DCIT CENT. CIR. 4(2), CENT. RANGE - 4, MUMBAI V. SHOPPERS STOP LTD., MUMBAI

ITA 6549/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3522 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2014-2015
• Appeal Filed On: 09-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Presumptive income; Rule of consistency; Earning of tax free income; Wholly owned subsidiary; Commercial expediency; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 6549/MUM/2017 (ASSESSMENT YEAR 2014-15 ) ITA NO. 6550/MUM/2017 (ASSESSMENT YEAR 2013-14 ) DCIT CENTRAL CIRCLE- 4(2) ROOM NO. 1918, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 VS. M/S SHOPPERS STOP LTD. 5 TH FLOOR, UMANG TOWER, MINDSPACE, MALAD LINK ROAD, MALAD (WEST), MUMBAI- 64. PAN: AABCS4383A APPELLANT RESPONDE NT ITA NO. 6072/MUM/2017 (ASSESSMENT YEAR 2013-14 ) ITA NO. 6073/MUM/2017 (ASSESSMENT YEAR 2014-15 ) M/S SHOPPERS STOP LTD. 5 TH FLOOR, UMANG TOWER, MINDSPACE, MALAD LINK ROAD, MALAD (WEST), MUMBAI- 64. PAN: AABCS4383A VS. DCIT CENTRAL CIRCLE- 4(2) ROOM NO. 1918, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 APPELLANT RESPONDE NT APPELLANT BY : SHRI SMITI SAMANT (CIT-DR) RESPONDENT BY : MS. AARTI SATHE ADVOCATE DATE OF HEARING : 23.01.2020 DATE OF PRONOUNCEMEN T : 14.02.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS GROUP OF FOUR APPEALS, OUT OF WHICH TWO CROSS APPEAL FOR ASSESSMENT YEAR 2013-14 AND TWO CROSS APPEAL FOR AS SESSMENT YEAR 2014-15 ARE DIRECTED AGAINST THE SEPARATE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-52, MUMBAI [FOR SHORT THE LD. CIT(A)] BOTH DATED 13.01.2017. IN ALL APPEALS, THE PARTIES HAVE RAISED CERTAIN COMMON GROUNDS OF APPEAL, THEREFORE, ALL THE APPEAL S WERE CLUBBED, ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 2 HEARD AND ARE DECIDED BY COMMON ORDER. FOR APPRECIA TION OF FACT, THE APPEALS FOR ASSESSMENT YEAR 2013-14 ARE TREATED AS LEAD CASE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A), ERRED IN DIRECTING THE AO TO RESTRICT THE DISALLOWA NCE U/S 14A OF THE IT ACT TO RS. 90,83,000 AS AGAINST THE DISALLOWANCE OF RS. 11,52,51,328 MADE BY THE ASSESSING OFFICER.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LEI CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO RESTRI CT THE DISALLOWANCE U/S 14A OF THE IT ACT TO F 90,83,000 INSTEAD OF RS. 11, 52,51,3286 RELYING UPON THE DECISION IN THE CASE OF RELIANCE UTILITIES AND HDFC BANK EVEN THOUGH THE ASSESSEE COULD NOT SUBMIT THE FUND FLOW IN ORDER TO ESTABLISH AS TO HOW THE INVESTMENTS HAVE BEEN MADE FROM THE O WN SURPLUS FUNDS BECAUSE THE ASSESSEE HAS ALSO MADE INVESTMENTS IN V ARIOUS ASSETS OUT OF ITS AVAILABLE FUNDS?' 3.'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS. 2,86,37,549 BEING INCOME U/S 5 OF THE IT ACT.' 4. 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS. 2,86,37,549 ON THE BASIS OF RESOLUTION PASSED BY TH E BORROWER COMPANY ABOUT NON-PAYMENT OF INTEREST ON LOANS TAKEN BY IT? ' 5. 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN NOT TAKING THE COGNIZANCE OF TH E FACT THAT THE BORROWING COMPANY IS A 100% SUBSIDIARY OF THE ASSES SEE AND THE DECISION TO NOT CHARGE INTEREST ON ICD WAS NOT A PRUDENT COM MERCIAL DECISION WHICH IS NOT AT ARMS LENGTH?' 6. 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), WAS JUSTIFIED IN NOT FOLLOWING HIS PREDECES SOR'S DECISION AND DIRECTING THE AO TO DELETE THE ADDITION OF RS. 2,86 ,37,549 BEING INCOME U/S 5 OF THE IT ACT WHEREAS THE PREDECESSOR OF THE LD. CIT(A) HAD ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 3 CONFIRMED SUCH ADDITION IN THE ASSESSEE'S CASE ON T HE SAME ISSUE FOR A.Y. 2009-10 AND 2010-11.' 7. THE APPELLANT CRAVES TO LEAVE, TO ADD, TO AMEND AND/ OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 2. THE ASSESSEE IN ITS CROSS APPEAL FOR A.Y. 2013-14 H AS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED BOTH IN FACTS AND IN LAW IN SUSTAINING THE DI SALLOWANCE UNDER SECTION 14A R.W.R. 8D(2)(III) OF THE INCOME TAX ACT , 1961. 1.2. YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER , DELETE AND/OR MODIFY THE ABOVE GROUND OF APPEAL ON OR BEFORE THE FINAL D ATE OF HEARING OF THIS APPEAL PETITION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF RETAIL APPARELS AND NON-APPARELS. IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 THE ASSESSEE DECLARED INCOME OF RS. 52 .12 CRORE. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFIC ER WHILE PASSING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITIONS/DI SALLOWANCES UNDER SECTION 14A OF RS. 8,71,03,426/-, WHICH INCLUDES UN DER DISALLOWANCE RULE 8D(2)(II) OF RS. 7,25,44,418/- AND DISALLOWANC E UNDER RULE 8D(2)(III) OF RS. 1,53,79,008/-. THE ASSESSING OFF ICER ALSO MADE ADDITION UNDER SECTION 5 OF RS. 2,86,37,549/-. ON A PPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE UNDER SECTION 14A WAS REST RICTED TO RS. 46,78,600/- AND ADDITION UNDER SECTION 5 ON ACCOUNT OF PRESUMPTIVE INCOME WAS ALSO DELETED. AGGRIEVED BY THE ORDER OF LD. CIT(A), BOTH THE PARTIES HAVE FILED THEIR RESPECTIVE APPEAL BY R AISING THE GROUNDS OF APPEAL AS MENTIONED ABOVE. ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 4 ITA NO. 6072/MUM/2017 BY ASSESSEE FOR AY 2013-14 4. THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT FINANCIAL YEAR NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE. T HOUGH THE ASSESSEE MADE SUO MOTO DISALLOWANCE UNDER SECTION 1 4A OF RS. 8,20,000/-. ASSESSING OFFICER WHILE PASSING THE AS SESSMENT ORDER MADE DISALLOWANCE UNDER RULE 8D(2)(II) OF RS. 7,25, 44,418/- AND UNDER RULE 8D(2)(III) OF RS. 1,53,79,008/-. THE LD. AR OF THE ASSESSEE FURNISHED THE COPY OF FINANCIAL/BALANCE SHEET AND F UND FLOW STATEMENT FOR A.Y. 2013-14. THE LD. AR OF THE ASSESSEE ALSO F URNISHED A SUMMARY OF INTEREST FREE FUND CONSISTING OF SHARE C APITAL AND RESERVE AND SURPLUS AND THE INVESTMENT DURING THE RELEVANT FINANCIAL YEAR. THE LD. AR FURTHER SUBMITS THAT SINCE NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE, THEREFORE, NO DISALLOWANCE UNDER SECTION 14A R.W.R. 8D IS WARRANTED. THE LD. AR SUBMITS THAT ON SIMILAR GROUN D OF APPEAL IN ASSESSEES OWN CASE FOR A.Y. 2012-13 IN ITA NO. 524 6/MUM/2016, THE TRIBUNAL DIRECTED TO RESTRICT THE DISALLOWANCE TO THE VOLUNTARY DISALLOWANCE OFFERED BY ASSESSEE. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE AFTER GOING THROUGH THE FUND FLOW STATEMENT/BALANCE SHEET FOR A.Y. 2013-14 AND THE ORDER OF TRIBUNAL FOR A.Y. 2012-13 RELIED UPON THE ORDER OF ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE NO TED THAT THE ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 5 ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 1 4A OF RS. 8,79,23,426/-, ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS RESTRICTED TO RS. 46,78,600/-. BEFORE US, THE LD. A R OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT DURING THE RELEVANT PERIO D, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. WE HAVE NOTED THAT ON SIMILAR SET OF FACT IN ASSESSEES OWN CASE, THE CO-ORDINATE BENCH PASSED THE FOLLOWING ORDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SE EN THAT THE ASSESSEE HAS NO EXEMPT INCOME DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE HAS NOT MADE ANY INVEST MENT DURING THE YEAR UNDER CONSIDERATION. THERE IS NO DISPUTE THAT ALL I NVESTMENT HAS BEEN MADE IN THE SUBSIDIARIES COMPANIES AS STRATEGIC INVESTME NT SO AS TO GET CONTROLLING INTEREST IN SUCH SUBSIDIARIES. THE HON BLE DELHI HIGH COURT IN CASE OF CHEMINVESTMENT LTD. VS. CIT REPORTED IN 378 ITR 272 (DEL), HELD THAT, IF THERE IS NO DIVIDEND INCOME, THEN THERE CA NNOT BE ANY CORRESPONDENCE ALLOWANCE. WE HAVE NOTED THAT THE AS SESSEE HAS VOLUNTARY DISALLOWED RS. 13.10 LAKHS AS ADMINISTRATIVE EXPENS ES FOR INVESTMENT IN ITS ASSOCIATE COMPANIES/SUBSIDIARIES. THE ASSESSEE HAS PLACED ON RECORD FUND FLOW STATEMENT (PAGE 33 OF PB), WHICH CLEARLY SHOW THAT THE ASSESSEE HAS SUFFICIENT OWN INTEREST FREE FUND OF RS. 1,26,2 89.65/- LAKHS AS ON 31.03.2012 . THUS, IN OUR CONSIDERED VIEW THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE AS PER THE PROVISIONS OF SECTIO N 14A R.W. RULE 8D. FURTHER, WE HAVE NOTED THAT SIMILAR DISALLOWANCE WA S MADE IN AY 2008- 09, THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL AND THE CO-ORDINATE BENCH IN ITA NO. 1753/M/2012 PASSED THE FOLLOWING O RDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE HAD NOT CLAIMED AN Y DEDUCTION IN RESPECT OF EXEMPT INCOME NOR HAS IT CLAIMED ANY EXP ENDITURE AGAINST THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL IN COME. THUS, BOTH THE ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 6 BASIC INGREDIENTS FOR MAKING A DISALLOWANCE U/S.14A ARE MISSING. SECONDLY, THE FUND FLOW STATEMENT MADE AVAILABLE TO THE FAA, DURING THE APPELLATE PROCEEDINGS, CLEARLY SHOW THAT IT HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMENTS(PG-1 OF THE PB).THE FAA HAS ADM ITTED THAT FUNDS AVAILABLE TO THE ASSESSEE WERE MORE THAN THE INVEST MENTS MADE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN OUR OPI NION THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE AS PER THE PR OVISIONS OF SECTION 14A R.W.R 8D OF THE RULES. CONSIDERING ALL THESE FA CTORS WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE AO. HENCE, REVERSING HIS ORDER WE DECIDE THE EFFECT IVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 5. CONSIDERING THE FACTS OF THE CASE AND THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE, THE DISALLOWANCE MADE BY AO AND CONFIRMED BY LD. CIT(A) IS UNCALLED FOR AND THEREFORE, WE DIRECT THE AO TO RES TRICT THE DISALLOWANCE TO RS. 13.10 LAKHS, WHICH WAS VOLUNTARY DISALLOWED BY ASSESSEE. THUS, THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 7. CONSIDERING THE AFORESAID ORDER OF TRIBUNAL ON SIMI LAR SET OF FACT, WHEREIN NO VARIATION IS BROUGHT TO OUR NOTICE AND T HE FACT THAT NO EXEMPT INCOME IS EARNED BY THE ASSESSEE DURING THIS YEAR AS WELL, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RESTR ICT THE DISALLOWANCE SUO-MOTO OFFERED BY THE ASSESSEE AT RS. 8,20,000/-. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 6073/MUM/2017 BY ASSESSEE FOR A.Y. 2014-15 9. THE ASSESSEE HAS RAISED IDENTICAL GROUND OF APPEAL AS RAISED IN APPEAL FOR A.Y. 2013-14, WHICH WE HAVE ALLOWED. THEREFORE, FOLLOWING THE RULE OF CONSISTENCY, THE APPEAL FOR A.Y. 2014-15 IS ALLOWED WITH SIMILAR DIRECTION. TO MAKE IT MORE CLEAR THE ASSESS ING OFFICER DIRECTED ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 7 TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A TO S UO-MOTO DISALLOWANCE OF RS. 7,05,027/- OFFERED BY ASSESSEE. 10. IN THE RESULT, APPEAL OF A.Y. 2014-15 BY ASSESSEE I S ALSO ALLOWED. ITA NO. 6550/MUM/2017 BY REVENUE FOR A.Y. 2013-14 11. GROUND NO.1 & 2 RELATES TO DISALLOWANCE UNDER SECTI ON 14A. CONSIDERING THE FACT THAT WHILE DECIDING THE SIMILA R ISSUE IN ASSESSEES APPEAL FOR AY 2013-14, WE HAVE RESTRICTED THE DISAL LOWANCE TO THE SUO- MOTO DISALLOWANCE HOLDING THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THEREFORE, THESE GROUNDS OF APPEAL H AVE BECOME INFRUCTUOUS AND ARE DISMISSED AS SUCH. 12. GROUND NO. 3 TO 6 RELATES TO DELETING THE ADDITION UNDER SECTION 5. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSES SING OFFICER AND PRAYED THAT THE ORDER OF ASSESSING OFFICER MAY BE R ESTORES BY REVERSING THE ORDER OF LD CIT(A). 13. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A) AND WOULD SUBMITS THAT THESE GROUNDS OF APPE AL ARE ALSO COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES O WN CASE FOR EARLIER YEARS. 14. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDER OF LOWER AUTHORITIES. THE ASSESSI NG OFFICER MADE ADDITION ON ACCOUNT OF PRESUMPTIVE BASIS UNDER SECT ION 5 ON ADVANCES MADE BY ASSESSEE TO ITS SUBSIDIARIES. THE ASSESSING OFFICER COMPUTED ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 8 THE DISALLOWANCE/ADDITION OF RS. 2.86 CRORE. WE HA VE NOTED THAT THE ASSESSEE ADVANCED THE MONEY TO ITS SUBSIDIARY, WHIC H FALLS UNDER THE BUSINESS EXPEDIENCY. THEREFORE, IN THE PRESENT CASE THAT THE ASSESSEE ADVANCES TO ITS SUBSIDIARY FOR BUSINESS REQUIREMENT S, WHICH MAY HAVE IMPACT ON THE OBJECTIVES OF THE ASSESSEE FOR EARNIN G FUTURE REVENUE TO THE ASSESSEE. WHEN IT MADE IN RELATION TO ADVANCES. THOUGH, IT IS ANOTHER FACT THAT THE BUSINESS OF SUCH NATURE DID N OT MATERIALIZED IN POSITIVE OUTCOME AND THE SUBSIDIARY HAD TO CLOSE SU CH BUSINESS OPERATION. THE HONBLE SUPREME COURT IN S.A. BUILDE RS (288ITR 1 SC) HELD THAT W HETHER EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, YET IT IS ALLOWABLE AS A BUSI NESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. T HE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS MADE ADVANCES TO ITS SUBSIDIARY FOR BUSINESS EXPEDIENCY. THEREFORE, CONSIDERING THE DEC ISION OF HONBLE SUPREME COURT IN SA BUILDER (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). EVEN OTHERWISE THE LD. CIT(A) DELETED THE ENTIRE ADDITION BY FOLLOWING THE DECISION OF HI S PREDECESSOR IN APPEAL FOR A.Y. 2010-11 & 2012-13. 15. NO CONTRARY FACT OR LAW TO TAKE OTHER VIEW IS BROUG HT TO OUR NOTICE TO TAKE OTHER VIEW, NOR ANY VARIATIONS IN FACTS ARE BR OUGHT TO OUR NOTICE. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENUE. ITA NOS. 6549, 6550, 6072 & 6073 MUM 2017 M/S SHOPPERS STOP LTD. 9 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 6549/MUM/2017 BY REVENUE FOR A.Y. 2014-15 17. THE REVENUE HAS RAISED IDENTICAL GROUND OF APPEAL A S RAISED IN APPEAL FOR A.Y. 2013-14, WHICH WE HAVE DISMISSED. THEREFOR E, FOLLOWING THE RULE OF CONSISTENCY, THE APPEAL FOR A.Y. 2014-15 IS DISMISSED WITH SIMILAR DIRECTION. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/02/2020. SD/- SD/- S.RIFAUR RAHMAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 14.02.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI