ABOVE GROUND FOR APPEAL IS INDEPENDE NT OF THE OTHERS AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEA L. 5. THE APPELLANT PRAYS THAT:- ITA NO.5947/MUM/2018 DSP INVESTMENT PVT.LTD. 3 I. THE REASONABLE METHOD OF APPORTIONING THE EXPEND ITURE INADMISSIBLE UNDER SECTION 14A AS DETERMINED BY TH E APPELLANT BE ACCEPTED. II. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE THAT THE DISALLOWANCE U/S 14A APPLIES ONLY TO SECTION 14A AND NOT TO SECT ION 115JB AND BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS A REGISTERED NON BANKING FINANCE COMPANY WITH THE RBI , WITH THE MAIN OBJECT OF INVESTMENTS IN VARIOUS CLASS OF ASSETS. T HE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE AY 2014-15 ON 28 /11/2014, DECLARING TOTAL INCOME OF RS.19,14,55,330/- UNDER N ORMAL PROVISION OF THE INCOME TAX ACT, 1961 AND BOOK PROFIT OF RS.3 6,21,57,865/- UNDER THE PROVISION OF SECTION 115JB OF THE I.T.ACT , 1961. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BE EN COMPLETED U/S 143(3) OF THE I.T.ACT, 1961,DETERMINING THE TOT AL INCOME AT RS.21,21,03,403/- UNDER THE NORMAL PROVISION OF THE I.T.ACT, 1961, BY MAKING ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITU RE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A BY INVOKING RULE 8D OF I.T.RULES 1962. THE LD. AO HAS ALSO RECOMPUTED BOOK PROFIT U/ S 115JB OF THE I.T.ACT 1961 BY MAKING ADDITIONS TOWARDS DISALLOWAN CES OF EXPENDITURE U/S 14A OF THE I.T.ACT 1961. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD.CIT(A), FOR THE DETAILE D REASONS RECORDED IN HIS APPELLATE ORDER, DATED 31/08/2018, DISMISSED APPEAL FILED BY THE ASSESSEE, WHERE HE HAS AFFIRMED THE FINDINGS OF THE LD.AO BY FOLLOWING HIS PREDECESSOR APPELLATE ORDER FOR AY 20 13-14. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS IN APPEAL B EFORE US. 5. THE LD. AR, FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE BY ITA NO.5947/MUM/2018 DSP INVESTMENT PVT.LTD. 4 THE DECISION OF ITAT D BENCH, MUMBAI IN ASSESSEE OWN CASE FOR AY 2013-14 IN ITA NO. 3514/MUM/2018, WHERE UNDER ID ENTICAL SET OF FACTS, THE TRIBUNAL HAS ACCEPTED SUO-MOTO DISALLOWA NCES COMPUTED BY THE ASSESSEE, IN RESPECT OF DISALLOWANCES OF EXP ENDITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE I.T.ACT , 1961. 6. THE LD. DR, ON THE OTHER HAND STRONGLY SUPPORTED ORDER OF THE LD.CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE CO-ORDINATE BENCH OF ITAT, MUMBAI D BENCH IN ASSESSEES OWN CASE FOR AY 2013-14 HAD CON SIDERED AN IDENTICAL ISSUE AND BY FOLLOWING THE TRIBUNAL ORDER S FOR EARLIER YEARS AND ALSO, THE DECISION OF HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 03/06/2019 RESTRICTED DISALLOWANCES COMPUTED BY THE LD. AO U/S 14A R.W.RULE 8D TO THE EXTENT OF SUO-MOTO DISAL LOWANCES MADE BY THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBU NAL ARE AS UNDER:- 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THOUGH THERE IS NO DISPUTE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED BOTH TAXABLE AS WELL AS EXEMPT INCOME, HOWEVER, FACT REMAINS, THE TOTAL EXPENDITUR E CLAIMED BY THE ASSESSEE IN RESPECT OF ALL SOURCES INCOME EARNED DU RING THE YEAR IS RS.6.71 LAKH. EVEN OUT OF THE SAID AMOUNT, THE ASSE SSEE HAS FURTHER DISALLOWED RS.2,02,688, UNDER SECTION 14A, TOWARDS EARNING OF EXEMPT INCOME. THE AFORESAID DISALLOWANCE WAS MADE BY THE ASSESSEE ON PROPORTIONATE BASIS KEEPING IN VIEW THE QUANTUM OF TAXABLE INCOME AND EXEMPT INCOME EARNED DURING THE YEAR. IT IS ALSO EV IDENT, ASSESSEE HAD BEEN FOLLOWING THE AFORESAID METHODOLOGY OF APPORTI ONING EXPENDITURE BETWEEN THE TAXABLE AND EXEMPT INCOME FROM THE PAST SEVERAL YEARS AND ACCEPTING THE METHODOLOGY ADOPTED BY THE ASSESSEE, THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 200809 IN IT A NO.7598/MUM./2011, DATED 22ND JANUARY 2014, HAS DIR ECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO T HE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE VOLUNTARILY. THE SAME VI EW WAS EXPRESSED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEALS IN A SSESSMENT YEARS ITA NO.5947/MUM/2018 DSP INVESTMENT PVT.LTD. 5 201011, VIDE ITA NO. 7135/MUM./2013 &ORS., DATED 2 2ND APRIL 2016 AND IN THE ASSESSMENT YEAR 201112, VIDE ITA NO.546 7/MUM./2014 & ANR., DATED 17TH MARCH 2016. PERTINENTLY, THE AFORE SAID DECISIONS OF THE TRIBUNAL HAVE BEEN UPHELD BY THE HON'BLE JURISDICTI ONAL HIGH COURT VIDE ORDER DATED 3RD JUNE 2019 WHILE DISMISSING THE APPE ALS FILED BY THE REVENUE. IN ANY CASE OF THE MATTER, THE DISALLOWANC E MADE BY THE ASSESSING OFFICER IS FAR IN EXCESS OF THE TOTAL EXP ENDITURE CLAIMED BY THE ASSESSEE. THEREFORE, UNDER NO CIRCUMSTANCES, THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER COULD HAVE BEEN SUSTAINED. TH EREFORE, FOLLOWING THE DECISIONS OF THE TRIBUNAL AND THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE PRECEDING ASSESSMENT YEARS, AS REFERRED TO ABOV E, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D, SHOULD BE RESTRICTED TO THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE UNDER SEC TION 14A OF THE ACT. THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND THOSE OF THE REVENUE ARE DISMISSED. 8. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIE R YEARS, WE DIRECT THE AO TO RESTRICT DISALLOWANCES OF EXPENDIT URE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A R.W.RULE 8D OF I. T.RULES, 1962 TO THE EXTENT OF SUO-MOTO DISALLOWANCES MADE BY THE A SSESSEE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 02/12/2 019 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 02/12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT ITA NO.5947/MUM/2018 DSP INVESTMENT PVT.LTD. 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//