DCIT CEN CIR 3(3) CEN RN.3, MUMBAI V. ORICON ENTERPRISES LTD, MUMBAI

ITA 693/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5824 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 05-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.693/MUM/2018 ASSESSMENT YEAR: 2013-14 DCIT, CENTRAL CIRCLE-3(3) ROOM NO. 1923 AIR INDIA BUILDING, 19 TH FLOOR NARIMAN POINT MUMBAI-400 021 VS. M/SORICON ENTERPRISES LTD. 1076, DR. E MOSES ROAD WORLI MUMBAI-400 018 PAN AAACO0480F (REVENUE) (ASSESSEE) REVENUE BY : SHRI ABI RAMA KARTIKEYAN ASSESSEE BY : SHRI SUNIL NAHTA DATE OF HEARING :27.02.2019 DATE OF PRONOUNCEMENT : 12 .04.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER 1. THE REVENUE BY WAY OF THIS APPEAL IS CHALLENGING THE ORDER DATED 16/11/2017 OF THE LD. COMMISSIONER OF INCOME- TAX (APPEALS)-51 {HEREINAFTER CALLED [CIT(A)}, MUMBAI, IN APPEAL NO.CIT(A)-51/IT/DC-CC-3(3)/1/2016-17. THE ASSESSMEN T FOR IMPUGNED ASSESSMENT YEAR WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3(3), MUM BAI [AO] U/S 143(3) OF THE INCOME TAX ACT,1961 ON 11/03/2016 .THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 2 ITA N O.693/MUM/2018 ORICON ENTERPRISES LTD. I)' ON THE FACTS AND CIRCUMSTANCES OF THE CAE AND I N LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SAID INVESTMENTS TO THE TUNE OF RS. 382.44 CRORES OUT OF RS. 391.91 CRORES CONSIDERED BY THE AO FOR THE COMPUTATION OF DISALLO WANCE U/S. 14A RWR 8D(2)(III) HOLDING THAT INVESTMENT ARISEN OUT OF ME RGERS/DEMERGERS DOES NOT REQUIRE ANY CASH OUTFLOW WHICH IS IN CONTR AVENTION TO THE CGBDT CIRCULAR NO 5/2014 DATED 11.02.2011 WHICH DOE S NOT MENTION ANY SUCH EXCLUSION FOR THE PURPOSE OF COMPUTATION O F DISALLOWANCE U/S 8D(2)(III). 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE INVESTMENTS ARISEN OUT OF MERGERS/DEMERGERS FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE U/S 14A RWR 8D(2)(III) RELYING ON THE DECISION OF THE HONBLE ITAT IN ITA NO. 1145/MUM/20 13 DATED 12.09.2014 IN AY 2009-10 WITHOUT APPRECIATING THE F ACT THAT THE DEPARTMENT HS NOT ACCEPTED THE ABOVE ORDER AND HAS FILED FURTHER APPEAL TO TE BOMBAY HIGH COURT AGAINST THE ORDER. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THE TWO GROUNDS OF APPEAL IS AGAINST THE DIRECTION OF CIT(A) TO AO TO EXCLUDE THE INVESTMENTS TO THE TUNE OF RS. 382.44 CRORES OUT OF RS. 391.91 CRORES THE AMOUNT TAKEN BY THE AO FOR COMPUTATION O F DISALLOWANCES U/S 14A OF THE ACT R.W.R 8D(2)(III) O F THE RULES BY HOLDING THAT INVESTMENTS HAS ARISEN OUT OF MERGER S/DEMERGERS AND DID NOT ENTAIL ANY CASH OUT FLOW BY WAY OF EXPE NSES. 3. AT THE OUTSET THE LD. AR OF THE ASSESSEE SUBMITT ED BEFORE THE BENCH THAT ISSUE INVOLVED IN THE PRESENT APPEA L FILED BY THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE IN ASSESSEES OWN CASE IN AN EARLIER YEAR. THE LD COU NSEL SUBMITTED THAT THE LD.CIT(A) ,BY FOLLOWING THE SAID DECISIO N OF THE HONOURABLE TRIBUNAL IN THE EARLIER YEAR, HAS ALLOWE D THE RELIEF TO THE ASSESSEE BY DIRECTING THE AO TO EXCLUDE THE SAI D INVESTMENTS RESULTING FROM MERGERS/DEMERGERS WHICH DO NOT IN VOLVE ANY OUT FLOW OF FUNDS. THE LD. AR PRAYED THAT THE A PPEAL OF THE REVENUE MAY BE DISMISSED IN VIEW OF THE SAID COORDI NATE BENCH 3 ITA N O.693/MUM/2018 ORICON ENTERPRISES LTD. DECISION. THE LD. DR ON THE OTHER HAND RELIED ON TH E GROUNDS OF APPEAL FILED BY THE REVENUE 4. AFTER HEARING BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER WE OBSERVED THA T THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORD INATE BENCH IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR 2009-10 WHICH HAS BEEN FOLLOWED BY THE CIT(A) IN PARA 5.4 O F THE APPELLATE ORDER PASSED BY THE LD. CIT(A). THE RELEVANT OPERAT IVE PART IS REPRODUCED AS UNDER: 5. THE CONTENTIONS OF THE ASSESSEE HAVE BEEN DULY C ONSIDERED. THE FIRST APPELLATE AUTHORITY WHILE ADJUDICATING THE APPEAL O F THE ASSESSEE ON THIS ISSUE FOR AY 2009-10 HAD HELD THAT WHILE COMPUTING THE DISALLOWANCE U/S 14A RWR.8D(2)(III) AS WELL AS 8D(2)(III]) THE INVESTMEN TS WHICH HAVE BEEN ACQUIRED ON ACCOUNT OF MERGERS / DEMERGERS WHICH DO NOT REQU IRE ANY CASH OUTFLOW SHOULD BE EXCLUDED. THIS DECISION OF THE FAA WAS UP HELD BY THE HONBLE ITAT, MUMBAI. THE RELEVANT PORTION OF THE ORDER OF THE HON'BLE TRIBUNAL IN THE CASE OF ASSESSEE FOR AY 2009-10 IS REPRODUCED AS UN DER: '9. WE HAVE CAREFULLY PERUSED THE ORDERS OF AUTHORI TIES BELOW. WEHAVE ALSO CAREFULLY PERUSED THE BALANCE SHEET OF THE ASS ESSEE. THE UNDISPUTED FACT IS THAT ASSESSEE IS HAVING OWN FUND S IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS AMOUNT IN RS , 101.31.31 CRORES AS AGAINST THE INVESTMENTS OFRS. 69.08 CRORES. THIS CLEARLY SHOWS THAT THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS TO MAKE THE INVESTMENT FURTHER, WE FIND THAT OUT OF THE TOTAL INVESTMENT O F RS, 69.08 CRORES ARE INVESTED IN SUBSIDIARY/ASSOCIATE COMPANIES. FURTHER , WE FIND THAT LOAN LIABILITY OF RS. 25.25 CRORES AS ON 31.03.2008 HAS COME DOWN TO RS. 15.61 CRORES ASON 31.03.2009 I.E. YEAR UNDER CONSID ERATION. THIS ALSO PROVES THAT THERE IS NO FRESH BORROWING DURING THE YEAR UNDER CONSIDERATION. 9.1 CONSIDERING THE ABOVE STATED FACTS INFERTILITY, WE DO NOT FIND ANY REASON FOR THE LOCATION OF INTEREST EXPENDITURE TOW ARD EARNING OF INCOME HOWEVER, ALLOCATION OF ADMINISTRATIVE AND OTHER EXP ENSES CANNOT BE RULED OUT THE DISALLOWANCE AS PER RULE 8D(2)(III) I S COMPUTED BY BRANDED COMMISSIONER APPEAL COMES TO RS. 2,10,756. IN OUR CONSIDERED OPINION, THIS DISALLOWANCE WOULD MEET TH E END OF JUSTICE THE TOTAL DISALLOWANCE SUSTAINED IS RS. 2,10,756/-. 4 ITA N O.693/MUM/2018 ORICON ENTERPRISES LTD. 10. IN THE RESULT, THE APPEAL FILED BY THE VENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALL OWED' 5.5 FOR THE SUBSEQUENT YEARS ALSO, THE FAA AS W ELL AS THE TRIBUNAL HAVE FOLLOWED THE DECISION TAKEN IN THE CASE OF THE ASSE SSEE-FOR AY 2009- 10. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE TRIBUNAL AND ALSO MY LD. PREDECESSORS, THE AO IS DIRECTED TO RECOMPUTE THE D ISALLOWANCE U/S 14A R.W.R 8D(2)(III) AFTER EXCLUDING THE SAID INVESTMENTS WHI CH HAVE ARISEN ON ACCOUNT OF MERGERS / DEMERGERS. ACCORDINGLY, THE GROUND NOS 1 & 2 OF THE APPEAL ARE PARTLY ALLOWED. 5. SINCE THE FACTS IN THE PRESENT CASE ARE IDENTICA L ONE AS DECIDED BY THE COORDINATE BENCH IN AY 2009-10 WHICH IS FOLLOWED BY LD. CIT(A) AS STATED HEREINABOVE. THEREFORE, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 2 TH APRIL, 2019 SD/- SD/- (AMARJIT SINGH) (RAJES H KUMAR) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED :12.04.2019 * THIRUMALESH, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI