SITI NETWORKS LTD, MUMBAI V. ASST CIT RG 16(1), MUMBAI

ITA 6970/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5623 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 6970 /MUM/201 6 ( / ASSESSMENT YEAR: 2012 - 13 ) M/S SITI NETWORKS LTD. 4 TH FLOOR, MADHUINDL . ESTATE, PB. MARG, WORLI M UMBAI - 4000 13 / VS. ACIT RG 16(1 ) 4TH FLOOR, ROOM NO. 467 . AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. AAA CW6349M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JAY BHANSALI , AR / RESPONDENTBY : MS. ARJUGARODIA , DR / DATE OF HEARING : 07 /0 6 /201 8 / DATE OF PRONOUNCEMENT : 04/07/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI, DATED 18.08.16 FOR AY 20 12 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . 1. (I) THE LD. CIT(A) ERRED IN LAW AND FACTS IN DISALLOWING RS. 10,61,425/ - OUT OF EXPENSES U/S 14A OF THE ACT. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. (II) THE LD. CIT(A)/ AO ERRED IN LAW AND FACTS IN MECHANICALLY DISALLOWING RS. 10,61,425/ - U/S 14A OF THE ACT OUT OF EXPENSES 0,5% OF AVERAGE INVESTMENTS ON ASSUMPTION WITHOUT RECORDING HIS DISSATISFACTION WITH THE CORRECTNESS OF CLAIM MADE BY THE APPELLANT THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME. (III) THE LD. AO ERRED IN LAW AND FACTS IN MECH ANICALLY DISALLOWING EXPENSES WITHOUT PROVING ANY OF THE EXPENSES HAVE BEEN INCURRED IN RELATION TO INVESTMENTS AND NONE OF THE EXPENSES OF THE COMPANY ARE PROVED TO HAVE BEEN INCURRED FOR THE PURPOSES OTHER THAN BUSINESS, HENCE THE DISALLOWANCE U/S 14 A I S UNWARRANTED. 2. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALTER ALL OR ANY GROUNDS OF THE APPEAL. 2 . AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A MULTI SYSTEM OPERATOR (MSO) AND ENGAGED IN DISTRIBUTION/ TELECASTING/ 3 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . 'RE - BROADCASTING OF TELEVISION CHANNELS THROUGH CABLE OPERATORS ON ITS ANALOGUE AND / DIGITAL CABLE DISTRIBUTION NETWORK, PRIMARY INTERNET AN D ALLIED SERVICES. THE ASSESSEE RECEIVES AGREED SUBSCRIPTION FROM CABLE OPERATORS AND PAYS PAY CHANNEL CHARGES TO CHANNELS. THE ASSESSE E HAS FILED ITS ORIGINAL RETURN OF INCOME ON 28.09.2012 DECLARING LOSS OF RS. 51,88,24,064/ - AND CLAIMING REFUND OF RS. 6,91,53,050/ - . THE RETURN WAS REVISED ON 31.03.2014 DECLARING LOSS OF RS. 71,67,95,470/ - AND CLAIMING REFUND OF RS. 7,08,33,600/ - . THERE AFTER A SSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED AFTER MAKING DISALLOWANCES ON ACCOUNT OF THE FOLLOWING: (1) PAY CHANNEL CHARGES OF RS. 85,62,23,223/ - (2) DISALLOWANC E U/S 14A OF RS. 2,21,78,835/ - AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEA L BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERI NG THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE APPEAL BY RAISING THE ABOVE GROUNDS. 4 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . 3. THE SOLITARY GROUND RAISED BY THE ASSESSEERELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN MAKING DISALLOWANCE U/S 14A OF THE I.T. ACT. 4 . AT THE VERY OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BEFORE LD. CIT(A) AND RESTRICTED HIS ARGUMENTS BY SUBMITTING THAT THE PURPOSE OF DISALLOWANCE U/S 14A OF THE I.T. ACT, ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FROM WHICH EXEMPT INCOME HAS BEEN RECEIVED DURING THE YEAR. IT WAS FURTHER SUBMITTED T HAT THE AO HAD TAKEN INTO CONSIDERATION OF THE INVESTMENTS, EVEN THOUGH FROM WHICH NO EXEMPT INCOME WAS RECEIVED DURING THE YEAR, THEREFORE IN SUCH A WAY, THE REVENUE HAS COMMITTED AN ILLEGALITY. IN SUPPORT OF HIS SUBMISSIONS, LD. AR RELIED UPON THE JUDGME NT PASSED BY COORDINATE BENCH OF HONBLE ITAT IN THE CASE OF ACIT VRS. VIREET INVESTMENT PVT. LTD. (82) TAXMANN.COM 415 (T. DEL). 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. 5 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . 6. WE HAVE HEARD THE COUNSELS FOR BOTH TH E PARTIES AND A FTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE , MATERIAL PLACED ON RECORD AS WELL AS JUDGMENT CITED BY THE PARTIES AND THE ORDERS PASSED BY THE REVENUE AUTHORITIES , W E FIND THAT COORDINATE BENCH OF HONBLE ITAT HAD PASSED ORDERS IN THE CASE OF ACIT VRS. VIREET INVESTMENT PVT. LTD . (82) TAXMANN.COM 415 (T. DEL), WHEREIN IT WAS H ELD THAT O NLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME DURING THE YEAR. I N OUR CONSI DERED VIEW , THIS PROPOSITION WAS NOT CONSIDERED BY THE REVENUE AUTHORITIES WHILE MAKING DISALLOWANCE U/S 14A OF I.T. ACT. THEREFORE, CONSIDERING THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO PASS AFRESH ORDER WHILE C ONSIDERING THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY THE C OORDINATE BENCH OF HONBLE ITAT IN THE CASE OF ACIT VRS. VIREET INVESTMENT PVT. LTD . (82) TAXMANN.COM 415 (T. DEL) 6 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . BEFORE PAR TING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WIT H LAW. RESULTANTLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES WITH NO ORDERS AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY , 2018. SD/ - SD/ - ( SHAMIM YAHYA ) ( SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 04 . 07 . 201 8 SR. RS. DHANANJAY 7 I.T.A. NO. 6970 /MUM/201 6 M/S SITI NETWORKS LTD. . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI