DCIT 12 (2)(2), MUMBAI V. M/S HATHWAY INVESTMENTS PVT LTD., MUMBAI

ITA 7604/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2006 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 11-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 7604 /MUM/2019 ASSESSMENT Y EAR: 2012 - 13 DCIT - 12(2)(2), ROOM NO. 128F, 1 ST FLOOR, AAYAKAR BHAWAN, C HURCHGATE, MUMBAI - 400020 VS. M/S HATHWAY INVESTMENTS PVT. LTD., 4 TH FLOOR, RAHEJAS, CORNER OF MAIN AVENUE & V P ROAD, SANTACRUZ (WEST), MUMBAI - 400054 PAN: AAACH1675B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GURBINDER SINGH (D R) ASSESSEE BY : NONE DATE OF HEARING: 04/05 /20 21 DATE OF PRONOUNCEMENT: 02 / 0 6 /202 1 O R D E R PER SAKTIJIT DEY , JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 19 .09 .2019 OF LEARNED COMMISS IONER OF INCOME TAX (APPEALS) 2 0, MUM BAI FOR THE ASSESSMENT YEAR 2012 - 13 . 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) IS JUSTIFIED IN DIRECTING TO EXCLUDE THE SHAR ES WHICH YIELDED EXEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR FROM SPECIFIED INVESTMENTS AND RECOMPUTED THE DISALLOWANCE U/S 8D(2)(II) THOUGH THERE IS NO SUCH PROVISIONS FOR EXCLUSION AS PER SECTION 14A R.W.R. 8D FOR CALCULATION OF EXPENSES RELATED TO EXEMPT INCOME? 2 ITA NO. 7604 / MUM/2019 ASSESSMENT YEAR: 201 2 - 1 3 3. BRIEFLY THE FACTS ARE, THE ASSESSEE A RESIDENT COMPANY IS STATED TO BE ENGAGED IN INVESTMENT ACTIVITY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 27.09.2012 DECLARING TOTAL INCOME OF RS. 1,87, 26,750/ - . IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO RS. 5,73,25,415/ - AND SUO MOT U DISALLOWANCE AN AMOUNT OF RS. 2 8,96,745/ - TOWARDS EXPENDITURE ATTRIBUTABLE TO EARNING THE EXEMPT INCOME. THE AO HOWEVER WAS OF THE VIEW THAT THE SUO MOT U DISALLOWANCE MADE BY THE ASSESSEE IS NOT IN ACCORDANCE WITH RULE 8D. THUS, HE PROCEEDED TO COMPUTE THE DISALLOWANCE BY APPLYING RULE 8D. THOUGH, THE AO AGREED THAT THE ASSESSEE HAS NO DIRECT EXPENDITURE DISALLOWABLE UNDER RULE 8D(2)(I) AND NO INTEREST EXPENDITURE DISALLOWABLE UNDER RULE 8D (II). H OWEVER, HE DISALLOWED AN AMOUNT OF RS. 2,26,04,842/ - UNDER RULE 8D(2)(III). THE ASSESSEE IT SELF HAVING DISALLOW ED RS. 28,96,745/ - , THE AO MADE A NET DISALLOWANCE OF RS. 1,71,68,206/ - . THE ASSESSEE CONTESTED THE AFORESAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS) . A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD AND RELYING UPON THAT THE DECISION S OF ITAT DELHI SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET INVESTMENTS (P) LTD. (2017) 58 ITR (T) 313 (DELHI) AND THAT OF THE MUMBAI BENCH IN THE CASE OF PIRAMAL ENTERPRISES LTD. VS. ADDITIONAL CIT (2018) 97 TAXMAN.COM 352 , LEARNED COMMISSIONER (APPEALS) HELD THAT ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR HAS TO BE CONSIDERED FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III) . ACCORDINGLY, HE DIRECT ED THE AO TO COMPUTE TH E DISAL LOWANC E . FURTHER, HE DIRECTED , I F ON SUCH COMPUTATION THE DISALLOWANCE COMPUTED BECOMES LESS THAN SUO MOT U DISALLOWANCE MADE BY THE ASSESSEE , THEN , THE DISALLOWANCE MADE BY THE ASSESSEE WOULD REMAIN. 4. WHEN APPEAL WAS CALLED FOR HEARING NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE. ACCORDINGLY, WE PROCEED TO DISPOSE OF 3 ITA NO. 7604 / MUM/2019 ASSESSMENT YEAR: 201 2 - 1 3 THE APPEAL EX - PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND BASED ON MATERIAL AVAILABLE ON RECORD. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. FACTS ON RECORD CLEARLY REVEAL THAT , BOTH , THE ASSESSEE AND THE ASSESSING OFFICER HAVE AGREED THAT ONLY EXPENDITURE WHICH CAN BE DISALLOWED U NDER SECTION 14A R.W.R. 8D I S INDIRECT EXPENSES UNDER RULE 8D(2)(III) . W HILE THE ASSESSEE HAS COMPUTED THE DISALLOWANCE AT RS. 28,96,745/ - , T HE AO HAS ENHANCED IT TO RS. 2,26,04,842/ - . W HEREAS , LEARNED COMMISSIONER (APPEALS) HAS DIRECTED T HE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) BY CONSIDERING ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. 5. IN OUR VIEW, THE AFORESAID DECISION OF LEARNED COMMISSIONER (APPEALS) IS IN CONF O RMITY WITH THE LEGAL PRINCIPLE LAID DOWN BY ITAT , DE LHI SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET INVESTMENTS (SUPRA) AS WELL AS VARIOUS OTHER DECISIONS , INCLUDING , THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL RELIED UPON BY THE LEARNED COMMISSIONER (APPEALS) . T HAT BEING THE CASE, WE DO NOT FIND ANY INFI RMITY IN DECISION OF LEARNED COMMISSIONER (APPEALS). GROUND S ARE DISMISSED. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JUNE , 2021 . SD/ - SD/ - ( M. BALAGANESH ) ACCOUNTANT MEMBER ( SAKTIJIT DEY ) JUDICIAL MEMBER MUMBAI ; DATED: 02 / 0 6 /202 1 ALINDRA, PS 4 ITA NO. 7604 / MUM/2019 ASSESSMENT YEAR: 201 2 - 1 3 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT (A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY OR DER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI