DCIT CEN CIR 5(4), MUMBAI V. EMERALD REALTORS P.LTD, MUMBAI

ITA 6264/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0931 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-10-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.6264/M/2016 (AY 2012 - 13) DCIT - CC - 5(4), R.NO.1927, 19 TH FLOOR, AIR INDIA BUILDING, NARIMN POINT, MUMBAI 400 021. / VS. M/S. EMERALD REALTORS PVT LTD., 2 ND FLOOR, CAPRI, ANANT KANEKAR MARG, BANDRA (E), MUMBAI 400 051. ./ PAN : AAACE4757B ( / APPELLANT) .. ( / RESPONDENT ) ITA NO.6265/M/2016 (AY 2012 - 13) DCIT - CC - 5(4), R.NO.1927, 19 TH FLOOR, AIR INDIA BUILDING, NARIMN POINT, MUMBAI 400 021. / VS. M/S. SATYAM REALTORS PRIVATE LIMITED, 04, 3 RD FLOOR CAPRI, ANANT KANETKAR MARG, BANDRA (EAST), MUMBAI - 51. ./ PAN : AACCS7290P ( / APPELLANT) .. ( / RESPONDENT ) ITA NO.6266/M/2016 (AY 2012 - 13) DCIT - CC - 5(4), R.NO.1927, 19 TH FLOOR, AIR INDIA BUILDING, NARIMN POINT, MUMBAI 400 021. / VS. SHRI SARANG R. WADHAWAN, WADHAWAN HOUSE, PLOT NO. 32/A, UNION PARK ROAD NO.5, NEAR SHATRANJ HOTE L, BANDRA (W), MUMBAI 400 050. ./ PAN : AAAPW2530R ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI RAHUL HAKANI / REVENUE BY : MS. BEENA SANTOSH, DR / DATE OF HEARING : 13.04 .2017 / DATE OF PRONOUNCEMENT : 19 .04.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE THREE APPEALS UNDER CONSIDERATION INVOLVING THREE DIFFERENT ASSESSEES. ALL THESE APPEALS ARE FILED BY THE REVENUE FOR THE AY 2012 - 13. SINCE, 2 THE ISSUES INVOLVED IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CL UBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. SINCE, THE ISSUES RAISED IN ALL THE THREE APPEALS ARE IDENTICAL, THEREFORE, FOR THE REFERENCE SAKE AND ADJUDICATION PURPOSE, GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ITA NO.6266/M/2016 FOR THE AY 2012 - 13 IN THE CASE OF SHRI SARANG R. WADHAWAN ARE EXTRACTED AS UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION U/S 14A OF THE ACT BY IGNORING THE FACT THAT THE PROVISIONS OF SECTION 14A APPLY EVEN IF NO EXEMPT INCOME IS ACTUALLY EARNED OR RECEIVED DURING THE YEAR IN ANY FORM WHATSOEVER? 2. WHETHER ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LA W, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION/S U/S 14A OF THE ACT BY IGNORING THE PROVISIONS OF CBDT CIRCULAR NO.5/2014 DATED 11.02.2014 WHEREBY IT HAS BEEN CLARIFIED THAT RULE 8D R.W.S 14A PROVIDES FOR THE DISALLOWANCE O F EXPENDITURE EVEN WHERE THE ASSESSEE IN PARTICULAR HAS NOT EARNED EXEMPT INCOME. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT MY ATTENTION TO THE FACT THAT ALL THE THREE ASSESSEES NEVER EARNED EXEMPT INCOME FOR INVOKING THE PROVISIONS OF SECTIO N 14A READ WITH RULE 8D OF THE IT RULES, 1962. BRINGING OUR ATTENTION TO THE FACTS OF THE CASE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT CONSIDERING THE ABOVE FACT WITH REGARD TO NON - EARNING OF THE EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, CIT (A) GRANTED RELIEF TO THE ASSESSEE AS PER THE DISCUSSION GIVEN IN PARA 5 AND IT SUB - PARAS. IN THE SAID PARAS IN GENERAL AND IN PARA 5.3.2 IN PARTICULAR, CIT (A) RELIED HEAVILY ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S. CHEMINVEST LTD VS. CIT (ITA NO.749/2014) AND HELD THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D(2)(III) CANNOT BE INVOKED WHEN THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVA NT LINES FROM THE SAID PARA ARE EXTRACTED AS UNDER: - 5.3.2. HOWEVER, I AM INCLINED TO ACCEPT THE ALTERNATIVE PLEA OF THE APPELLANT BASED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT DATED 2.9.2015 IN THE CASE OF M/S. CHEMINVEST LTD VS. CIT (ITA NO.749/2014) WHERE IN IT HAS BEEN HELD THAT SECTION 14A WILL NOT AP PLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. WHILE SETTING ASIDE THE DECISION OF THE HONBLE SPECIAL BENCH IN THAT CASE, IT HAS BEEN HELD THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A O F THE ACT 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 IN RELATION TO THE SAID INCOME. IT IS A MATTER OF RECORD THA T THE APPELLANT HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE RELEVANT 3 PERIOD. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF ABOVE DECISION, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS. 1,51,71,892/ - U/S 14A READ WITH RULE 8D(2) (III). THE DISALLOWANCE SO MADE BY THE AO IS DIRECTED TO BE DELETED. GROUND NO.2 RAISED BY THE APPELLANT IS ACCORDINGLY ALLOWED. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AS WELL AS THE RELEVANT MATERIAL PLACED BEFO RE US, I FIND, THE PROPOSITION LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S. CHEMINVEST LTD (SUPRA) WAS CONFIRMED BY THE ORDER OF THE ITAT, DELHI BENCH IN THE CASE OF MS. AMITA VERMA VS. ACIT [2016] 71 TAXMANN.COM 91 (DELHI.TRIB). IN THE S AID TRIBUNALS ORDER (SUPRA) THE JUDGMENT OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF CH EMINVEST LTD (SUPRA) WAS FOLLOWED. EVEN, THE HONBLE MADRAS HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD VS. ADDL. CIT [2017] 77 TAXMANN.COM 257 (MADRAS) WAS TAK EN SIMILAR VIEW AND FOLLOWED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF M/S. CHEMINVEST LTD (SUPRA). CONSIDERING THE SETTLED POSITION OF THE ISSUE, I AM OF THE OPINION, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE IN ALL THE THREE APPEALS ARE DISMISSED. 5. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 T H APRIL, 2017. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 19.04.2017 . . ./ OKK , SR. PS / 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 . //TRUE COPY// 4 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI