DCIT 5(1), MUMBAI V. ABG KANDLA CONTAINER TERMINAL LTD, MUMBAI

ITA 6923/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2214 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DARSI SUMAN RATNAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI A BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 6923/MUM/2013 (ASSESSMENT YEAR:2010-11) DEPUTY COMMISSIONER OF INCOME-TAX, 5(1), MUMBAI APPELLANT VS. M/S. ABG KANDLA CONTAINER TERMIANL LTD., 5 TH FLOOR, BHUPATI CHAMBER, 13, MATHEW ROAD, OPP. OPERA HOUSE, MUMBAI - 400004 RESPONDENT PAN: AAFCA9007R /BY APPELLANT : DR. DARSI SUMAN RATNAM, D.R. /BY RESPONDENT : NONE /DATE OF HEARING :16.11.2015 /DATE OF PRONOUNCEMENT : 08.12.2015 ORDER PER RAJESH KUMAR, A.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-9, MUMBAI, DAT ED 23.09.2013 FOR A.Y. 2010-11 ON FOLLOWING GROUNDS: ITA NO.6923/MUM/13 A.Y. 10-11 [DCIT VS. ABG KANDLA CONTAINER TERMIANL LTD.] PAGE 2 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.53,97,038/- MADE U/S.14A READ WITH RULE 8D OF TH E INCOME TAX ACT, 1961.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S.14A READ WITH RUL E 8D OF THE INCOME TAX ACT WITHOUT APPRECIATING THE FACT THAT A SSESSEE DID NOT FURNISH ANY DETAILS WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT.? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN OBSERVING THAT THE PROV ISIONS OF RULE 8D WERE NOT APPLICABLE AS ASSESSEE DID NOT EARN ANY EXEMPT INCOME?. LD. CIT(A) FAILED TO APPRECIATE THAT DISA LLOWANCE UNDER SECTION 14A CAN BE MADE IRRESPECTIVE OF THE FACTS T O WHETHER THE ASSESSEE EARNED ANY EXEMPT INCOME OR NOT. 2. THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF AP PEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.53,97,03 8/- U/S.14A BY THE CIT(A) WITHOUT APPRECIATING THE FACT THAT AS SESSEE DID NOT FURNISH ANY DETAILS IN RESPECT OF EXPENSES U/S.14A. 2.1 ON THE APPOINTED DATE OF HEARING, NEITHER AUTHO RIZED REPRESENTATIVE OF ASSESSEE ATTENDED NOR ANY LETTER OF ADJOURNMENT WAS RECEIVED. WE, THEREFORE, DECIDING THE APPEAL O N MERIT AFTER HEARING THE LD. D.R. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 29.09.2010 DECLARING A LOSS OF RS.33,34,68,544/-. THE ASSESSEE IN ITS BALANCE SHE ET HAD SHOWN INVESTMENTS OF RS.107,94,07,693/- AS ON 31.03.2010 IN ITS SUBSIDIARY AND SAME INVESTMENT WAS AS ON 31.03.2009 MEANING THEREBY THAT NO NEW INVESTMENT WAS MADE DURING THE YEAR. ITA NO.6923/MUM/13 A.Y. 10-11 [DCIT VS. ABG KANDLA CONTAINER TERMIANL LTD.] PAGE 3 3.1 THE LD. A.O. WHILE FRAMING THE ASSESSMENT AT A LOSS OF RS.32,81,02,067/- MAD ADDITIONS INTER ALIA OF RS.53 ,97,038/- ON ACCOUNT OF DISALLOWANCE U/S.14A R.W.R. 8D ON THE GR OUND THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. V S. DCIT, THE HONBLE BOMBAY HIGH COURT HAD HELD THAT DIVIDEND IN COME WAS TO BE CONSIDERED FOR THE PURPOSE OF SECTION 14A AND ALSO THE FACT THAT TAX FREE INVESTMENT MADE BY THE ASSESSEE OUT O F OWN FUNDS DID NOT MEAN THAT THERE WAS NO EXPENDITURE INCURRED TO EARN TAX FREE INCOME AND THEREFORE, SECTION 14A WAS APPLICAB LE. THE DISALLOWANCE WAS WORKED OUT EQUAL TO % OF THE AVE RAGE INVESTMENTS AS PER THE PROVISION OF SECTION 14A RUL E 8D(III). 4. THE LD. CIT(A) DELETED THE ADDITION BY HOLDING A S UNDER: 5.1 I HAVE CAREFULLY AND DISPASSIONATELY CONSIDERE D THE FACTS AND CIRCUMSTANCES OF THE CASE, STATEMENT OF FACTS, RELE VANT ASSESSMENT ORDER, WRITTEN SUBMISSION, RELIED UPON CASE LAWS AN D THE ARGUMENTS MADE BY THE LAR BEFORE THE UNDERSIGNED. AFTER CONS IDERING THE RIVAL SUBMISSION I DO AGREE WITH THE CONTENTION OF THE AP PELLANT THAT DURING THE YEAR UNDER CONSIDERATION NEITHER THE APPELLANT HAD EARNED ANY EXEMPT INCOME NOR THE A.O. HAS POINTED OUT ANY POSS IBILITY OF ANY DIRECT OR INDIRECT EXPENDITURE WHICH COULD BE RELATED IN C ONNECTION WITH THE INVESTMENT OF THE APPELLANT IN ITS PARENT COMPANY, THEREFORE, UNDER THESE CIRCUMSTANCES THERE APPEARS NO JUSTIFICATION AT ALL FOR INVOKING THE PROVISIONS OF SECTION 14A / RULE 8D. THE A.O. APPE ARS TO HAVE MISUNDERSTOOD THE PRINCIPLE LAID DOWN BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF M/S. GODREJ & BOYCE MFG. CO. L TD. (SUPRA), WHICH DOES NOT MAKE IT COMPULSORY TO APPLY RULE 8D IN EAC H AND EVERY CASE, SPECIALLY IN THE CASES LIKE THE INSTANT CASE, WHERE NEITHER THERE IS ANY EXEMPT INCOME NOR THE APPELLANT HAS INCURRED ANY EX PENDITURE RELATABLE TO SUCH EXEMPT INCOME. UNDER THESE CIRCUMSTANCES, THE DISALLOWANCES, THE DISALLOWANCE MECHANICALLY MADE BY THE A.O. CANN OT BE UPHELD. THE SAME IS DIRECTED TO BE DELETED. 5. LD. D.R. RELIED ON THE ORDER OF A.O. AND SUBMITT ED BEFORE US THAT THE SAME MAY KINDLY BE RESTORED. ITA NO.6923/MUM/13 A.Y. 10-11 [DCIT VS. ABG KANDLA CONTAINER TERMIANL LTD.] PAGE 4 6. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATE RIAL ON RECORD. WE FIND FROM THE ORDERS OF CIT(A), A.O. AN D PAPER BOOK FILED THAT THE ASSESSEE HAD MADE HUGE INVESTMENTS T O THE TUNE OF RS.107,94,07,693/- IN THE FELLOW SUBSIDIARY COMPANY AS A HOLDING COMPANY AND DURING THE YEAR DID NOT RECEIVE ANY INCOME BY WAY OF DIVIDEND. THE LD. CIT(A) HAD GIVEN A CLE AR FINDING THAT THE ASSESSEE NEITHER EARNED ANY EXEMPT INCOME NOR A NY EXPENDITURE OF DIRECT OR INDIRECT NATURE WERE INCUR RED IN RELATION TO THE INVESTMENT MADE IN THE SUBSIDIARY COMPANY. IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT ( 2010) 328 ITR 81, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSMENT YEAR 2008- 09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAD TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTIO N 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DET ERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. IN OUR CONSIDERED VIEW, THE CIT(A) HAS RIGHTLY CAME TO THE CONCLUSION THAT THER E IS NO EXEMPT INCOME NOR ANY EXPENDITURE WAS INCURRED RELATING TO EXEMPT INCOME AND RIGHTLY INTEROPERATED THE RATIO LAID DOW N IN THE ABOVE DECISION BY THE HONBLE BOMBAY HIGH COURT. THE HON BLE HIGH COURT HELD THAT WHEN THERE IS AN EXEMPT INCOME WHIC H DOES NOT ITA NO.6923/MUM/13 A.Y. 10-11 [DCIT VS. ABG KANDLA CONTAINER TERMIANL LTD.] PAGE 5 FORM PART OF THE TOTAL INCOME, THEN THE A.O. HAS TO APPLY THE PROVISION OF SECTION 14A RULE 8D. IN THE INSTANT C ASE, THERE WAS NO INCOME DURING THE YEAR NOR ANY EXPENDITURE WAS I NCURRED IN RELATION TO THE INVESTMENTS MADE IN THE EARLIER YEA R. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND AFFIRM THE SAME BY DISMISSING THE APPEAL OF THE REVENUE. 7. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 8 TH DAY OF DECEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED 08/12/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) ,-./00'(1 '( 1 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / 1 / % 1 '( 1 %&