Dy. CIT-1(1), Indore V. M/s. Brilliant Estate Ltd., Indore

ITA 652/Ind/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6480 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S MANTRI
• Assessee Lawyers: SHALINI MEHTA A RS; AJAY TULSIYAN KAPIL SHAH
• Keywords: Business expenditure; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 142(1); 14A; 143(2); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE RAJPAL YADAV, VICE PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA NO.652/IND/2019 ASSESSMENT YEAR 2014-15 DCIT-1(1) : REVENUE INDORE V/S M/S BRILLIANT ESTATE LTD, BRILLIANT SOLITARE, SCHEME NO.78, INDORE : RESPONDENT PAN AAACB7115L REVENUE BY SHRI S.S. MANTRI, CIT ASSESSEE BY S/SHRI AJAY TULSIYAN, KAPIL SHAH & MISS SHALINI MEHTA, ARS DATE OF HEARING 24.05.2021 DATE OF PRONOUNCEMENT 29.06.2021 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE O F THE REVENUE FOR ASSESSMENT YEAR 2014-15 IS DIRECTED A GAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I (IN SHORT LD. CIT], INDORE DATED 08.03.2019 WHICH IS ARISIN G OUT OF THE BRILLIANT ESTATE LTD ITA NO.652/IND/2019 2 ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHO RT THE ACT) DATED 14.12.2016 FRAMED BY DCIT-1(1), INDORE. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETIN G THE DISALLOWANCE MADE BY THE AO OF RS. 3,35,38,350/- U/ S 14A OF INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOM E TAX RULES, 1962? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETIN G THE DISALLOWANCE OF RS.3,35,38,350/- U/S 14A OF THE IN COME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES , 1962 BY NOT TAKING INTO ACCOUNT THE DECISION OF THE HONBLE SUPREME COURT IN M/S MAXOPP INVESTMENTS LTD VS. CIT 402 ITR 640 (SC) ? THE APPELLANT, CARVES LEAVE TO ADD OR TO DEDUCT FRO M OR OTHERWISE AMEND THE ABOVE GROUNDS OF APPEAL.. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RE CORDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE AND CONSTRUCTION. ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.2014 DECLARING TOTAL INCO ME AT NIL AND CURRENT YEAR LOSS OF RS.5,02,86,279/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U /S 143(2) OF THE ACT DATED 31.08.2015 WAS DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCE EDINGS QUERY LETTER U/S 142(1) OF THE ACT WAS ALSO ISSUED. DETAILED BRILLIANT ESTATE LTD ITA NO.652/IND/2019 3 SUBMISSIONS WERE FILED BY THE ASSESSEE. LD. ASSESSI NG OFFICER COMPLETED THE ASSESSMENT AFTER MAKING VARIO US ADDITIONS TOTALLING TO RS.3,39,03,281/- WHICH ALSO INCLUDED DISALLOWANCE U/S 14A OF THE ACT AT RS.3,35,38,350/- . INCOME ASSESSED ON BOOK PROFIT AT RS. 6,43,95,032/- . 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CI T(A) AND PARTLY SUCCEEDED. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING SOLE ISSUE REGARDING DELETION OF DISALLOWAN CE U/S 14A OF THE INCOME TAX ACT R.W.R.T. RULE 8D OF THE I .T. RULES AT RS.3,35,38,350/- BY LD. CIT(A). 6. LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING THE ORDER OF THE LD. ASSESSING OF FICER. 7. PER CONTRA LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ISSUES RAISED IN THE INSTANT APPEAL IS SQUARELY COVERED BY THE DECISION OF HONBLE INDORE BENCH IN ASSESSEE S OWN CASE FOR A.Y. 2013-14 IN ITANO.393/IND/2017 DATED 30.05.2019. IT WAS ALSO SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT EARNED ANY E XEMPT INCOME DURING THE YEAR AND THUS IN VIEW OF JUDGMENT OF BRILLIANT ESTATE LTD ITA NO.652/IND/2019 4 HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. CIT (2015) 378 ITR 033 , NO DISALLOWANCE U/S 14A OF THE ACT WAS CALLED FOR. 8. RELIANCE WAS ALSO PLACED ON FOLLOWING DECISIONS: 1. COPY OF ORDER OF THE HON'BLE ALLAHABAD HIGH COUR T IN THE CASE OF SHIVAM MOTORS PRIVATE LIMITED. (2015) 230 TAXMAN 0063 (ALL) 2. COPY OF ORDER OF THE HON'BLE DELHI HIGH COURT IN T HE CASE OF HOLCIM INDIA PRIVATE LIMITED. (2014) 90 CCH 008 1 (DEL HC) 3. COPY OF ORDER OF THE HON'BLE PUNJAB AND HARYANA HI GH COURT IN THE CASE OF LAKHANI MARKETING INCL. VS. C IT (ITA NO. 970/2008) 4. COPY OF ORDER OF THE HON'BLE PUNJAB AND HARYANA HI GH COURT IN THE CASE OF HERO CYCLES LIMITED VS. CIT ( 2010) 323 ITR 518. 5. COPY OF ORDER OF THE HON'BLE PUNJAB AND HARYANA HI GH COURT IN THE CASE OF WINSOME TEXTILE INDUSTRIES L IMITED VS. CIT (2009) 319 ITR 204. 6. COPY OF ORDER OF HON'BLE ITAT INDORE BENCH IN T HE CASE OF DCIT-1(1), INDORE VS. M/ S BRILLIANT ESTATE P VT. LTD IN DEPARTMENTAL APPEAL ITA NO. 393/IND/2017 FOR AY 2013-2014. 7. COPY OF THE DECISION OF HON'BLE IT AT DELHI B ENCH IN THE CASE OF AMAR PACKAGING PVT. LTD. VS. CIT (ITANO.6291/DEL/2013 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND ALSO CAREFULLY GONE THROUGH JU DGMENTS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSE SSEE. SOLE BRILLIANT ESTATE LTD ITA NO.652/IND/2019 5 GRIEVANCE OF THE REVENUE CHALLENGING THE FINDING OF LD. CIT(A) IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF RS.3,35,38,350/- MADE BY THE LD. AO U/S 14A OF THE ACT R.W. RULE 8D OF I.T. RULES. 10. FROM PERUSAL OF THE AUDITED PROFIT AND LOSS ACC OUNT PLACED AT PAGES 16 TO 31 OF THE PAPER BOOK DATED 29 TH JULY 2020 AND MORE SPECIFICALLY NOTE NO. 14 & 15 (PAPER BOOK PAGE 27) PERTAINING TO REVENUE FROM OPERATIONS AND OTHER INC OME, WE FIND THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURI NG THE YEAR. THIS FACT REMAINS UNDISPUTED AT THE END OF LD . DR. 11. UNDER THESE GIVEN FACTS AND CIRCUMSTANCES WHERE NO EXEMPT INCOME HAS BEEN EARED BY THE ASSESSEE DURING THE YE AR, IN VIEW OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED (SUPRA), NO DISALLOWANCE U/S 14A WAS CALLED FOR. RELEVANT ABSTRACT OF THE JUDGMENT OF HONBLE D ELHI HIGH COURT IS REPRODUCED BELOW: 22. IN THE IMPUGNED ORDER, THE ITAT HAS REFERRED TO THE DECISION IN MAXOPP INVESTMENT LTD. (SUPRA) AND REMANDED THE MAT TER TO THE AO FOR RECONSIDERATION OF THE ISSUE AFRESH. THE ISSUE IN MAXOPP INVESTMENT LTD. (SUPRA)WAS WHETHER THE EXPENDITURE (INCLUDING INTEREST ON BORROWED FUNDS) IN RESPECT OF INVESTMENT IN SHAR ES OF OPERATING BRILLIANT ESTATE LTD ITA NO.652/IND/2019 6 COMPANIES FOR ACQUIRING AND RETAINING A CONTROLLING INTEREST THEREIN WAS DISALLOWABLE UNDER SECTION 14 A OF THE ACT. IN THE SAID CASE ADMITTEDLY THERE WAS DIVIDEND EARNED ON SUCH INVEST MENT. IN OTHER WORDS, IT WAS NOT A CASE, AS THE PRESENT, WHERE NO EXEMPT INCOME WAS EARNED IN THE YEAR IN QUESTION. CONSEQUENTLY, THE S AID DECISION WAS NOT RELEVANT AND DID NOT APPLY IN THE CONTEXT OF TH E ISSUE PROJECTED IN THE PRESENT CASE. 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBE FORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXP RESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE 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 INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 24. CONSEQUENTLY, THE IMPUGNED ORDER OF THE ITAT IS SET ASIDE AND THE APPEAL IS ALLOWED IN THE ABOVE TERMS. THIS COURT SH OULD NOT BE UNDERSTOOD TO HAVE EXPRESSED ANY OPINION ON THE ISS UE OF WHETHER FOR THE AY IN QUESTION THE INTEREST EXPENDITURE INCURRE D BY THE ASSESSEE WOULD BE ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 36 (1)(III) OF THE ACT. 12. WE FURTHER OBSERVE THAT THIS COORDINATE BENCH I N ASSESSEES OWN CASE FOR A.Y.2013-14 VIDE ITANO.393/IND/2017 DA TED 30.05.2019 HAS DECIDED VERY SAME ISSUE WHEREIN DISA LLOWANCE U/S 14A WAS MADE BUT THERE WAS NO EXEMPT INCOME EAR NED DURING THE YEAR. THIS TRIBUNAL CONFIRMED THE VIEW T AKEN BY THE LD. CIT(A), AND DISMISSED THE REVENUES APPEAL OBSE RVING AS FOLLOWS: BRILLIANT ESTATE LTD ITA NO.652/IND/2019 7 47. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE RE CORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISION R ELIED BY BOTH THE PARTIES. REVENUES SOLE GRIEVANCE IS AGAINST THE F INDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS.3,10,93,327/- MADE BY THE LD. A.O. WE FIND THAT THE SIMILAR ISSUE CAME UP BEFORE US FO R THE ASSESSMENT YEAR 2012-13 IN ASSESESES OWN CASE AND THE REVENUE S GROUND CHALLENGING THE DISALLOWANCE U/S 14A OF THE ACT WAS DISMISSED BY US BY DISTINGUISHING FACTS OF THE ASSESSEE WITH THE FA CT ADJUDICATED BY THE HONBLE APEX COURT IN THE CASE OF MAXOPP INVEST MENT LTD VS. CIT 101 CCH 0092 DATED 12.02.2018. RELEVANT EXTRACT OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-13 DEALING WITH THE ISSUE OF DISALLOWANCE U/S 14A OF T HE ACT IS REPRODUCED BELOW; 14. FROM GOING THROUGH THE ABOVE DISCUSSIONS, WE AR E SATISFIED WITH THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSE SSEE THAT THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MAXOP P INVESTMENT LTD (SUPRA) IS NOT APPLICABLE ON THE ASSESSEE AS THE FA CTS ARE DIFFERENT. SIMILARLY RELIANCE PLACED BY LD. DR ON THE DECISION OF I.T.A.T. AMRITSAR BENCH IS ALSO NOT APPLICABLE TO THE FACTS OF THE AS SESSEE. 15. FURTHER WE ARE OF THE CONSIDERED VIEW THAT DISA LLOWANCE U/S 14A OF THE ACT IS NOT CALLED FOR IN THE CASE OF THE ASSESSEE AS THERE IS NO DIVIDEND INCOME EARNED DURING THE YEAR AND THE A SSESSEES CASE IS SQUARELY COVERED IN THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S CORRTECH ENERGY (P) LTD (SUPRA) WHE REIN THE HONBLE HIGH COURT HAS HELD THAT WHERE THE ASSESSEE HAS NO T MADE ANY CLAIM FOR ANY EXEMPTION THEN IN SUCH SITUATION THE DISALL OWANCE U/S 14A OF THE ACT HAVE NO APPLICATION. 