DCIT 11 (1)(1), MUMBAI V. M/S QING AMBAY DEVELOPERS CORPORATION LTD., MUMBAI

ITA 7128/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3695 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 20-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH MISHRA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 250; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 7128 & 7129/MUM/2019 (A.Y: 2015-16 & 2016-17) DCIT 11(1)(1) R NO. 204, AAYAKAR BHAVAN, MK ROAD, MUMBAI 400020. VS. M/S. QING AMBAY DEVELOPERSCORPORATION . LTD.,HOTEL SAHARA STAR, OPP DOMESTIC AIRPORT, VILE PARLE, MUMBAI - 400099 PAN/GIR NO. : AAJCA2307C APPELLANT .. RESPONDENT APPELLANT BY : SHRI RAJESH MISHRA, DR RESPONDENT BY : NONE DATE OF HEARING 20 .0 5 .2021 DATE OF PRONOUNCEMENT 02 .0 6 .2021 / O R D E R PER PAVAN KUMAR GADALE, JM: THESE ARE THE TWO APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -18 MUMBAI, PASSED U/S. 143(3) AND 250 OF THE ACT. SINCE THE ISSUES INVOLVED IN THE APPEALS ARE IDENT ICAL AND SIMILAR, HENCE THEY ARE CLUBBED, HEARD AND CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVE NIENCE WE SHALL TAKE UP THE ITA NO. 7128/MUM/2019 FOR THE A.Y QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 2 - 2015-16 AS A LEAD CASE AND THE FACTS NARRATED THERE IN. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR AS THE ASSESSEE HA S NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATI ON WITHOUT APPRECIATING THE LEGAL INTENT OF INTRODUCING PROVIS IONS OF SEC. 14A OF THE ACT BY FINANCE ACT 2001 AS CLARIFIED BY CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF ENTERTAINMENT , HOSPITALITY AND PROPERTY DEVELOPERS AND FILED THE RETURN OF INCOME FOR THE A.Y 2015-16 WITH A TOTAL L OSS OF RS.31,64,17,828/-ON 06.12.2016.SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) OF THE ACT WAS ISSUED. IN COMPLIANCE THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS. ON PERUSAL OF THE FINANCIAL STATEMENT S, THE A.O. FOUND THAT THE ASSESSEE HAS RECEIVED REVENUE FROM OPERATIONS AND OTHER INCOME AND AFTER CLAIM OF EXPENSES, THE LOSS IS ARRIVED. FURTHER, TH E ASSESSEE COMPANY HAS MADE INVESTMENTS OF RS. 17,30,08,73,965/-AS ON 31.03.2015 WHICH YIELD THE EXEMPT INCOME. WHEREAS, THE ASSESSEE HAS NOT ATTRIBUTED ANY EXPENSES INCURRED IN THE CARRYING OU T THE OPERATIONAL ACTIVITY OF INVESTMENTS. THE A.O QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 3 - OBSERVED THAT THE ASSESSEE MUST HAVE INCURRED CERTAIN EXPENSES AND THERE IS NO DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT AND CALLED FOR THE EXPLANATIONS. THE ASSESSEE HAS FILED THE EXPLANATIO NS MENTIONING THAT THE INVESTMENTS ARE MADE FOR BUSINESS OPERATIONS OF THE COMPANY BEING STRATEGIZE IN ASSOCIATES AND INFRASTRUCTURE IS NOT REQUIRED TO REGULATE THE INVESTMENTS. BUT THE A.O. WAS NOT SATISFIED WITH THE EXPLANATIONS AND FINALLY CONSIDE RING THE INVESTMENTS MADE BY THE ASSESSEE HAS WORKED OUT THE DISALLOWANCE U/SEC14A R.W.R 8D(2)(III) OF THE I T RULES OF RS. 8,67,37,238/-AND ASSESSED THE TOTAL LO SS OF RS.22,96,80,592/- AND PASSED ORDER U/S 143(3) OF THE ACT DATED 29.12.2017. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL BEFORE THE CIT(A), THE CIT(A) CONSIDERED THE GROUNDS OF APPEAL, SUBMISSIONS OF THE ASSESSEE AND THE ASSESSING OFFICER FINDINGS. THE APPELLATE AUTHO RITY ON PERUSAL OF THE FACTS AND FINANCIAL DETAILS FOUND THAT THE ASSESSEE COMPANY HAS MADE INVESTMENTS IN ASSOCIATES AND HAS NOT RECEIVED ANY EXEMPTED INCOME DURING THE YEAR. WHEREAS, THE A.O. HAS MADE DISALLOWANCE U/SEC14A R.W.R 8D(2)(III) IRRESPECTIVE OF QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 4 - THE FACTS ON RECORD THAT THERE IS NO EXEMPT INCOME RECEIVED BY THE ASSESSEE. THE LD.CIT(A) RELIED ON T HE JUDICIAL DECISIONS AND DELETED THE ADDITION AND ALLOWED THE ASSESSEE APPEAL. AGGRIEVED BY THE CIT(A ) ORDER THE REVENUE HAS FILED AN APPEAL WITH THE HON BLE TRIBUNAL. 4. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE AND LD.DR HAS MADE THE SUBMISSIONS. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DELET ING THE ADDITION MADE U/S 14AR.W.R 8D(2) (III) OF THE A CT THOUGH THE ASSESSEE COMPANY HAS NOT RECEIVED EXEMPT INCOME DURING THE YEAR BUT MADE SUBSTANTIAL INVESTMENTS AND PRAYED FOR ALLOWING THE REVENUE APPEAL. 5. WE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED AS ENVISAGED BY THE LD.DR THAT THE A.O HAS MADE DISALLOWANCE U/S 14A R.W.R 8D(2)(III) OF THE IT RULES BASED ON THE INVESTMENTS AND THE LD.CIT(A) HAS DELETED THE ADDITION CONSIDERING THE FACT THAT THERE IS NO EXEM PT INCOME RECEIVED BY THE ASSESSEE. WE FOUND THAT THE CIT(A) HAS RELIED ON THE FACTS AND JUDICIAL DECISIO NS AND GRANTED THE RELIEF. WE CONSIDERED IT APPROPRIAT E TO QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 5 - REFER TO THE OBSERVATIONS OF THE CIT(A) AT PAGE 3 P ARA 6.1 TO 7 OF THE ORDER WHICH IS READ AS UNDER: 6.1 GROUND NO. 1: VIDE THIS GROUND APPELLANT HAS AG ITATED AGAINST ADDITION OF RS. 8,67,37,238/- U/S 14A R.W.R .8D. IN PARA 4 OF THE ASSESSMENT ORDER THE LD. AO HAS MENTI ONED THAT IT WAS OBSERVED FROM THE BALANCE SHEET FOR AX, 2015 -16 THAT THE APPELLANT COMPANY HAD MADE INVESTMENT IN THE SH ARES ON WHICH THE APPELLANT IS LIKELY TO EARN EXEMPT INCOME . ACCORDING TO THE AO PROVISION OF SECTION 14A R.W.R.8D WERE AP PLICABLE AND THE APPELLANT COMPANY HAD FAILED TO MAKE ANY DISALLOWANCE U/S 14A R.W.R.8D. IN VIEW OF IT THE LD . AO WORKED OUT A DISALLOWANCE OF RS. 8,67,37,238/- U/S 14A R.W.R.8D, 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING T HE COURSE OF THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT THE APPELLANT HAD EARNED NO EXEMPT INCOME DURING THE YE AR UNDER CONSIDERATION AND THEREFORE NO DISALLOWANCE COULD B E MADE UNDER SECTION 14A R.W.R. 8D OF THE INCOME TAX ACT, 1961. 6.3 RELIANCE CAN BE PLACED ON THE RECENT JUDGMENT O F THE HON'BLE SUPREME COURT IN THE CASE OF PCIT VS. OIL I NDUSTRY DEVELOPMENT BOARD [2019] 262 TAXMANN 102 [SC], WHER EIN IT IS HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME, DISALLOWANCE U/ S 14A 86 RULE 8D OF THE ACT OF ANY AMOUNT IS NOT PERMISSIBLE (ESSAR TELEHOLDINGS 401 ITR 445 (SC ) FOLLOWED, CHEMINVEST 378 ITR 33 (DEL) APPROVED) 6.4 FURTHER RELIANCE WAS PLACED ON FOLLOWING CASES: A). THE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. BALLA RPUR INDUSTRIES LTD.(85 TAXMANN.COM 13) B). HON'BLE APEX COURT'S DISMISSAL OF SLP FILED BY THE REVENUE AGAINST THE DECISION GIVEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT. (CENTRAL)-1 VS. CHETTINAD LOGISTIC S (P.) LTD.(95 TAXMANN.COM 250). QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 6 - C). CHEMINVEST LIMITED VS. CIT-4 (DELHI HC) (378 ITR 33 ) D). JURISDICTIONAL MUMBAI ITAT IN THE CASE OF KAMAT H OTELS (INDIA) LTD VS DCIT E). HIGH COURT OF DELHI IN PRINCIPAL COMMISSIONER OF IN COME- TAX-04 V. IL&FS ENERGY DEVELOPMENT COMPANY LTD. [20 17] 84 TAXMANN.COM 186 (DELHI) J). JURISDICTIONAL ITAT MUMBAI BENCH 'G' IN ASSISTA NT COMMISSIONER OF INCOME TAX, MUMBAI V. GINI 86 JONY LTD. [2018] 97 TAXMANN.COM 401 (MUMBAI - TRIB.) 6.4.1 THE HON'BLE JURISDICTIONAL BOMBAY HC RECENTLY IN THE CASE OF PCIT VS. BALLARPUR INDUSTRIES LTD.(85 TAXMA NN.COM 13) PUBLISHED ON 17TH AUGUST, 2018 HAS HELD AS FOLLOWS: 'ON HEARING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOT H THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT T HAT THERE WAS NO EXEMPT INCOME EARNED BY THE APPELLANT. WHILE HOLDING SO, THE AUTHORITIES RELIED ON THE JUDGMENT OF THE D ELHI HIGH COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLD S THAT THE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INC OME' IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES T HAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPE LLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIVED BY THE APPELLANT AND THE SAME WAS INCLUDIBLE IN THE TOTAL INCOME. IN THE FAC TS OF THE CASE, THE AUTHORITIES HELD THAT SINCE THE INVESTMEN TS MADE BY THE APPELLANT IN THE SISTER CONCERNS WERE NOT THE A CTUAL INCOME RECEIVED BY THE APPELLANT, THEY COULD NOT HA VE BEEN INCLUDED IN THE TOTAL INCOME.' 6.4.2 FURTHER THE HON'BLE APEX COURT HAS DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE DECISION GIVEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT, (CENTRAL)-1 VS. CHET TINAD QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 7 - LOGISTICS (P.) LTD.(95 TAXMANN.COM 250) STATING THA T SECTION 14A CANNOT BE INVOKED WHERE NO EXEMPT INCOME WAS EA RNED BY APPELLANT IN RELEVANT ASSESSMENT YEAR. 6.4.3 CHEMINVEST LIMITED VS. CIT-4 (DELHI HC) (378 ITR 33) '23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME , DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR.' 6.4.4 THE JURISDICTIONAL MUMBAI ITAT IN THE CASE OF KAMAT HOTELS (INDIA) LTD VS DCIT HAS HELD THAT '2.5.1 WE ARE OF THE CONSIDERED VIEW THAT THE LEGIS LATIVE INTENT IS MORE DISCERNIBLE IN THE JUDICIAL DECISIONS. IN C HETTINAD LOGISTICS (P.) LTD. (SUPRA), THE HON'BLE MADRAS HIG H COURT HAS HELD THAT SECTION 14A CANNOT BE INVOKED WHERE NO EX EMPT INCOME WAS EARNED BY THE APPELLANT IN THE RELEVANT ASSESSMENT YEAR. IN THE CASE OF CIT V. SHIVAM MOTOR S (P.) LTD. [2015] 55 TAXMANN.COM 2621230 TAXMAN 63 (ALL.), IT HAS BEEN HELD THAT IN ABSENCE OF ANY TAX FREE INCOME EARNED BY THE APPELLANT, DISALLOWANCE U/S. 14A COULD NOT BE MADE. IN A SIMILAR VEIN, IT HAS BEEN HELD IN CHEMINVEST LTD. V . CIT [2015] 61 TAXMANN.COM 1181284 TAXMAN 7611378 ITR 33 (DELHI ) THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS R ECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR.' 6.4.5 THE HON'BLE HIGH COURT OF DELHI IN PRINCIPAL COMMISSIONER OF INCOME-TAX-04 V. IL&FS ENERGY DEVEL OPMENT COMPANY LTD. [2017] 84 TAXMANN.COM 186 DELHI WHEREI N IT WAS HELD THAT WHERE NO EXEMPT INCOME WA EARNED IN R ELEVANT ASSESSMENT YEAR, THERE COULD BE NO DISALLOWANCE IN TERMS OF SECTION 14A R.W.R 8D. 6.4.6 JURISDICTIONAL ITAT MUMBAI BENCH 'G' IN ASSIS TANT I COMMISSIONER OF INCOME TAX, MUMBAI V. GINI & JONY L TD. [2018] 97 TAXMANN.COM 401 (MUMBAI - TRIB.) WHEREIN IT WAS QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 8 - HELD THAT WHERE THERE WAS NO EXEMPT INCOME EARNED B Y APPELLANT DURING PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR, THERE COULD BE NO DISALLOWANCE IN TERMS OF SECTION 14A. 6.5 IT IS SEEN FROM THE ITR AND FINANCIAL STATEMENT S THAT THE APPELLANT HAD NOT EARNED ANY EXEMPT INCOME DURING T HE YEAR. THE SAME WAS ALSO ACCEPTED BY THE AO IN HIS ASSESSM ENT ORDER. SINCE NO EXEMPT INCOME WAS EARNED BY THE APP ELLANT DURING THE YEAR, THEREFORE RESPECTFULLY FOLLOWING T HE ABOVE NOTED JUDICIAL PRONOUNCEMENTS, THE ADDITION MADE BY THE LD. AO AMOUNTING TO RS.8,67,37,238/ - IS HEREBY DELETED . HENCE, THE APPEAL OF THE APPELLANT ON THIS GROUND I S ALLOWED. 7. IN THE RESULT, FOR STATISTICAL PURPOSE, THE APPEAL IS ALLOWED. 5.1 THE LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) WITH ANY COGENT EVIDENCES OR INFORMATIO N BUT RELIED ONLY ON THE ORDER OF THE A.O. WE FOUND THAT THE CIT(A) HAS RELIED ON THE FINDINGS IN THE ASSESSMENT ORDER AND OBSERVED THAT THERE IS NO EXEMPT INCOME RECEIVED BY THE ASSESSEE AND RELIED ON THE PROVISIONS OF SEC. 14A R.W.R 8D OF THE IT RULES . FURTHER CIT(A) EMPHASIZED THAT THE PROVISIONS OF SEC.14A OF THE ACT SHALL NOT BE APPLICABLE WHERE TH ERE IS NO EXEMPT INCOME RECEIVED AND STRENGTHENED HIS ORDER RELYING ON THE HONBLE HIGH COURT AND HONBL E TRIBUNAL DECISIONS AND PASSED A REASONED ORDER. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 9 - 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 7129/MUM/2019, FOR THE A.Y 2016-17. 7. AS THE FACTS AND CIRCUMSTANCES IN THIS APPEAL AR E IDENTICAL TO ITA NO. 7128/MUM/2019 FOR A.Y. 2015- 16, THE DECISION RENDERED IN ABOVE PARAGRAPHS WOULD APPLY MUTATIS MUTANDIS FOR THIS CASE ALSO. ACCORDINGLY, GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.06.2021 SD/- SD/- ( S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 02.06.2021 KRK, PS QI NG AMBAY CITY DEVELOPERS CORPORATION LTD ITA NOS.7128&7129/MUM/2019 - 10 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. !!' , $ % , / DR, ITAT, MUMBAI 6. () * + / GUARD FILE. / BY ORDER, ! //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBA I