ALLANA SONS PVT. LTD., MUMBAI V. DCIT - 1(1)(1), MUMBAI

ITA 7086/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5748 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 07-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.7086/MUM/2018 ( ASSESSMENT YEAR: 2015-16 ) ALLANA SONS PVT.LTD. ALLANA HOUSE, ALLANA ROAD COLABA MUMBAI-400 001 VS. DCIT-1(1)(1) AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA ACA4533D APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI APURVA R.SHAH, AR REVENUE BY SHRI MICHAEL JERALD, DR DATE OF HEARING 11/02 /2020 DATE OF PRONOUNCEME NT 14 /0 2 /2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)02, MUMBAI, DATED 18/09/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. IN NOT ADJUDICATING THAT NO DISALLOWANCE U/S 14A OUGHT TO BE DONE ON THOSE INVESTMENT THAT HAVE NOT YET YIELDED ANY INCO ME DURING THE YEAR. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME FOR AY 2015-16 ON 27/11/2015, DECL ARING TOTAL INCOME AT RS. 231,88,17,060/-. THE CASE HAS BEEN SE LECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ITA NO.7086/MUM/2018 ALLANA SONS PVT.LTD. 2 I.T.ACT, 1961 ON 24/11/2017, DETERMINING THE TOTAL INCOME AT RS.231,97,51,290/- BY MAKING ADDITIONS TOWARDS DISA LLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A OF THE I.T.ACT, 1961 FOR RS. 3,19,101/-. THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) FOR THE REASONS RECORDED IN HIS APPELLATE ORDER, DATED 18/09/2018, PARTLY AL LOWED APPEAL FILED BY THE ASSESSEE, WHERE HE HAS RESTRICTED DISALLOWAN CES MADE BY THE LD. AO TOWARDS EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE ACT, TO THE EXTENT OF DIVIDEND INCO ME EARNED FOR THE YEAR AMOUNTING TO RS 2,28,150/-. AGGRIEVED BY THE L D.CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR FOR THE ASSESSE, AT THE TIME OF HEARI NG SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS CO VERED IN FAVOUR OF THE ASSESEE BY THE DECISION OF ITAT, MUMBAI A BEN CH IN ASSESSEE OWN CASE FOR AY 2013-14, WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNAL HELD THAT FOR THE PURPOSE OF DISALLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A R.W.R ULE 8D(2)(III), ONLY THOSE INVESTMENTS, WHICH YIELD EXEMPT INCOME N EEDS TO BE CONSIDERED. THE LD. DR, ON THE OTHER HAND STRONGLY SUPPORTED ORDER OF THE LD.CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE TRIBUNAL HAD CONSIDERED AN IDENTICAL ISSUE IN ASSESSEE OWN CASE FOR AY 2013-14, WHERE UNDER IDENTICAL SET OF F ACTS, IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTATION OF AVERAGE VALUE OF INVESTMENTS, ONLY THOSE INVESTMENTS, WHICH YIELD EX EMPT INCOME ITA NO.7086/MUM/2018 ALLANA SONS PVT.LTD. 3 NEEDS TO BE CONSIDERED. THE RELEVANT FINDINGS OF TH E TRIBUNAL ARE AS UNDER:- 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS SQUARELY COVERED BY THE TRIBUNALS DECISION IN A SSESSEES SISTER CONCERN CASE (IN THE CASE OF ALLANA COLD STORAGE PR IVATE LIMITED) IN ITA NO 2366 & 2377/MUM/2015 FOR AY 2010-11 & 2011-12 VI DE ORDER DATED 20.12.2017, WHEREIN THE TRIBUNAL HAS DIRECTED THE A O TO FOLLOW THE DECISION OF SPECIAL BENCH OF THIS ITAT IN THE CASE OF ACIT VS. VIREET INVESTMENTS (P.) LTD. [2017] 58 ITR(T) 313 (DELHI - TRIB.) (SB) AND CONSIDER ONLY DISALLOWANCE ON THOSE INVESTMENT WHIC H ARE YIELDING EXEMPT INCOME AND ACCORDINGLY COMPUTE THE AVERAGE V ALUE OF INVESTMENT WHILE COMPUTING THE DISALLOWANCE. THE TR IBUNAL OBSERVED AS UNDER AT PARA 4 AS UNDER: - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF THE DELHI SPE CIAL BENCH IN THE CASE OF ACIT V. VIREET INVESTMENTS PRIVATE LIMI TED (SUPRA). WE OBSERVE THAT THE SPECIAL BENCH OF THE DELHI TRIBUNA L HELD THAT ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTIN G AVERAGE VALUE OF INVESTMENTS WHICH YIELDED EXEMPT INCOME DU RING THE YEAR. THEREFORE, RESPECTFULLY FOLLOWING THE SAID DE CISION, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE U NDER RULE 8D(2)(III) BY CONSIDERING ONLY THOSE INVESTMENTS WH ICH YIELDED EXEMPT INCOME DURING THE YEAR AND RECOMPUTE THE INC OME ACCORDINGLY. NEEDLESS TO SAY THAT THE ASSESSING OFF ICER SHALL GIVE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . SINCE WE FOLLOWED THE ORDER OF THE SPECIAL BENCH TRIBUNAL AN D HELD THAT THE ONLY THE INVESTMENTS YIELDING DIVIDEND INCOME SHOUL D BE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D(2)(III) T HE OTHER CONTENTIONS RAISED BY THE ASSESSEE NEED NOT GONE IN TO AS THEY ARE NOT RELEVANT AS SUBMITTED BY LD. A.R. WHEN A QUERY WAS PUT TO THE LEARNED SR. DEPARTMENTA L REPRESENTATIVE, HE SIMPLY RELIED ON THE ASSESSMENT ORDER. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE FACTS OF THE CASE, WE FIND THAT IN ALL THESE APPEALS FACTS A ND CIRCUMSTANCES ARE EXACTLY IDENTICAL. HENCE, WE ALSO DIRECT THE AO TO CONSIDER THE INVESTMENTS WHICH ARE GIVING EXEMPT INCOME FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III). ACCOR DINGLY, ALL THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN VIEW OF THE ABOVE DIRECTIONS. 8. SIMILAR ARE THE FACTS IN ITAS NO. 922,924 & 926/ MUM/2018 FOR AY 2014-15, 2013-14 & 2014-15 RESPECTIVELY, HENCE, THE SAME ARE ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSES IN VIEW OF THE ABOVE DIRECTIONS. ITA NO.7086/MUM/2018 ALLANA SONS PVT.LTD. 4 6. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEE OWN CASE FOR EARLIER YEARS, WE ARE OF THE CONSIDERED VIEW THAT FOR THE PURPOSE OF COMPUTA TION OF DISALLOWANCES U/S 14A R.W.RULE 8D (2)(III) OF I.T.R ULES, 1962, ONLY THOSE INVESTMENTS, WHICH YIELD EXEMPT INCOME NEEDS TO BE CONSIDERED. HENCE, WE DIRECT THE LD. AO TO RECOMPUT E DISALLOWANCES BY TAKING INTO ACCOUNT INVESTMENTS, W HICH YIELD EXEMPT INCOME FOR THE YEAR UNDER CONSIDERATION. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /02/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/02/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//