16. PERUSAL OF THE AUDITED BALANCE SHEET OF THE ASS ESSEE SHOWS THAT AS ON 31.03.2012 THE TOTAL OF THE SHARE CAPITAL AND RESERVE AND SURPLUS AT THE END OF THE YEAR STANDS AT RS.39,28,4 4,695/- AND AGAINST THESE INTEREST FREE FUNDS AVAILABLE WITH TH E ASSESSEE, THE AVERAGE VALUE OF INVESTMENT IS RS.29,83,62,600/-, WHICH MEANS THAT BRILLIANT ESTATE LTD ITA NO.652/IND/2019 8 THE AVERAGE INVESTMENTS ARE LESS THAN THE INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE. FURTHER THERE IS NO SPECIFIC SAT ISFACTION BY THE LD.A.O WHICH COULD PROVE THAT INTEREST BEARING FUND S HAVE BEEN APPLIED FOR THE INVESTMENTS IN GROUP CONCERNS FOR N ON BUSINESS PURPOSES. IN SUCH SITUATION JUDGMENT OF HONBLE HI GH COURT OF BOMBAY IN THE CASE OF CIT V/S RELIANCE UTILITIES & POWER LTD (SUPRA) IS ALSO APPLICABLE AND IS IN FAVOUR OF THE ASSESSEE, W HEREIN THE HONBLE HIGH COURT WHILE ADJUDICATING SIMILAR ISSUE HELD TH AT IF THERE ARE FUNDS AVAILABLE, BOTH INTEREST FREE AND OVER DRAFT OR LOANS TAKEN, THEN THE PRESUMPTION WOULD ARISE THAT THE INVESTMENTS WO ULD BE OUT OF THE INTEREST FREE FUND GENERATED BUT AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INV ESTMENTS. 17. SIMILAR VIEW WAS ALSO TAKEN BY HONBLE HIGH COU RT OF BOMBAY IN THE CASE OF CIT V/S HDFC BANK LTD (SUPRA) WHERE IN THE ASSESSEES CAPITAL, PROFIT, RESERVE SURPLUS AND CURRENT ACCOUN T DEPOSITS WERE HIGHER THAN THE INVESTMENT IN TAX FREE SECURITIES, THEN IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WO ULD BE OUT OF THE AVAILABLE INTEREST FREE FUNDS. 18. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE J UDGMENTS, DETAILED FINDING OF LD.CIT(A) AS WELL AS OUR DISCUS SIONS ABOVE ARE OF THE CONSIDERED VIEW THAT NO DISALLOWANCE U/S 14A W AS CALLED FOR BY THE LD.A.O AND THEREFORE WE FIND NO INFIRMITY IN TH E FINDING OF LD.CIT(A) DELETING THE DISALLOWANCE U/S 14A OF THE ACT AT RS.2,31,50,925/-. IN THE RESULT GROUND NO.1 OF TH E REVENUE STANDS DISMISSED. 48. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISIO N OF THE CO- ORDINATE BENCH AS WELL AS IN THE GIVEN FACTS AND CI RCUMSTANCES OF THE CASE ARE OF THE CONSIDERED VIEW THAT FIRSTLY THE AS SESSEE HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AN D RESERVE AND SURPLUS TO COVER UP VARIOUS INVESTMENTS MADE IN SUB SIDIARY AND ASSOCIATED COMPANIES AND SECONDLY THE ALLEGED INVES TMENTS IN SUBSIDIARY COMPANIES HAVE BEEN MADE FOR PROMOTING B USINESS AND TO BRILLIANT ESTATE LTD ITA NO.652/IND/2019 9 HAVE CONTROLLING INTEREST AND THE INCOME FROM INVES TMENTS HAVE BEEN DULY OFFERED TO TAX AND THEREFORE NO DISALLOWANCE U /S 14A OF THE ACT WAS CALLED FOR. ACCORDINGLY WE FIND NO REASON TO I NTERFERE IN THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS.3,10,93,327/-. ACCORDINGLY GROUND NO. 1 TO 3 OF REVENUE DULY STAND S DISMISSED. 13. WE, THEREFORE, RESPECTFULLY FOLLOWING THE JUDG MENT OF HONBLE DELHI HIGH COURT AND THE VIEW TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE, AND SIMILARITY OF FACTS AND ISSUES RAISED IN THE INSTANT APPEAL, ARE OF THE CON SIDERED VIEW THAT SINCE NO EXEMPT INCOME IS EARNED BY THE A SSESSEE DURING THE YEAR, DISALLOWANCE U/S 14A WAS UNCALLED FOR. WE, THUS, FIND NO INCONSISTENCY IN THE FINDING OF LD. C IT(A). ACCORDINGLY, BOTH THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IN I TA NO. 652/IND/2019 IS DISMISSED. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 29.06.2021. SD/- SD/- (RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT ME MBER / DATED : 29.06. 2021 PATEL/PS SMT. SARITA BAGDI ITA NO.06/IND/2020 10 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE