DCIT 1(1)(1), MUMBAI V. BENNNETT PROPERTY HOLDING COMPANY LTD, MUMBAI

ITA 728/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0019 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: S VENKATRAMA N
• Keywords: Earning of tax free income; Revised return
• Section: 14A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 728/MUM/2016 ( / ASSESSMENT YEAR: 2012 - 13 ) DCIT 1(1)(1) 579, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 4000 20 / VS. BENNETT PROPERTY HOLDING COMPANY LTD. 5 TH FLOOR, TIMES TOWER, K. KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL(W), MUMBAI - 400012 ./ ./ PAN NO. A AECS3180H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SUMAN KUMAR / RESPONDENTBY : SHRI S. VENKATRAMAN / DATE OF HEARING : 2 6/02 /201 8 / DATE OF PRONOUNCEMENT : 28/02/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CI T (APPEAL) 2, MUMBAI DATED 20.1 1.15 F OR AY 201 2 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. (1) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT( A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS. 5,66,902/ - AS AGAINST RS. 2,62,40,605/ - MADE BY THE A.O. WITHOUT APPRECIATING THE FACT THAT SECTION 14A R.W. RULE 8D IS SQUARELY APPLICABLE IN THIS CASE AND DISALLOWANCE HAS TO BE MADE AS PER THE FORMULA GIVE IN RULE 8D.' THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR WITHDRAW THE AFORESAID GROUND OF APPEAL. 2. THE B RIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS E - FILED ITS ORIGINAL RETURN OF INCOME ON 29.09.2012 DECLARING TOTAL INCOME OF RS. 33,93,73,990/ - . SUBSEQUENTLY, REVISED RETURN WAS FILED ONLINE ON 25.03.2014 DECLARING THE SAME INCOME. THE ASSESSMENT WAS COMPLETED BY THE AO U/S.143(3) OF THE INCOME - TAX ACT, 1961 ON 20.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS. 36,50,47,700/ - UN DER NORMAL PROVISIONS OF THE ACT. IN THE ASSESSMENT ORDER , THE AO MADE D ISALLOWANCE U/S. 14A OF I.T. ACT OF RS. 2,56,73,703/ - . 3 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES ALLOWED THE APPEAL OF THE ASSESSEE THEREBY DELETING THE ADDITIONS MADE BY THE AO BY INVOKING RULE 8D OF THE I.T. ACT. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 3. THE SOLE GROUND RAISED BY THE REVENUE RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN RESTRICTING THE DISALLOWANCE TO RS. 5,66,902/ - AS AGAINST RS. 2,62,40,605/ - MADE BY THE A.O. WITHOUT APPRECIATING THE FACT THAT SECTION 14A R.W. RULE 8D IS SQUARELY APPLICABLE IN THIS CASE AND DISALLOWANCE HAS TO BE MADE AS PER THE FORMULA GIVE IN RULE 8D . 4. WE HAVE HEARD BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 4 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT (A) IS CONTAINED IN PARA NO. 5.1 & 5.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.1 THE APP ELLANT, PURSUANT TO A SCHEME OF ARRANGEMENTS UNDER SECTION 391 TO 394 OF THE COMPANIES ACT, 1956, HAD ACQUIRED THE REAL ESTATE DIVISION THAT INCLUDED UNITS OF MUTUAL FUNDS, WITH EFFECT FROM 1 ST APRIL 2011. CONSEQUENTLY, THE APPELLANT HAD NOT BORROWED ANY MONIES FOR INVESTMENT IN UNITS. THE EXPENSES, OTHER THAN THOSE WHICH RELATED TO THE REAL ESTATE DIVISION, AGGREGATING RS.33,72,029/ - WERE, THEREFORE, ATTRIBUTABLE ALSO TO THE EARNING OF THE EXEMPT INCOME FROM UNITS. THE APPELLANT HENCE ALLOCATED THE COMMON EXPENSES INCURRED IN THE RATIO OF EXEMPT INCOME TO TOTAL INCOME AND DISALLOWED RS.5,66,902/ - UNDER SECTION 14A OF THE I.T. ACT, 1961 WHILE FILING ITS RETURN OF INCOME. THE O BSERVATIONS OF THE LD. A.O. IN PARA 5.2 OF HIS ORDER TO INVOKE RULE 8D CLEARLY SHOW THAT HE HAS NOT ARRIVED AT ANY OBJECTIVE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE 5 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. APPELLANT TO DISALLOW THE COMMON EXPENSES IN THE RATIO OF EXEMPT IN COME TO TOTAL INCOME UNDER SEC. 14A OF THE I.T. ACT. THE OBSERVATIONS IN THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN GODREJ 86 BOYCE MFG. CO. LTD. VS. DCIT (328 ITR 81) RELIED UPON BY THE LD. AR, CLEARLY LAY DOWN THAT THE A.O. HAS TO ARRIVE AT AN OBJE CTIVE SATISFACTION AS TO THE CORRECTNESS OF THE DISALLOWANCE MADE BY THE APPELLANT BEFORE SEEKING TO INVOKE RULE 8D. A.O. CANNOT IPSO FACTO INVOKE RULE 8D STRAI GHT AWAY WITHOUT COMING TO SUCH A SATISFACTION. IN THE INSTANT CASE, THE APPELLANT COMPANY ITSELF DISALLOWED RS. 5,66,902/ - IN CONNECTION WITH EXEMPTED INCOME. 5.2 IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (328 ITR 81), I AM INCLINED TO AGREE WIT H THE SUBMISSIONS OF THE LD. AR. THE ADDITION OF RS.2,56,73,703/ - MADE BY THE A.O. BY INVOKING RULE 8D IS, THEREFORE, DELETED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES, WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE FACTS HAD RIGHTLY RELIED UPON THE JUDGMENT RENDERED BY HONBLE BOMBAY HIGH COURT IN 6 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. LTD. VRS. DCIT (328 ITR 81) WHEREIN IT HAS CATEGORICALLY LAID DOWN THAT THE A.O. HAS TO ARRIVE AT AN OBJECTIVE SATISFACTION AS TO THE CORRECTNESS OF THE DISALLOWANCE MADE BY THE ASSESSEE BEFORE SEEKING TO INVOKE RULE 8D. THE A.O. CANNOT IPSO FACTO INVOKE RULE 8D STRAIGHT AWAY WITHOUT COMING TO SUCH A SATISFACTION. IN THE INSTANT CASE, THE ASSESSEE COMPANY ITSELF DISALLOWED RS. 5,66,902/ - IN CONNECTION WITH EXEMPTED INCOME. HOWEVER THE AO HAD NOT RECORDED HIS SATISFACTION REGARDING THE CORRECTNESS OF DISALLOWANCE MADE BY THE ASSESSES. HENCE IN THESE CIRCUMSTANCES, THE LD. CIT(A) RIGHTLY D ELETED THE ADDITIONS MADE BY AO IN CONTRAVENTION OF RULE 8D. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE 7 I.T.A. NO. 728 /MUM/201 6 BENNETT PROPERTY HOLDING COMPANY LTD. JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . 5 . IN THE NET RESU LT, THE APPEAL FILED BY THE REVENUE STANDS D ISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB. 2018 SD/ - SD/ - (G. S. PANNU) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 28 . 02 .201 8 SR.PS. DHANANJAY / 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 FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI