NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY, MUMBAI V. ITO 3(2)(3), MUMBAI

ITA 6257/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3161 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 22-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2013
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 6257 /MUM./ 2013 ( ASSESSMENT YEAR : 20 0 9 10 ) NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY G ROUND FLOOR, C 11, G BLOCK SME DEVELOPMENT CENTRE BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAATN1889L .. APPELLANT V/S INCOME TAX OFFICER WARD 3(2)(3), AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT REVENUE BY : SHRI VIVEK BUTRA ASSESSEE BY : SHRI MILIN DATTANI DATE OF HEARING 22 .09.2015 DATE OF ORDER 30.09.2015 O R D E R PER SAKTIJIT DEY, J.M. THE AFORESAID APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 5 TH AUGUST 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) IV, MUMBAI, FOR THE ASSESSMENT YEAR 2009 10. NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY 2 2. THE SOLITARY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL RELATES TO DISALLOWANCE OF AN AMOUNT OF ` 18,95,141 UNDER SECTION 14A OF THE INCOME TAX ACT , 1961 (FOR SHORT 'THE ACT' ) R/W RULE 8D OF THE INCOME TAX RULES, 1962 (FOR SHORT 'THE RULES'). 3. BRIEFLY STATED THE FACTS ARE, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30 TH JANUARY 2009, DECLARING TOTAL INCOME OF ` 5,60,430. IN THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER, WHILE VERIFYING THE PROFIT & LOSS ACCOUN T, NOTICED THAT THE ASSESSEE HAS EARNED INCOME BY WAY OF DIVIDEND AMOUNT ING TO ` 35,72,428, DURING THE RELEVANT PREVIOUS YEAR WHICH IS EXEMPT UNDER SECTION 10(34) OF THE ACT . HOWEVER, THE ASSESSEE HAS FAILED TO MAKE DISALLOWANCE OF EXPENDITURE AS REQUIRED UNDER SECTION 14A OF THE ACT. HE, THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH A WORKING SHOWING DISALLOWANCE UNDER SECTION 14A R/W RULE 8D. AS OBSERVED BY THE ASSESSING O FFICER IN RESPONSE TO SUCH QUERY THE ASSESSEE SUBMITTED A WORKING AS PER WHICH DISALLOWANCE UNDER SECTION 14A R/W RULE 8D WAS WORKED OUT TO ` 18,95,141. ACCORDINGLY, THE ASSESSING OFFICER, WHILE COMP LE TING THE ASSESSMENT MADE DISALLOWANCE OF ` 18,95,141. 4. BEING AGGRIEVED OF SUCH DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). IN THE COURSE OF HEARING OF APPEAL, IT WAS SUBMITTED BY THE ASSESSEE THAT DURING THE NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY 3 YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED TOTAL E XPENDITURE OF ` 3,11,29,227, OUT OF WHICH AN AMOUNT OF ` 2,49,45,390, WAS DISALLOWED BY THE ASSESSEE ITSELF ON A PRO RATA BASIS BY APPLYING THE PROVISION OF SECTION 14A OF THE ACT AND THE ASSESSEE CLAIMED EXPENDITURE ONLY TO THE TUNE OF ` 61,83,838. HE, TH EREFORE, SUBMITTED THAT FURTHER DISALLOWANCE OF ` 18,95,141 BY APPLYING RULE 8D OVER AND ABOVE THE DISALLOWANCE ALREADY MADE BY THE ASSESSEE IS NOT JUSTIFIED. THE ASSESSEE ALSO RAISED AN ADDITIONAL GROUND TO THE EFFECT THAT SINCE THE ASSESSING OFFICER MADE DISALLOWANCE BY APPLYING PROVISIONS OF RULE 8D, HE SHOULD HAVE DELETED THE ORIGINAL DISALLOWANCE MADE BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS), HOWEVER, UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, DISMISSED THE GROUNDS RAISED BY T HE ASSESSEE BY HOLDING THAT THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A R/W 8D, BEING STATUTORY DISALLOWANCE IT HAS TO BE UPHELD IN SPITE OF SUO MOTU DISALLOWANCE BY THE ASSESSEE ON PRO RATA BASIS. 5. REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUT HORITIES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE HAVING VOLUNTARILY DISALLOWED AN AMOUNT OF ` 2,49,45,390 UNDER SECTION 14A OF THE ACT, FURTHER DISALLOWANCE OVER AND ABOVE THE SAID AMOUNT IS NOT ONLY UNREASONABLE BUT WIT HOUT JUSTIFICATION. THE NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY 4 LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO THE WORKING OF SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE SUBMITTED IN THE PAPER BOOK, SUBMITTED , THE ASSESSEE HAVING ALREADY MADE DISALLOWANCE UNDER SECTION 14A ON PRO RATA BASIS WHICH IS MUCH MORE THAN THE ACTUAL DISALLOWANCE WHICH SHOULD HAVE BEEN MADE IN TERMS WITH RULE 8D, FURTHER DISALLOWANCE MADE BY THE ASSESSING OFFICER REQUIRES TO BE DELETED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF T HE LEARNED COMMISSIONER (APPEALS). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS IT TRANSPIRES FROM THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE HAD MADE INVESTMENT OF ` 37,31,76,398, A S ON 31 ST MARCH 2009 AND ` 38,48,79,898, AS ON 31 ST MARCH 2010, IN SHARES WHICH HAS RESULTED IN DIVIDEND INCOME TO THE ASSESSEE TO THE TUNE OF ` 35,72,428. THOUGH THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS NOT MENTIONED ANYTHING ABOUT THE PRO RATA D ISALLOWANCE MADE BY THE ASSESSEE UNDER SECTION 14A OF THE ACT, BUT , THE LEARNED COMMISSIONER (APPEALS) ACCEPTS THE FACT THAT ASSESSEE SUO MOTU HAD MADE DISALLOWANCE OF EXPENDITURE TO THE TUNE OF ` 2,49,45,390 UNDER SECTION 14A OF THE ACT. ON A REFERENCE TO THE RELEVANT STATUTORY PROVISIONS AS CONTAINED UNDER SECTION 14A , IT IS SEEN NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY 5 IT WAS BROUGHT TO THE STATUTE BY FINANCE ACT, 2001, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 1962, BUT THE RELEVANT RULE PRESCRIBING THE MODE AND MANNER AND COMPUTATION OF DISALL OWANCE WAS BROUGHT TO THE STATUTE BY INSERTION OF RULE 8D W.E.F. 24 TH MARCH 2008, WHICH IS APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS, ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR HAS TO BE MADE IN THE MAN NER PRESCRIBED UNDER RULE 8D OF THE RULES. THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER WAS, CORRECT IN CALLING UPON THE ASSESSEE TO WORK OUT THE DISALLOWANCE UNDER SECTION 14A BY APPLYING PROVISIONS OF RULE 8D. AS COULD BE SEEN DURING THE ASSESSMENT PROC EEDINGS, THE ASSESSEE ALSO FURNISHED A WORKING COMPUTING THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D, WHICH WORKED OUT TO ` 18,45,336. THE ASSESSING OFFICER, IN FACT, HAS ACCEPTED THE DISALLOWANCE UNDER RULE 8D COMPUTED BY THE ASSESSEE. THEREFORE, FROM THE AFORESAID FACTS, IT IS VERY MUCH CLEAR THAT THE MAXIMUM DISALLOWANCE WHICH COULD HAVE BEEN MADE UNDER SECTION 14A R/W RULE 8D, WAS TO THE TUNE OF ` 18,45,336. HOWEVER, AS IS APPARENT ON RECORD, THE ASSESSEE ITSELF HAS MADE A SUO MOTU DISALLOWANCE OF EX PENDITURE TO THE TUNE OF ` 2,49,45,390, WHICH IS MUCH HIGHER THAN THE DISALLOWANCE WHICH COULD HAVE BEEN MADE BY APPLYING THE PROVISIONS OF RULE 8D. THEREFORE, THE ASSESSEE HAVING ALREADY MADE DISALLOWANCE UNDER SECTION 14A, FOR AN AMOUNT OF ` NATIONAL VENTURE FUND FOR SOFTWARE & INFORMATION TECHNOLOGY INDUSTRY 6 2,49,45,390, AN Y FURTHER DISALLOWANCE OVER AND ABOVE THE SAID AMOUNT IS NOT ONLY UNREASONABLE BUT IS AGAINST EQUITY , FAIR PLAY AND JUSTICE . THAT BEING THE CASE, WE DELETE THE ADDITION OF ` 18,45,336, MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R/W RULE 8D. GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 8. SINCE, AT THE TIME OF HEARING OF APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ARGUED ONLY ON THE ISSUE OF ADDITION OF ` 18,45,336, WE HAVE RENDERED OUR FINDING WITH REGARD TO THAT ISSUE ALONE. THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE DEEMED TO HAVE NOT BEEN PRESSED, HENCE, DISMISSED. 9. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.09.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 30.09.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. R EGISTRAR) ITAT, MUMBAI