DCIT CIR. 6(3)(1), MUMBAI V. INSTANT TRADERS PVT. LTD., MUMBAI

ITA 6527/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6896 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI G S PANNU, ACCOUNTANT MEMBER & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NOS.6527/MUM/2016 ASSESSMENT YEAR: 2012-13 DY CIT CENTRAL CIRCLE 6(3)(1), MUMBAI VS. INSTANT TRADERS PVT. LTD., KRISHNA HOUSE, RAGHUVANSHI MILL COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL (W), MUMBAI 400 013 PAN AAACI9114Q (APPELLANT) (RESPONDENT) ITA NOS.7364/MUM/2016 ASSESSMENT YEAR: 2012-13 INSTANT TRADERS PVT. LTD., MUMBAI 400 013 PAN AAACI9114Q VS. DY CIT CENTRAL CIRCLE 6(3)(1), MUMBAI (APPELLANT) (RESPONDENT) REVENUE BY : MS. ARJU GARODIA (DR) ASSESSEE BY : SHRI BHUPENDRA SHAH (AR) DATE OF HEARING : 20.06.2018 DATE OF PRONOUNCEMEN T : 20.06.2018 O R D E R PER G S PANNU, ACCOUNTANT MEMBER THESE ARE CROSS-APPEALS, DIRECTED AGAINST THE ORDE R OF THE CIT(A)-12, MUMBAI, DATED 01.08.2016, WHICH IN TURN HAS ARISEN OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO A.Y. 2012-13. SINCE THEY INVOLVE CERTAIN COMMON ISSUES, THEY HAVE BEEN CLUBBED & HEARD TOGETHER AND CONSOLI DATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 2 2. IN THE ASSESSEES APPEAL (ITA NO.7364/MUM/2016), FOLLOWING THREE SUBSTANTIVE GROUNDS OF APPEAL HAVE BEEN RAISED: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE ACTION OF THE LD. A.O. IN INVOKING PROVISIONS OF SECTION 7 9 OF IT. ACT. 1961 AND FURTHER ERRED IN DENYING THE EARN FORWARD OF LOSSES OF RS. 2,74,33,786/- PERTAINING TO ASSESSMENT YEAR 2006-07 TO 2011-12. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING ADDITION OF RS. 53,40,642/- U/S 14A OF IT. ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING ADDITION OF RS. 11,52,959/- ON ACCOUNT OF COMMON AMENITIES A ND MAINTENANCE EXPENSES. 3. IN SO FAR AS FACTS RELATING TO GROUND NO.1 ARE C ONCERNED, A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT DURING THE YEAR UNDER CONSIDERATION THERE HAS BEEN A CHANGE OF SHARE HOLDING PATTERN OF THE ASSESSEE COM PANY AND THE ASSESSING OFFICER INVOKED SECTION 79 OF THE ACT. BROADLY SPEAKING, S ECTION 79 OF THE ACT AS IT PREVAILED FOR THE YEAR UNDER CONSIDERATION PROHIBIT S CARRY FORWARD AND SET OFF OF LOSS INCURRED IN ANY YEAR PRIOR TO THE PREVIOUS YEAR IN WHICH THE CHANGE IN SHARE HOLDING HAS TAKEN PLACE IN CASE OF A CORPORATE ASSESSEE TO THE EXTENT SPECIFIED IN THE SECTION. ONLY ASPECT THAT IS SOUGHT TO BE EMPHASIZ ED BEFORE US BY THE APPELLANT IS THAT SECTION 79 OF THE ACT CAN BE INVOKED ONLY IN T HE YEAR WHEN THE ASSESSEE SEEKS CARRY FORWARD AND SET OFF OF A LOSS. IN THIS CONTE XT, THE LEARNED REPRESENTATIVE EXPLAINED THAT HAVING REGARD TO THE TOTAL INCOME DE TERMINED BY THE ASSESSING OFFICER IN ORDER PASSED U/S. 143(3) READ WITH AN OR DER PASSED U/S. 154 OF THE ACT, DATED 12.06.2015, THE CURRENT YEAR INCOME FROM BUSI NESS HAS BEEN ASSESSED AT A LOSS AND, NO SET OFF HAS BEEN CLAIMED FOR BROUGHT F ORWARD LOSS. IT WAS THEREFORE, CONTENDED THAT THE INSTANT YEAR IS NOT A CORRECT YE AR OF DETERMINATION OF THE IMPACT OF SECTION 79 OF THE ACT IN AS MUCH AS THE SAME OUG HT TO BE DEALT WITH IN THE ASSESSMENT OF THE ASSESSMENT YEAR IN WHICH THE ASSE SSEE ACTUALLY CLAIMS THE SET-OFF OF BROUGHT FORWARD LOSS IN THE SUBSEQUENT ASSESSMEN T YEAR AND NOT IN THE IMPUGNED ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 3 ASSESSMENT YEAR. THEREFORE, AS PER THE ASSESSEE, I N THE IMPUGNED ASSESSMENT YEAR THE ASSESSING OFFICER COULD NOT HAVE CONSIDERED AND DIRECTED FOR DENIAL OF CARRY FORWARD OF SET OFF IN FUTURE YEARS. FOR THE SAID P ROPOSITION, LEARNED REPRESENTATIVE REFERRED TO THE DECISION OF CO-ORDINATE BENCH DATED 07.09.2017 IN THE CASE OF KHAJRANA GANESH PROPERTIES PRIVATE LIMITED (ITA NO. 2629/MUM/2014 FOR A.Y. 2010- 11), WHEREIN BY RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MANMOHAN DAS (DECEASED) 59 ITR 699, SUCH PLEA OF TH E ASSESSEE HAS BEEN UPHELD. 4. ON THE OTHER HAND, ON THIS ASPECT, THE LEARNED D R HAS MERELY REITERATED THE STAND OF THE LOWER AUTHORITIES. 5. AFTER HAVING CAREFULLY CONSIDERED THE RIVAL SUBM ISSIONS, WE FIND THAT THE LIMITED PLEA OF THE ASSESSEE BEFORE US IS TO THE EF FECT THAT THE DISPUTE REGARDING THE DENIAL OF THE CARRY FORWARD OF LOSS ON THE BASIS OF PROHIBITION CONTAINED IN SECTION 79 OF THE ACT BE CONSIDERED BY THE ASSESSING OFFICER I N ACCORDANCE WITH LAW IN THE SUBSEQUENT YEAR WHERE THE ASSESSEE CLAIMS ACTUAL SE T OFF. AN IDENTICAL SITUATION HAS BEEN CONSIDERED BY OUR CO-ORDINATE BENCH IN THE CAS E OF KHAJRANA GANESH PROPERTIES PRIVATE LIMITED (SUPRA), WHEREIN ONE OF US IS PART OF THE BENCH. THE TRIBUNAL, BY RELYING THE JUDGMENT OF HONBLE SUPREM E COURT IN THE CASE OF MANMOHAN DAS (DECEASED) (SUPRA), NOTED THAT WHETHER OR NOT LOSS IN ANY YEAR CAN BE CARRIED FORWARD AND SET OFF IN THE SUBSEQUENT YE AR IS LIABLE TO BE DETERMINED BY THE ASSESSING OFFICER WHO DEALS WITH THE ASSESSMENT OF SUCH SUBSEQUENT YEAR. IN FACT, THE HONBLE SUPREME COURT SPECIFICALLY NOTED THAT THE DECISION RECORDED BY THE ASSESSING OFFICER, WHO COMPUTES THE LOSS IN PRECEDI NG YEAR THAT LOSS CANNOT BE SET OFF IN THE SUBSEQUENT YEAR IS NOT BINDING ON THE AS SESSEE IN THE SUBSEQUENT ACTUAL YEAR OF SET OFF. CONSIDERED IN THIS LIGHT, THE CO- ORDINATE BENCH IN THE CASE OF KHAJRANA GANESH PROPERTIES PRIVATE LIMITED (SUPRA) CAME TO CONCLUDE THAT IT IS ONLY THE ASSESSING OFFICER DEALING WITH THE ASSESSMENT O F THE ASSESSMENT YEAR WHERE THE ASSESSEE HAS CLAIMED SET OFF OF THE LOSS IS COMPETE NT AND NOT THE ASSESSING OFFICER OF THE EARLIER YEAR. THE RELEVANT DECISION OF THE CO-ORDINATE BENCH IS AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND FIND THAT THE ISSUE BEFORE US CAN BE DISPOSED OFF IN THE LIGHT OF THE POINT OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF MA NMOHAN DAS ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 4 (DECEASED) (SUPRA). AS PER THE HON'BLE SUPREME COUR T, WHETHER THE LOSS IN ANY YEAR MAY BE CARRIED FORWARD TO THE FOLLOWING YEAR AND SET-OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR IS LIABLE TO BE DETERMINED BY THE ASSESSING OFFICER WHO DEALS WITH THE ASSESSMENT OF SUCH SUBSEQUENT YEAR. THE HON'BLE SUPREME COURT FURTHER NOTED THAT A DECISION RECORDED BY THE ASSESSING OFFICER WHO COMPUTES THE LOSS IN A PREVIOUS YEAR THAT THE LOSS CANNOT BE SET-OFF AGAINST THE INCOME OF TH E SUBSEQUENT YEAR IS NOT BINDING ON THE ASSESSEE IN THE SUBSEQUENT ACTUA L YEAR OF SET-OFF. CONSIDERED IN THIS LIGHT, IN OUR VIEW, THE ASSESSIN G OFFICER IN THE INSTANT YEAR HAD NO JURISDICTION TO GIVE A FINDING THAT THE LOSS OF RS.7,96,21,402/- CANNOT BE CARRIED FORWARD AND SET-OFF AGAINST THE I NCOME OF THE SUBSEQUENT YEAR. THEREFORE, SUCH OBSERVATIONS/DIREC TIONS OF THE ASSESSING OFFICER, IN OUR VIEW, ARE BEREFT OF JURIS DICTION AND ARE ACCORDINGLY DIRECTED TO BE REMOVED. SO HOWEVER, OUR AFORESAID DECISION SHOULD NOT BE UNDERSTOOD AS ANY REFLECTION ON THE M ERIT OR OTHERWISE OF INVOKING OF SEC. 79 OF THE ACT PROHIBITING CARRY FO RWARD AND SET-OFF OF LOSS IN CERTAIN SITUATIONS. THE APPLICATION OF SEC. 79 O F THE ACT SHALL BE OPEN TO BE CONSIDERED BY THE ASSESSING OFFICER IN THE SU BSEQUENT YEAR WHILE EVALUATING THE CLAIM OF THE ASSESSEE FOR SET-OFF OF THE IMPUGNED BUSINESS LOSS. AS A CONSEQUENCE OF OUR AFORESAID DISCUSSION, WE SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO REMOVE THE DIRECTIONS RELATING TO DENIAL OF CARRY FORWARD AND SET-OFF OF LOSS OF RS.7,96,21,402/-. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS FOR STATIST ICAL PURPOSES. 6. CONSIDERING IN THE AFORESAID LIGHT, IN OUR VIEW, SO FAR AS THE INSTANT ASSESSMENT YEAR IS CONCERNED, THE ASSESSING OFFICER IS NOT COMPETENT TO GIVE A FINDING THAT THE LOSS CANNOT BE CARRY FORWARD AND S ET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. ACCORDINGLY, THE MATTER IS REMAND ED BACK TO THE FILE OF THE ASSESSING OFFICER TO REMOVE THE DIRECTION RELATING TO DENIAL OF CARRY FORWARD AND SET- OFF OF LOSS. HOWEVER, OUR DIRECTION SHOULD NOT BE INTERPRETED TO BE ANY REFLECTION ON THE MERITS OF INVOKING SECTION 79 OF THE ACT, WHICH PROHIBITS CARRY FORWARD AND SET OFF OF LOSS IN SPECIFIED SITUATIONS. THE SAME SHAL L BE OPEN TO BE CONSIDERED BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR OF ACTUAL SET-OFF WHILE EVALUATING THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE IMPUGNED BUSINES S LOSS. 7. AS A CONSEQUENCE OF OUR AFORESAID DISCUSSION, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO EXPUNGE THE DIRECTIONS SO FAR AS IT RELATES TO DENIAL OF CARRY FORWARD AND SET OFF OF LOSS. TH US, ON THIS ASPECT THE ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES ONLY. ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 5 8. IN SO FAR AS GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS CONCERNED, THE SAME ARISES FROM A DISALLOWANCE MADE BY THE ASSESSI NG OFFICER U/S. 14A OF THE ACT. NOTABLY, IN THE CROSS-APPEAL FILED BY THE REVENUE T HE ONLY ISSUE RAISED IS WITH REGARD TO THE DISALLOWANCE DELETED BY THE CIT(A) WH ICH WAS MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT. SINCE THE CROSS-GROUN DS RELATE TO THE SAME ISSUE THEY ARE BEING TAKEN UP TOGETHER. 9. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT T HE ASSESSING OFFICER DISALLOWED ` 53,40,642/- U/S. 14A OF THE ACT BY APPLYING RULE 8 D(2) OF THE RULES. THE DISALLOWANCE COMPRISED OF ` 48,40,642/- OUT OF THE INTEREST EXPENDITURE AS PER RULE 8D(2)(II) OF THE RULES AND ` 5 LACS OUT OF ADMINISTRATIVE EXPENDITURE AS PER RULE 8D(2)(III) OF THE RULES THEREBY TOTALLING TO ` 53,40,642/-. BEFORE THE CIT(A) ASSESSEE RAISED VARIED SUBMISSIONS, WHICH HAVE BEEN NOTED IN PARA 5 OF HIS ORDER AND ONE PERTINENT POINT RAISED WAS THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS NOT EARNED ANY TAX FREE INCOME AND, TH EREFORE, NO DISALLOWANCE U/S. 14A OF THE ACT WAS MERITED. IN THIS CONTEXT, WE FI ND THAT BEFORE THE ASSESSING OFFICER ALSO, ASSESSEE HAD ASSERTED THAT IT HAS NEI THER EARNED ANY TAX FEE INCOME AND NOR DEBITED ANY EXPENDITURE RELATING TO EQUITY INVESTMENT OF ` 10,00,00,030/- MADE IN THE SHARES OF GINGER ENTERPRISES P. LTD. W E FIND THAT THE CIT(A) HAS DETERMINED THE SAID GROUND AS UNDER: 9.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. IT IS SEEN THAT APPEL LANT HAS NOT RECEIVED ANY TAX FREE INCOME AND THIS FACT IS NOT DISPUTED B Y THE AO. THE AO NOTED THAT THE APPELLANT SUO MOTO DISALLOWED THE EX PENDITURE. HENCE, I FIND FORCE IN THE SUBMISSION OF THE APPELLANT. THE REFORE, AO IS DIRECTED TO RESTRICT THE DISALLOWANCE MADE SUO MOTO BY THE APPE LLANT. THE GROUND OF APPEAL N.3 IS PARTLY ALLOWED. NOTABLY, AS PER THE CIT(A) IN THE ABSENCE OF THE AS SESSEE HAVING RECEIVED ANY EXEMPT INCOME, THE DISALLOWANCE U/S. 14A WAS NOT ME RITED EXCEPT TO THE EXTENT OF AMOUNT SUO MOTO DISALLOWED BY THE ASSESSEE. AGAINS T SUCH A DECISION, THE ASSESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US. 10. IN OUR VIEW SO FAR AS THE DECISION OF THE CIT(A ) IN PRINCIPLE IS CONCERNED, THE SAME IS JUSTIFIED IN VIEW OF THE DIRECT DECISION OF THE HONBLE DELHI HIGH COURT IN THE ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 6 CASE OF CHEMINVEST LIMITED VS. CIT378 ITR 33. WE A LSO FIND NO ERROR ON THE PART OF THE CIT(A) IN DIRECTING THE AO TO RETAIN THE SUO MO TO DISALLOWANCE MADE BY THE ASSESSEE IN THIS REGARD IF ANY. THEREFORE, IN OUR VIEW, THE GROUND RAISED BY THE ASSESSEE AS WELL AS THE REVENUE IS LIABLE TO BE DIS MISSED. WE HOLD SO. 11. THE LAST GROUND IN THE APPEAL OF THE ASSESSEE I S WITH REGARD TO AN ADDITION OF ` 11,52,959/- WHICH HAS BEEN EARNED BY THE ASSESSEE ON ACCOUNT OF PROVIDING COMMON AMENITIES AND MAINTENANCE CHARGES FROM THE T ENANTS. IT WAS NOTED THAT APART FROM RENTALS THE ASSESSEE WAS RECOVERING AMOU NT ON ACCOUNT OF AMENITIES AND MAINTENANCE CHARGES FROM THE TENANTS, WHO WERE GIVE N HOUSE PROPERTY ON RENT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS I NCURRING EXPENDITURE ON MAINTENANCE OF THE PROPERTY UNDER VARIOUS HEADS OF WATER CHARGES, CLEANING CHARGES, ELECTRICITY CHARGES, SECURITY CHARGES, REP AIR CHARGES ETC., AMOUNTING TO ` 11,52,959/- WHICH WAS NET OFF RECOVERIES MADE FROM THE TENANTS. THE ASSESSING OFFICER DISALLOWED SUCH EXPENDITURE NOTICING THAT W HILE COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY THE STATUTORY ALL OWANCE OF 30% ON ACCOUNT OF REPAIRS ETC., HAS BEEN ALLOWED. THIS POSITION HAS BEEN AFFIRMED BY THE CIT(A) ALSO AND NOT BEING SATISFIED THE ASSESSEE IS IN APPEAL B EFORE US. 12. BEFORE US, THE SHORT POINT RAISED BY THE ASSESS EE IS BASED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SIR SOBHA SINGH & SON (P.) LTD. 41 TAXMANN.COM 378, WHICH IS TO THE EFFECT THAT THE AN NUAL LETTING VALUE (ALV) OF A PROPERTY WOULD NOT INCLUDE THE CONSIDERATION OF OTH ER AMENITIES LIKE WATCHMAN, SWEEPERS, GARDENERS, ETC., WHICH HAS BEEN PROVIDED BY THE OWNER AS PER SEPARATE AGREEMENT WITH THE TENANT. AT THE TIME OF HEARING, IT WAS PUT ACROSS BEFORE THE LEARNED REPRESENTATIVE TO ESTABLISH THAT THE IMPUGN ED RECEIPTS BY WAY OF PROVISION OF AMENITIES, ETC. WAS CONTRACTED WITH THE RESPECTI VE TENANTS BY SEPARATE AGREEMENTS. THERE WAS NO MATERIAL ON RECORD TO EST ABLISH THE SAME AND, THEREFORE, FACTUALLY SPEAKING THE AMOUNTS RECEIVED BY THE ASSE SSEE TOWARDS SUCH AMENITIES IS TO BE TAKEN AS A PART OF RENTAL ARRANGEMENT. THUS, THE RATIO OF THE DECISION OF DELHI BENCH OF THE TRIBUNAL, IN THE CASE OF SIR SOBHA SIN GH & SON (P.) LTD (SUPRA), IS NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. IN OUR VIEW, THE DISALLOWANCE MADE BY ITA NOS.6527 & 7364/MUM/2016 INSTANT TRADERS PVT. LTD. 7 THE ASSESSING OFFICER HAS BEEN RIGHTLY SUSTAINED BY THE CIT(A) WHICH WE HEREBY CONFIRM. THUS, ON THIS ASPECT THE ASSESSEE FAILS. 13. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT AT THE CONCLUSION OF HEARING IN THE PRESENCE OF BOTH THE PARTIES TODAY I .E. 20 TH JUNE, 2018. SD/- SD/- (PAWAN SINGH) (G S PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 20 TH JUNE, 2018. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T , MUMBAI. 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI