DCIT CEN CIR 5(4), MUMBAI V. SATYAM REALATORS P.LTD, MUMBAI

ITA 7334/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6382 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2013-2014
• Appeal Filed On: 22-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENC H MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 7334/MUM/2017 FOR (ASSESSMENT YEAR 2013-14) M/S SATYAM REALTORS PVT LTD, 04, 3 RD FLOOR, CAPRI ANANT MARG, BANDRA( EAST) MUMBAI-400051 PAN: AACCS 7290 P VS. DCIT,CC-5(4) , ROOM NO. 1927, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY : NIMESH THAR &CO (CA FIRM) RESPONDENT BY : CHAUDHARY ARUN KUMAR SINGH (DR) DATE OF HEARING : 06.02.2019 DATE OF PRONOUNCEMEN T : 06.02.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LEARNED COMMISSIONER (APPEALS)- 53, MUMBAI DATED 17 TH OCTOBER 2017, WHICH IN TURN ARISES FROM ASSESSMENT ORDER DATED 30 TH MARCH 2016 PASSED UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2013-14. THE REV ENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING ADDITION U NDER SECTION 14A OF THE ACT IGNORING THAT PROVISION OF SECTION 14A W HICH APPLY EVEN IF NO EXEMPT INCOME IS ACTUALLY AND RECEIVED DURING THE Y EAR IN ANY FORM WHATSOEVER. ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 2 (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LEARNED COMMISSIONER (APPEALS) HAS ERRED IN DELETING THE AD DITION UNDER SECTION 14A OF THE ACT BY IGNORING THE PROVISIONS O F CBDT CIRCULAR NO. 5/2014 DATED 11 FEBRUARY 2014 WHEREIN, IT HAS BEEN CLARIFIED THAT RULE 8D READ WITH SECTION 14A PROVIDES FOR THE DISALLOWA NCE OF EXPENDITURE EVEN WHERE THE ASSESSEE IN PARTICULAR HAS NOT EARNE D EXEMPT INCOME. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN DELETING THE AD DITION UNDER SECTION 14A OF THE ACT RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CHEM INVESTMENT LTD OVERLOOKING TH E FACT THAT THE ABOVE DECISION HAS NOT BEEN ACCEPTED BY THE REVENUE AND SLP HAS BEEN FILED BEFORE HONBLE SUPREME COURT AND SAME IS PEND ING . 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 13 TH SEPTEMBER 2013 DECLARING TOTAL INCOME AT RS. NILL. THE RETURN OF INCOME WAS SELECTED FOR SCRUTIN Y AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30 TH MARCH 2016. THE ASSESSING OFFICER DURING THE ASSESSMENT NOTED THAT THE ASSESS EE COMPANY HAS SHOWN INVESTMENT IN EQUITY SHARE OF VARIOUS PRIVATE LIMIT ED COMPANIES OF RS.160 CRORE (APPROX) FROM WHERE, THE ASSESSEE MAY HAVE EA RNED INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME. THE ASSESSEE WA S ASKED TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A READ WITH RULE 8D SHOULD NOT BE APPLIED TO THE ASSESSEE. THE ASSESSEE FURNISHED ITS REPLY DATED 23 RD OF MARCH 2016 AND ALSO FURNISHED WORKING OF DISALLOWAN CE UNDER SECTION14A. THE ASSESSEE ALSO CONTENDED THAT THE AS SESSEE HAS NOT ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 3 ATTRIBUTED ANY EXPENSES FOR EARNING EXEMPT INCOME. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF RULE 8D AND MADE THE DISA LLOWANCE UNDER RULE 8D (2)(III) @ 0.5% OF AVERAGE VALUE OF INVESTMENT. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF RS. 78,60,152/-. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE CONTENDED THAT DURING THE YEAR THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE ASSE SSEE IN ALTERNATIVE SUBMISSION CONTENDED THAT DURING THE PERIOD THE ASS ESSEE HAS INCURRED DEMAT CHARGES OF RS. 834/- AND THAT THE BEST DISALL OWANCE CAN BE RESTRICTED TO THE EXTENT OF RS. 834/- ONLY. THE ASS ESSEE HAS NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE TOWARD EARNING E XEMPT INCOME NOR ANY EXEMPT INCOME IS DERIVED, THEREFORE, THE PROVISION OF SECTION 14A READ WITH RULE 8D CANNOT BE INVOKED AGAINST THE ASSESSEE . THE LEARNED COMMISSIONER (APPEALS) BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMENT LTD VERSUS C IT (372 ITR 694) AND OTHER DECISIONS OF TRIBUNAL IN DAGA GLOBAL CHE MICAL PVT LTD IN ITA NO. 5592/M/2012 DATED 01.01.2015, DELETED THE ENTIR E DISALLOWANCE. THUS, AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEA LS) THE REVENUE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 3. THE APPEAL CAME UP HEARING ON 31.01.2019, SH. PUNIT THAR LEARNED AUTHORISED REPRESENTATIVE (AR) FOR THE ASSESSEE APP EARED AND SOUGHT TIME FOR FILING AUTHORITY LETTER AND FOR ENGAGING SENIOR COUNSEL FOR ARGUING THE ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 4 CASE BEFORE THE TRIBUNAL. ON THE REQUEST OF SH. PUN IT THAR APPEAL WAS ADJOURNED FOR 06.02.2019. AGAIN ON 06.02.2019, THE LD. AR FOR THE ASSESSEE FILED (SENT) ADJOURNMENT APPLICATION AND A LSO FILED HIS AUTHORITY LETTER WITH SIMILAR PRAYER FOR ENGAGING SENIOR COUN SEL. WE HAVE PERUSED THE GROUNDS OF APPEAL RAISED BY THE REVENUE AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW, AFTER GOING THROUGH THE G ROUNDS OF APPEAL THE ADJOURNMENT WAS DECLINED AND HEARD THE SUBMISSIONS OF LD. DR FOR THE REVENUE. 4. WE HAVE HEARD LEARNED DR FOR THE REVENUE AND ALSO G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LEARNED DR FURT HER SUBMITS THAT ASSESSEE HAS INVESTED HUGE FUND IN EQUITY SHARE OF VARIOUS PRIVATE LIMITED COMPANIES FOR EARNING EXEMPT INCOME. THE AS SESSEE HAS NOT MADE ANY SUO-MOTO DISALLOWANCE UNDER SECTION 14A, THEREFORE, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF RULE 8D AND MADE A REASONABLE DISALLOWANCE AS PER THE FORMULA PRESCRIB ED THEREIN. THE LEARNED DR PRAYED FOR REVERSING THE ORDER OF COMMIS SIONER (APPEALS) AND TO RESTORE THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE SUBMISSION OF LEARNED DR FOR THE REVENUE AND ALSO CAREFULLY PERUSED THE ORDER OF AUTHORITIES BEL OW. WE HAVE ALSO DELIBERATED ON THE VARIOUS CASE LAWS RELIED BY LEAR NED COMMISSIONER (APPEALS). THE ASSESSING OFFICER MADE THE DISALLOWA NCE BY INVOKING THE ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 5 PROVISIONS OF RULE 8D. THE ASSESSING OFFICER MADE D ISALLOWANCE UNDER RULE 8D (2)(III) @ 0.5% OF AVERAGE VALUE OF INVESTM ENT. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF RS. 78,60,15 2/-. BEFORE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE CONTENDED THAT DURING THE YEAR THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE ASSE SSEE IN ALTERNATIVE SUBMISSION CONTENDED THAT DURING THE PERIOD THE ASS ESSEE HAS INCURRED DEMAT CHARGES OF RS. 834/- AND THAT THE BEST DISALL OWANCE CAN BE RESTRICTED TO THE EXTENT OF RS. 834/- ONLY. THE ASS ESSEE HAS NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE TOWARD EARNING E XEMPT INCOME NOR ANY EXEMPT INCOME IS DERIVED, THEREFORE, THE PROVISION OF SECTION 14A READ WITH RULE 8D CANNOT BE INVOKED AGAINST THE ASSESSEE . AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CONCLUDED THAT SECTI ON 14A READ WITH RULE 8D CANNOT BE INVOKED IN AUTOMATICALLY, WITHOUT RECO RDING OBJECTIVE SATISFACTION THAT THE ASSESSEE HAS INCURRED EXPENDI TURE FOR EARNING THE EXEMPT INCOME. THE LEARNED COMMISSIONER (APPEALS) A LSO CONCLUDED THAT ASSESSING OFFICER HAS AUTOMATICALLY APPLIED RULE8D WITHOUT RECORDING ANY OBJECTIVE SATISFACTION THAT THE ASSESSEE HAS INCURR ED ANY EXPENSES TO EARN EXEMPT INCOME. THE LEARNED COMMISSIONER (APPEALS) A LSO EXAMINED THE INVESTMENT SHOWN BY THE ASSESSEE AT THE TIME OF CLO SING OF THE FINANCIAL YEAR AS ON 31 ST MARCH2013. THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE TOTAL INVESTMENT IS ON 31 ST MARCH 2013 WAS OF RS. 160 CRORE (APPROX), OUT OF WHICH IS INVESTMENT OF 154 C RORE (APPROX) ARE ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 6 COMING FROM EARLIER YEARS AND THE INVESTMENT WERE M ADE DURING THE YEAR IS ONLY OF RS. 5.72 CRORE. THE ASSESSEE HAS INVESTE D IN GROUP COMPANIES/SUBSIDIARIES, HENCE THERE IS NO QUESTION OF INCURRING ANY EXPENSES FOR EARNING TAX-FREE INCOME FROM SHARE OF SUBSIDIES COMPANY/GROUP COMPANIES/LISTED COMPANIES. THE LEARN ED COMMISSIONER (APPEALS) AFTER FOLLOWING THE DECISION OF HONBLE D ELHI HIGH COURT IN CHEMINVEST INVESTMENT LTD (SUPRA) CONCLUDED THAT TH E ASSESSEE HAS NOT CLAIMED EXEMPT INCOME AND DIRECTED THE ASSESSING OF FICER TO DELETE THE DISALLOWANCE. NO CONTRARY FACTS OR LAW IS BROUGHT T O OUR NOTICE TO TAKE THE OTHER VIEW. 6. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT THE GROUNDS OF APPEAL RAISED B Y REVENUE ARE COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. THE LEARNED COMMISSIONER (APPEALS) ALLOWED THE RELIEF TO THE ASSESSEE BY FOL LOWING THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF JOINT INVESTMEN T LTD VERSUS CIT (SUPRA) AND DECISIONS OF TRIBUNAL IN DAGA GLOBAL CH EMICAL PVT LTD (SUPRA). THEREFORE WE DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/02/2019 . SD/ SD/ - MANOJ KUMAR AGGARWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATE: 06 .02.2019 ITA NO. 73 34/M/2017 SATYAM REALTORS PVT LTD , 7 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI