HATHWAY INVESTMENT PVT LTD., MUMBAI V. ASST CIT CIRCLE-12 (2)(2), MUMBAI

ITA 7106/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9435 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 18-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITHA NAIR
• Keywords: Earning of tax free income; Reassessment proceedings; Rule 8D
• Section: 147; 143(3); 14A

Judgement Text

आयकर अपीलीय अिधकरण मुंबई पीठ “एच” मुंबई ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी एम.बालागनेश, लेखा सद˟ के समƗ IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER आअसं.7106/मुं/2019(िन.व. 2012-13) ITA No. 7106/MUM/2019 (A.Y.2012-13) Hathway Investments Pvt. Ltd. Rahejas, 4 th Floor, Corner of Main Avenue & V.P. Road, Santacruz (West), Mumbai-400054. PAN: AAACH1675B ...... अपीलाथŎ /Appellant बनाम Vs. ACIT, Circle-12(2)(2), Room No. 145, 1 st Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. ..... Ůितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Sh. Vijay Mehta Ůितवादी Ȫारा/Respondent by : Ms. Smitha Nair सुनवाई की ितिथ/ Date of hearing : 31/01/2022 घोषणा की ितिथ/ Date of pronouncement : 31/01/2022 आदेश/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 19.09.2019 for Assessment Year (AY) 2012-13. 2 आअसं. 7106/मुं/2019 (िन.व. 2012-13) ITA No. 7106/Mum/2019 (A.Y. 2012-13) 2. The assessee in appeal has raised multiple grounds assailing the disallowance under section 14A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 3. Sh. Vijay Mehta appearing on behalf of the assessee submitted at the outset that the only ground he would be pressing is ground no.3 and other grounds challenging disallowance under section 14A of the Act are not pressed. 4. Ground No.3 of the appeal reads as under: “3. Without prejudice to what has been stated above, the learned CIT-A ought to have restricted disallowance under section 14A of the Act at Rs. 10,31,593/- considering only those investments which yielded exempt dividend income and as per Rule 8D(2)(iii) of the Income Tax Rules, 1962.” 5. The ld. Authorized Representative (AR) of the assessee submitted that during the period relevant to Assessment Year (AY) under appeal, the assessee has received dividend income of Rs. 5,73,25,415/-. The assessee has made suo- moto disallowance of Rs. 28,96,745/- under section 14A of the Act for earning tax free income The Assessing Officer (AO) after invoking the provisions of Rule 8D made disallowance of Rs. 2,00,64,951/-. Aggrieved by the assessment order dated 23.02.2015 passed under section 143(3) of the Act, the assessee filed appeal before the CIT(A). Before the CIT(A), the assessee submitted that while computing disallowance under Rule 8D(2)(iii) only dividend yielding investments should be considered. For this propositions, the assessee placed reliance on various decisions including the decision rendered by the Special Bench in the case of ACIT Vs. Vireet Investments (P.) Ltd. 58 ITR (Trib.) 313. The CIT(A) accepted the proposition, however, the CIT(A) observed that disallowance under section 14A cannot be 3 आअसं. 7106/मुं/2019 (िन.व. 2012-13) ITA No. 7106/Mum/2019 (A.Y. 2012-13) below than the suo-moto disallowance made by the assessee. The ld. AR referred to the computation of revised disallowance at page 44 of the Paper Book. As per the working furnished by assessee, after considering only dividend yielding investments, the disallowance under section 14A of the Act is reduced to Rs. 10,31,598/-. 6. The ld. AR submitted that once disallowance is to be computed in accordance with the settled legal proposition, there is no bar in reducing the disallowance below the suo-moto disallowance made by the assessee. In support of his contentions, the ld. AR placed reliance on the decision in the case of Tejaskiran Pharmachem Industries Pvt. Ltd. Vs. DCIT in ITA No. 3307/Mum/2014 for AY 2010-11 decided on 13.12.2017. 7. The ld. AR further pointed that the Revenue had also filed appeal against the order of CIT(A) which is subject matter of present appeal, in ITA No. 7604/Mum/2019. The Tribunal in an ex-parte proceedings against the assessee vide order dated 02.06.2021 dismissed the appeal of Revenue after placing reliance on the decision of Special Bench in the case of ACIT Vs. Vireet Investments (P.) Ltd. (supra). 8. Ms. Smitha Nair representing the Department supported the order of CIT(A) in holding that the disallowance under section 14A of the Act cannot be below suo-moto disallowance made by the assessee in its return of income. 9. We have heard the submissions made by rival sides and have examined the orders of authorities below. The short issue in appeal before us is whether the disallowance under section 14A should be restricted to suo-moto disallowance made by the assessee at Rs. 28,96,745/- or the disallowance under section 14A of the Act can be below the suo-moto disallowance after re- 4 आअसं. 7106/मुं/2019 (िन.व. 2012-13) ITA No. 7106/Mum/2019 (A.Y. 2012-13) computing disallowance in accordance with the decision of Special Bench in the case of ACIT Vs. Vireet Investments (P.) Ltd. (supra). 10. The quantum of suo-moto disallowance made by assessee in return of income under section 14A is not disputed. Subsequently, in the light of decision of Special Bench, the assessee re-computed its disallowance under section 14A of the Act Rs. 10,31,598/- after considering only investments yielding exempt income. The CIT(A) in principle agreed with the proposition that for the purpose of computing disallowance under rule 8D(2)(iii), only those shares which yielded exempt income during the relevant previous year should be considered, but expressed his reservation in applying the above principle as after accepting the above proposition disallowance would have reduced to Rs. 10,31,598/- i.e. below the suo-moto disallowance made by the assessee at Rs. 28,96,745/-. 11. We are of considered view that if by virtue of law expounded by Courts the disallowance u/s 14A is reduced below suo-moto disallowance made by the assessee, there would not be any impediment in assessee getting the benefit. 12. Similar issue had come up before the Co-ordinate Bench in the case of Tejaskiran Pharmachem Industries Pvt. Ltd. Vs. DCIT (supra), the Co-ordinate Bench decided the issue in favour of assessee by observing as under: “The last grievance under these appeal is of the assessee as to whether the disallowance u/s 14A can fall below disallowance suo motu voluntarily made by the assessee in the return of income filed with the Revenue. The assessee has claimed that if his several contentions are favourably considered by tribunal keeping in view legal position, the disallowance u/s 14A can fall below the voluntary disallowance made by the assessee suo motu in return of income filed with the Revenue. The assessee has relied on decision of Hon‟ble Gujarat High Court in the case of Principal CIT v. UTI Bank Limited (2017) 398 ITR 514(Guj) and 5 आअसं. 7106/मुं/2019 (िन.व. 2012-13) ITA No. 7106/Mum/2019 (A.Y. 2012-13) decision of ITAT, Mumbai in the case of Rupee Finance and Management Private Limited v. DCIT (2017) 57 ITR(Trib.) 205(Mumbai) . We find merit in the contention of the assessee that once tribunal has adjudicated matter in assessee‟s favour then merely because disallowance was made in return of income voluntarily under a wrong belief , the assessee cannot resile from its position is not acceptable . The mandate of the 1961 Act is to tax real income and not an income which was never the income chargeable to tax in the hands of the assesseee but was declared under a wrong belief or notion . The mandate of the 1961 Act is to tax real income and tax can only be levied under the authority of law. Thus, if after verifications and following the ratio of law decided by the tribunal in the instant case, if the disallowance falls below the disallowance u/s 14A offered by the assessee in return of income, be it may the Revenue cannot charge tax on income which never was the income of the assessee chargeable to tax within the mandate and provisions of the 1961 Act as the tax can only be levied by the authority of law. The Hon‟ble Andhra Pradesh High Court in the case of CIT v. Bakelite Hylam Limited(1999) 237 ITR 392(AP) as well Hon;ble Gujarat High Court in the case of Gujarat Gas Company Limited v. JCIT reported in (2000) 245 ITR 84(Guj) has taken a similar view. Hon‟ble Gujarat High Court in the case of Gujarat Gas Company Limited(supra) has arrived at the said decision after considering CBDT circular No. 549 dated 31-10-1989 (1990) 182 ITR (st) 1 while arriving at the said decision that assessed income can fall below returned income in proceedings u/s 143(3) r.w.s. 143(2). The Hon‟ble Supreme Court decision in the case of CIT v. Sun Engineering Work Private Limited (1992) 198 ITR 297(SC) was in context of re-assessment proceedings initiated u/s 147 wherein Hon‟ble Supreme Court held that reassessment proceedings initiated u/s 147 are for the benefit of revenue and not the assessee, wherein the mandate is to bring to tax income which has escaped assessment while presently we are concerned with proceedings initiated u/s 143(3) r.w.s. 143(2). We order accordingly.” Thus, in view of our above observations, we find merit in ground no.3 of the appeal, hence, the same is allowed. 13. In so far other grounds raised in the appeal i.e. ground no. 1,2,4 & 5, the ld. AR of assessee stated at the Bar that he is not pressing the said grounds. In view of the statement made by ld. AR, ground no. 1,2,4 & 5 of the appeal are dismissed as not pressed. 6 आअसं. 7106/मुं/2019 (िन.व. 2012-13) ITA No. 7106/Mum/2019 (A.Y. 2012-13) 14. In the result, appeal of the assessee is partly allowed, in terms aforesaid. Order pronounced in the open court on Monday, the 31 th day of January, 2022. Sd/- Sd/- (M. BALAGANESH) (VIKAS AWASTHY) लेखा सद˟/ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER मुंबई/ Mumbai, िदनांक/Dated: 31/01/2022 S.K., PS Ůितिलिप अŤेिषतCopy of the Order forwarded to : 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai