DCIT CIRCLE-6 (3)(2), MUMBAI V. M/S KOHINOOR PLANET CONSTRUCTION PVT LTD., MUMBAI

ITA 7004/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1602 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 14-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 143(2); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) H BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR, HON'BLE ACCOUNTANT MEMBER ITA.NO. 7004 / MUM/201 9 (A.Y : 2012 - 13 ) D CIT - 6(3)(2) ROOM NO. 576 , 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., 3, KOHINOOR CORPORATE OFFICE SENAPATI BAPAT MARG DADAR (W), MUMBAI - 400028 PAN NO: AABCR6994E (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI GURBINDER SINGH DATE OF HEARING : 02.06.2021 DATE OF PRONOUNCEMENT : 11 .06.2021 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 12, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 24.07.2019 FOR THE A.Y. 2012 - 13. 2. REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL: - 2 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., 1. ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,19,23 ,040/ - MADE U/S.14A R.W.R 8D OF THE I.T. ACT, 1961. 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4,02,01,540/ - MADE U/S.14A R.W.R .8D OF THE IT. ACT, 1961 BY STATING NO ADJUSTMENT CAN BE MADE BY THE AO TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 3. BRIEFLY STATED, THE ASSES SEE COMPANY WHICH IS ENGAGED IN THE BUSINE SS OF PROPERTY DEVELOPMENT /POWER GENERATION WITH THE HELP OF WIND POWER CONVERTOR HAD FILED ITS OR IGINAL RETURN OF INCOME ON 20.09.2012 , DECLARING TOTAL INCOME/LOSS AT .1,90,56,166/ - . SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT U/S. 143(2) OF THE ACT. THE ASSESSING OFFICER VIDE HIS ORDER PASSED U/S . 143(3) OF THE ACT, DATED 31.03.2019 COMPUT ED THE DISALLOWANCE U/S. 14A AT . 4,02,01,540/ - BEING INTEREST OF . 2,02,67,906/ - UNDER R ULE 8 D ( 2 ) ( II ) AND . 1,99,33,634/ - UND E R R ULE R ULE 8 D ( 2 ) ( II I ) OF THE I . T . R ULES . ON APPEAL LD.CIT(A) DELETED THE ADDITION OF .2,19,23,040/ - MADE U/S. 14A R.W. RULE 8D ( 2 ) ( II ) OF I.T. RULES BEING IN TEREST . I N SO FAR AS THE DISALLOWANCE U NDER R ULE 8 D ( 2 ) ( III ) OF I . T . R ULES IS CONCERNED THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO . 1,82,78,50 0/ - AS AGAINST . 1,99,33,634/ - MADE BY THE ASSESSING OFFICER 3 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., AS THERE IS SOME M ISTAKE IN WORKING AS POINTED OUT BY THE ASSESSEE IN THE COURSE OF THE APPEAL PROCEEDINGS . LD.CIT(A) FURTHER DELETED THE DISALLOWANCE OF .4,02,01,540/ - MADE U/S. 14A OF THE ACT STATING THAT NO ADJUSTMENT CAN BE MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT COMPUTED U/S. 115JB OF THE ACT. AGAINST THIS ORDER OF THE LD.CIT(A ) REVENUE IS IN APPEAL BEFORE US. 4. ASSESSEE FILED A LETTER DATE D 22 ND APRIL, 2021 AND SUBMITTED THAT O N THE IDENTICAL ISSUE, IN THE ASSESSEE OWN CASE FOR THE SAME ASSESSMENT YEAR, THE MUMBAI TRIBUNAL IN ITA NO. 6342, 6343 & 6344/MUM/2019 DATED 06.04.2021 HAS HELD THAT DISALLOWANCES CANNOT BE MADE U/S. 14A OF THE ACT IN THE ABSENCE OF THE EXEMPT IN COME AND REQUESTED TO D ECIDE THE CASE ACCORDINGLY . ASSESSEE FURTHER SUBMITTED THAT T HE ISSUE IS RELATING TO THE DISALLOWANCE U/S. 14A OF THE ACT TO THE BOOK PROFIT U/S. 115JB OF THE ACT IS A CONSEQUENTIAL IN NATURE AND RELIED ON THE DECISION OF THE SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENT (P) LTD [ 82 TAXMANN.COM 415 ] WHICH CLEARLY HELD THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT BE MADE WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT . 5. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER . 4 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., 6. WE HAVE HEARD LD. DR , PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RELIED ON. COMING TO THE ISSUE IN RESPECT OF THE DISALLOWANCE MADE U/S. 14A OF THE ACT R.W. RULE 8 D ( 2 ) ( II ) OF I . T . R ULES , THE LD.CIT(A) ON EXAMINING THE DETAILS FILED BY THE ASSESSEE IN RESPECT OF SHARE CAPITAL , RESERVES AND SURPLUS AND THE INVESTMENT S MADE BY THE ASSESSEE AS ON 31.03.2012 AND 31.03.2011 LD.CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE HAS OWN FUNDS WHICH WERE FAR IN EXCESS OF THE INVESTMENT S THAT ARE CAPABLE OF YIELDING EXEMPT INCOME . T HUS, THE LD.CIT(A) FOLLOWING THE DECISION S OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V . HDFC BANK LTD [366 ITR 505 ] AND CIT V. RELIANCE UTILITIES AND POWER LTD. [313 ITR 340] DELETED THE DISALLOWANCE . F OLLOWING THE RATIO OF THE DECISION S OF THE HON'BLE BOMBAY HIGH COURT THAT A PRESUMPTION ARISES THAT WHEN ASSESSEE IS HAVING OWN FUNDS MUCH MORE THAN THE INVESTMENT S THAT ARE CAPABLE OF YIELDING EXEMPT INCOME WERE MADE OUT OF THE OWN FUNDS OF THE ASSESSEE AND NO INTEREST BEARING BORROWED FUNDS WERE UTILIZED FOR THE SAID PU RPOSE. T HUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) . GROUND NO. 1 OF GROUNDS OF APPEAL OF REVENUE IS DISMISSED . 7. C OMING TO GROUND NO. 2 WHICH IS IN RESPECT OF DISALLOWANCE MADE U/S. 14A OF THE ACT R.W. RULE 8 D OF I . T . R ULES WHILE COMPUTING BOOK PROFITS 5 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., U/S. 115JB OF THE ACT , WE OBSERVE THAT LD.CIT( A) DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF THE S PECIAL B ENCH OF THE D ELHI TRIBUNAL IN THE CASE OF ACIT V. V IREET I NVESTMENT ( P . ) L TD., (SUPRA) OBSERVING AS UNDER : - 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE A SSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. THE APPELLANT CONTENDED THAT THE AMOUNT OF DISALLOWANCE U/S. 14A CANNOT BE ADDED WHILE COMPUTING THE BOOK PROFIT U/S. 115JB AS THE PROVISIONS OF SEC. 14A ARE LIMITED FOR THE PURPOSE OF COMPUTATI ON OF INCOME AND THE SAME CANNOT BE EXTENDED TO MAT PROVISIONS U/S. 115JB WHICH IS A SELF CONTAINED CODE. IN THIS REGARD, THE APPELLANT PLACED RELIANCE ON THE DECISION OF IT AT DELHI BENCH 'H' (SPECIAL BENCH) IN THE CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. 82 TAXMANN.COM 415 WHEREIN IT WAS HELD THAT THE ' COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED UNDER SECTION 14A READ WITH RULE 8D.' 4.3 ON CAREFUL CONSIDERATION, IT IS SEEN THAT THE CONTENTION OF THE APPELLANT IS ACCEPTABLE. THE RECENT DECISION OF THE SPECIAL BENCH OF HON'BLE IT AT IN THE CASE OF VIREET INVESTMENT (P) LTD (SUPRA) RELIED UPON BY THE APPELLANT HAS LAID DOWN THE PRO POSITION THAT ADJUSTMENT UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A READ WITH RULE 8D. IN RENDERING THIS DECISION, THE HON'BLE ITAT TOOK INTO CONSIDERATION THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF BHUSHAN STEEL LTD, WHEREIN IT WAS HELD AS UNDER: '7. QUESTION NO. 6 CONCERNS DELETION OF ADDITION OF RS. 89,00,000/ - MADE BY THE AO FOR COMPUTATION OF THE INCOME FOR THE PURPOSE OF MINIMUM ALTERNATE T AX('MAT') UNDER SECTION 115JB OF THE ACT. THIS PERTAINED TO THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME UNDER SECTION 14A READ WITH RIDE 8D. THE ITAT HAS RIGHTLY HELD THAT THIS BEING IN I TAT CANNOT BE FAULTED WITH. IT IS CONSISTENT WITH THE DECISION IN APOLLO TYRES LTD. V. COMMISSIONER OF INCOME TAX (2002) 255 ITR 273(SC) WHICH HELD THAT ''THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE 6 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., EXPLANATIO N TO SECTION 115].' THE COURT DECLINES TO FRAME A QUESTION OF THE ABOVE ISSUE' 4.4 RESPECTFULLY FOLLOWING THE SAME, IT IS HELD THAT NO ADJUSTMENT CAN BE MADE TO THE BOOK PROFIT COMPUTED U/S 115JB BY THE AO IN RESPECT OF EXPENSES INCURRED IN RELATION TO E XEMPT INCOME DISALLOWED U/S 14A WHICH WAS COMPUTED BY INVOKING RULE 8D. HENCE, THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE TO THE BOOK PROFIT BY WAY OF THE AMOUNT OF DISALLOWANCE COMPUTED U/S. 14A R.W.RULE 8D. THIS GROUND OF APPEAL OF THE APPELLANT IS THEREFORE ALLOWED. 8. AS COULD BE SE EN FROM THE ABOVE, LD.CIT(A) DELETED THE DISALLOWANCE U/S. 14A R.W. R ULE 8 D IN COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT F OLLOWING THE DECISION OF THE S PECIAL B ENCH OF THE D ELHI TRIBUNAL IN THE CASE OF ACIT V. V IREET I NVESTMENT ( P . ) L TD., (SUPRA) . T HUS, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE LD.CIT(A) . G ROUND N O.2 OF GROUNDS OF APPEAL OF THE REVENUE IS REJECTE D . 9. I N THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON 11 .0 6 .2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD . SD/ - SD/ - ( RAJESH KUMAR ) ( C.N. PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 11 / 06 / 2021 GIRIDHAR , S R. PS 7 ITA.NO. 7004/MUM/2019 (A.Y: 2012 - 13) M/S. KOHINOOR PLANET CONSTRUCTIONS PVT. LTD., COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM