MUKTA ARTS LIMITED, MUMBAI V. ACIT., 11(1), MUMBAI

ITA 6048/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8068 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Opportunity of being heard; Earning of tax free income; Revised return
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM , , ITA NO. 6048 / MUM/ 20 1 1 ( / ASSESSMENT YEAR: 20 0 8 - 09 ) M/S MUKTA ARTS LIMITED 3 RD FLOOR, FILMCITY COMPLEX, GOREGAON(E), MUMBAI - 400065 / VS. ASSTT.COMMISSIONR OF INCOME TAX 11(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT) ( / RESPONDENT ) ./ PAN : AAACM9513F ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI RAHUL K HAKANI /RE VENUE BY : SHRI SUMAN KUMAR / DATE OF HEARING : 16 .1. 2017 / DATE OF PRONOUNCEMENT : 7.3 .2017 / O R D E R PER RAJESH KUMAR, A. M: TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 22.6.2011 PASSED BY THE LD . CIT(A) - 3 , MUMBAI FOR THE ASSESSMENT YEAR 200 8 - 09 WHEREIN THE A SSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE OF RS.35,07,280/ - AS MADE BY THE AO UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 2 ITA NO. 6048 /MUM/201 1 2. EARLIER, THE APPEAL WAS DISMISSED IN LIMINE FOR NON - PROSECUT ION BY THE TRIBUNAL ON 26.11.2012. THEREAFTER, VIDE MA NO.142/MUM/2013 THE ASSESSEE PRAYED FOR RESTORATION OF ORIGINAL APPEAL AND THE TRIBUNAL VIDE ORDER DATED 11.10.2013 PASSED IN MISCELLANEOUS APPLICATION RESTORED THE APPEAL FOR FRESH HEARING. HENCE, THI S IS A SECOND INNING OF THE LITIGANT BEFORE THE TRIBUNAL . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 29.9.2008 DECLARING A TOTAL INCOME OF RS.3,67,88,592/ - AND REVISED RETURN OF INCOME ON 23.3.2009 DECLARING THE SAME INCOME REVISING THE TDS CLAIM ONLY . THE RETURN WAS PROCESSED UNDER SECTION 143(1) AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY WHEREIN THE STATUTORY NOTICES UNDER SECTION 143(2) AND 142 (1) WERE ISSUED AND SERVED TO THE ASSESSEE. THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRODUCTION , DISTRIBUTION , AND EXHIBITION AND ALSO DERIVES INCOME FROM HIR ING OF STUDIO FACILITIES FOR PRODUCTION OF FILM, TV SERIALS AND AD VERTISEMENTS ETC . 4. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE CON FIRMATION OF DISALLOWANCE OF RS.35,07,280/ - BY LD.CIT(A) AS MADE BY THE AO U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME ON WHICH IT D ID NOT SHOW ANY DIRECT EXPENDITURE INCURRED BUT DEFINITELY HAS INCURRED SOME INDIRECT EXPENSES AS 3 ITA NO. 6048 /MUM/201 1 WITHOUT INCURRING ANY EXPENDITURE , INVESTMENT S IN SHARES COULD NOT HAVE BEEN MADE AND AS A RESULT THE SAME W AS CLAIMED AGAINST T HE TAXABLE INCOME OF THE ASSESSEE. THE AO CALCULATED DISALLOWANCE U /S 14A R.W.R.8D BY APPLYING 0.5% OF THE AVERAGE INVESTMENT WHICH CAME TO RS.35,07,280/. 5 . THE FIRST APPELLATE AUTHORITY DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE AO HAS C ORRECTLY APPLIED RULE 8D TO WORK OUT THE DISALLOWANCE U/S 14A. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RE LIED UPON BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.53,60,035/ - BY WAY OF DIVIDEND AND RS.4,43,009/ - AS LONG TERM CAPITAL GAINS WHICH WERE CLAIMED AS EXEMPT. THE ASSESSEE HAS NOT ATTRIBUTED ANY EXPENSES TOWARDS EARNING OF THIS EXEMPT INCOME AND HENCE THE AO APPLIED RULE 8D AFTER OBSERVING THAT THE ASSESSEE MIGHT HAVE INCURRED SOME EXPENDITURE IN RELATION TO THIS INCOME WHICH WE R E CLAIMED AGAINST THE TAXABLE INCOME. 7 . THE LD. AR VEHEMENTLY, SUBMITTED BEFORE US IF AT A LL RULE 8D IS APPLIED THEN THE INVESTMENT S YIELDING EXEMPT INCOME HA VE TO BE CONSIDERED ONLY TO CALCULATE THE DISALLOWANCE AND NOT THE ENTIRE INVESTMENT S AS APPEARING IN THE BALANCE SHEET AT BEGINNING AND THE END OF THE YEAR WHEREAS IN THE PRESENT CASE , WE FIND THAT THE AO CALCULATED THE DISALLOWANCE BY TAKING ALL THE 4 ITA NO. 6048 /MUM/201 1 INVESTMENTS INCLUDING THE ON ES INCOME FROM WHICH IS TAXABLE INCOME . WE, THEREFORE, FIND MERIT IN THE ARGUMENTS OF THE LD.AR THAT ONLY INVESTMENT S YIELDING EXEMPT INCOME HA VE TO BE CON SIDERED . S INCE THE ISSUE REQUIRES VERIFICATION AND ASCERTAINMENT OF INVESTMENTS YIELDING EXEMPT INCOME , WE DEEM IT FIT AND PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE AO TO RECALCULATE THE DISALLOWANCE BY TAKING TH O SE INVESTMENTS INTO CONSIDERATI ON WHICH YIELDED EXEMPT INCOME AFTER PROVIDING FAIR AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO CO - OPERATE WITH THE AO FOR SPEEDY DISPOSAL OF THE MAT T ER. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 7TH MARCH, 2017 SD SD ( /MAHAVIR SINGH ) ( / RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 07. 3 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI