DCIT CEN CIR 3(3) CRANGE 3, MUMBAI V. MENTOR CAPITAL LTD, MUMBAI

ITA 6329/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7486 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 02-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 6329 /M UM /20 18 ASSESSMENT YEAR: 2015 - 16 D CIT , CENTRAL CIRCLE - 3(3), MUMBAI VS. MENTOR CAPITAL LT D. 713 RAHEJA CENTRE, NARIMAN POINT, FREE PASS JOURNAL ROAD, MUMBAI, PIN - 400021. PAN: AACCP7995G (APPELLANT) (RESPONDENT) PRESENT FOR: APPELLANT BY : JOTHILAKSHMI NAYAK, SR. DR RESPONDENT BY : NONE DATE OF HEARING : 0 9 .01.2020 DATE OF PRONOUNCEMENT : 29 .01 . 20 20 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 14.08 .2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINA FTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2015 - 16 . 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELE TION OF ADDITION OF RS. 2,93,38,160 / - BY LD. CIT(A) AS MADE BY THE AO U/S ITA NO.6329/MUM/2018 MENTOR CAPITAL LTD. 2 14A R.W.R 8D(2)(II) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEES CASE IS NOT COVERED BY THE RATIO OF BOMBAY HIGH COURT IN THE CASE OF HDFC BANK AND RELIANCE UTILITIES. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS EARNED EXEMPT INCOME DURING THE YEAR AND MADE SUO MOT T O DISALLOWANCE U/S 14A OF THE ACT R.W.R. 8D OF INCOME TAX RULES AT RS.187,14,283/ - . ACCORDINGLY THE AO CALLED UPON THE ASSESSEE TO FILE THE WORKING OF SUO MOTTO DISALLOWANCE AND ALSO SHOW CAUSE AS TO WHY THE PROVISION S OF SECTION 14A R.W.R 8D SHOULD NOT BE APPLIED . THE AO CAME TO THE CONC LUSION ON THE PERUSAL OF THE REPLY OF THE ASSESSEE NO BOOKS OF ACCOUNTS WERE MAINTAINED IN RESPECT OF INVESTMENTS AND THEREFORE THERE IS NO ONE TO ONE NEXUS BETWEEN EXPENSES AND EXEMPT INCOME YIELDING INVESTMENTS AND ACCORDINGLY HELD THAT T HE WORKING OF TH E DISALLOWANCE OF THE ASSESSEE IN RESPECT OF THE EXEMPT INCOME IS NOT CORRECT. ACCORDINGLY, THE DISALLOWANCE WAS CALCULATED AT RS.4,80,52,443/ - COMPRISING 293,38,160/ - UNDER RULE 8D(2)(II) AND RS.187,14,283/ - UNDER RULE 8D(2)(III). THE AO MADE ADDITION OF RS.2,93,38,160/ - AFTER ALLOWING CREDIT OF SUO MOT T O DISALLOW ANCE BY FRAM ING ASSESSMENT U/S 143(3) DATED 22.06.2017. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK ITA NO.330 OF 2012 AND CAME TO THE CONCLUSION THAT NO DISALLOWANCE UNDER RULE 8D(2)(II) IS REQUIRED TO BE MADE AS ASSESSEE HAS MORE OWN FUNDS THAN THE INVESTMENT S WHICH YIELD ED EXEMPT INCOME DURING THE YEAR WHEREAS DISAL LOWANCE U/S 14A R.W.R 8D(2)(III) IS CONFIRMED. ITA NO.6329/MUM/2018 MENTOR CAPITAL LTD. 3 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE LD. CIT(A) HAS RE CORDED A FINDING OF FACT THAT ASSESSEES OWN FUNDS ARE FA R MORE THAN THE INVESTMENTS I N THE SECURITIES AND THEREFORE NO DISALLOWANCE IS CALLED FOR IN PURSUANT TO THE DECISION IN THE CASE OF HDFC BANK (SUPRA). ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE BY SUSTAINING THE APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01 . 20 20 . SD/ - SD/ - ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29 .01 . 2020 . RS , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.6329/MUM/2018 MENTOR CAPITAL LTD. 4 DATE INITIAL WHETHER DIC TATION PAD ENCLOSED WITH THE FILE : YES/NO (AS THE ORDER HAS BEEN TYPED WITH THE HELP OF MANUSCRIPT) 1. DRAFT DICTATED ON SR.PS 2. DRAFT PLACED BEFORE AUTHOR SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPRO VED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER