DY. COMMISSIONER OF INCOME TAX 2(3)(1), MUMBAI V. TATA INVESTMENT CORPORATION LIMITED, MUMBAI

ITA 6386/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4017 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 05-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Keywords: Earning of tax free income; Revenue expenditure; Rule 8D; Set aside
• Section: 143(3); 142(1); 14A; 115JB; 143(2); 13; 22

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, J M & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 6386 / MUM/ 2018 ( / ASSESSMENT YEAR: 2015 - 16 ) D CIT 2(3 ) (1), ROOM NO. 552 , 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. TATA INVESTMENT CORPORATION LTD. 2 ND FLOOR, ELPHINSTONE BUILDING, 10, VEER NARIMAN ROAD, FORT, MUMBAI - 400 001 ./ ./ PAN NO. A AACT 4120 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AMIT PRATAP SINGH , DR / RESPONDENTBY : SHRI M. M. GOLVALA , AR / DATE OF HEARING : 07.01.2020 / DATE OF PRONOUNCEMENT : 22.01.2020 / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT A PPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 6 , MUMBAI, IN SHORT LD. CIT(A) D ATED 21.08.18 FOR AY 2015 - 16 . 2 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. 2 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS A NON - BANKING FINANCIAL COMPANY REGISTERED WITH RESERVE BANK OF INDIA UNDER THE CATEGORY INVESTMENT COMPANY. IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.11.15 DECLARING TOT AL INCOME AT RS. 57,48,87,990/ - . THE ASSESSEE HAS SHOWN BOOK PROFIT U/S 115JB AT RS. 1,37,53,95,787/ - . THE RETURN WAS PROCESSED U/S 143(1). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) WERE ISSU ED AND SERVED ON THE ASSESSEE. THEREAFTER, A SSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT ON 27.12.17 DETERMINING THE TOTAL INCOME AT RS. 59,52,27,010 / - UNDER NORMAL PROVISION OF THE ACT AND RS. 1,42,53,88,677/ - U/S 115JB OF THE ACT. 3 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4 . NOW BEFORE US, THE REVENUE HAS PREFE RRED THE APPEAL BY RAISING THE GROUNDS OF APPEAL AS UNDER: - 3 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS RIGHT IN HOLDING THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO C OMPUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D AND ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENTS WHICH YIELDED EXEMPT INCOME BASED ON THE DECISION OF SPECIAL BENCH OF IT AT , DELHI IN THE CASE OF VIREET INVESTME NT PVT. LTD. (2017) 165 ITD 277? 2. WHETHER ON THE.FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , LD. CIT(A) IS RIGHT IN HOLDING THAT SHARE REGISTRY EXPENSES AS REVENUE EXPENDITURE WITHOUT CONSIDERING THE FACT THAT THESE EXPENSES ARE CLOSELY CONNECTED WI TH MATTERS RELATING TO SHARE CAPITAL AND HAVING CHARACTER OF GIVING ENDURING BENEFIT TO THE ASSESSEE? GROUND NO. 1 5 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT TH IS GROUND RAISED BY THE REVENUE IS SQUARELY COVERED BY THE ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 2332/MUM/2016 FOR AY 2012 - 13 IN ASSESSEES OWN CASE . 4 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. 6 . ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 7 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 2332/MUM/2016 FOR AY 2012 - 13 IN ASSESSEES OWN AND FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 7. WE HAVE HEARD THE LEARNED D.R. ON THIS ISSUE AND PERUSED THE RECORD. IN VIEW OF THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT P. LTD., THE DIRECTION OF THE LEARNED CIT(A) TO ADOPT THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB IS LIABLE TO BE SET ASIDE. THE ASSESSEE ALSO TOOK US TO THE WORKING MADE BY IT FOR ASCERTAINING THE EXPENSES REL ATING TO EXEMPT INCOME FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. WE NOTICED THAT THE ASSESSEE HAS ALLOCATED EXPENSES IN THE RATIO OF TAXABLE INCOME AND EXEMPT 5 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. INCOME AND THE SAID METHOD WAS DETERMINED BY THE DEPARTMENT I N A.Y. 2000 - 01. IT IS STATED THAT THE SAME METHOD IS BEING FOLLOWED FOR A.Y. 2000 - 01 ONWARDS BY THE ASSESSEE. SINCE A CONSISTENT METHOD IS BEING FOLLOWED BY THE ASSESSEE FOR MORE THAN 10 YEARS AND SINCE THE ALLOCATION OF EXPENSES IS ON THE BASIS OF EXEMPT INCOME AND TAXABLE INCOME, WE ARE OF THE VIEW THAT THE COMPUTATION MADE BY THE ASSESSEE FOR DETERMINING EXPENSES RELATING TO EXEMPT INCOME FOR THE REQUIREMENT OF PROVISIONS OF SECTION 115JB OF THE ACT DOES NOT REQUIRE DISTURBANCE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ACCEPT THE COMPUTATION MADE BY THE ASSESSEE FOR THE PURPOSE OF SEC. 115JB OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. T HEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH OF ITAT , WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE, WE DISMISS THIS GROUND OF APPEAL RAISED BY THE REVENUE . GROUND NO. 2 9 . BEFORE US, LD. DR APPEARING ON BEHALF OF THE DEPARTMENT BROUGHT TO OUR NOTICE PARA 6 OF THE ASSESSMENT ORDER AND FINDINGS 6 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. OF LD. CIT(A) AT PAGE NO. 10 OF ITS ORDER AND RELIED ON THE ASSESSMENT ORDER PASSED BY AO. 10 . ON THE OTHER HAND, LD. AR BROUGHT TO OUR NOTICE AT PAGE NO. 28 - 29 AND PAGE 30 OF THE PAPER BOOK, IN WHICH COPY OF AGREEMENT BETWEEN TSR DARSHAW LTD. AND TATA INVESTMENT CORPORATION LTD. AND FURTHER HE BROUGHT TO OUR NOTICE AT PAGE NO. 50 OF THE PAPER BOOK IN WHICH, CBDT HAS ISSUED CIRCULAR ON ALLOWING SHARE LISTING EXPENDITURE AS REVEN UE EXPENDITURE. THEREFORE, HE SUPPORTED THE FINDINGS OF LD. CIT(A). 11 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY R EVENUE AUTHORITIES. AFTER CONSIDERING THE SUBMISSI ON OF LD. AR AND CBDT CIRCULAR, WHICH IS PLACED ON RECORD BY THE ASSESSEE, WE NOTICE THAT ASSESSEE HAS INCURRED THIS EXPENDITURE ON LISTING OF SHARES IN THE STOCK MARKET AND IN THE NATURE OF SERVICES BY THE AGENT APPOINTED TO MAINTAIN THE SHARE TRANSFER AN D UPDATING THE REGISTER OF MEMBERS, ETC, WHICH IS IN THE NATURE OF ADMINISTRATION OF MEMBERS AND MAINTAINING SHARE TRANSFER 7 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. REGISTERS. AS PER THE CIRCULAR, THIS MAINTENANCE OF SERVICES OFFERED TO THE REGISTERED MEMBERS IN THE COMPANY CAN BE TREATED AS REVE NUE EXPENDITURE AND IT DOES NOT HAVE ANY CHARACTER OF CAPITAL ENDURING NATURE, THEREFORE WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DEALT WITH THIS GROUND AND PASSED ITS JUDICIOUS ORDER. ACCORDINGLY, WE DISMISS THIS GROUND OF APPEAL RAISED BY THE REVEN UE. 12 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JAN 2020 . SD/ - SD/ - (C. N. PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 22 . 01.2020 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, 8 I.T.A. NO. 6386 /MUM/201 8 TATA INVESTMENT CORPORATION LTD. MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI