DCIT CEN CIR 1(4), MUMBAI V. EVERSMILE CONSTRUCTION COMPANY P.LTD, MUMBAI

ITA 7733/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0270 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Assessee Lawyers: MRS ARATI VISSANJI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.7733/M/2014 ASSESSMENT YEAR: 2011-12 DCIT, CENTRAL CIRCLE 1(4), ROOM NO.902, PRATISHTHA BHAVAN, 9 TH FLOOR, OLD CGO BUILDING, ANNEXE, MUMBAI 400 020 VS. M/S. EVERSMILE CONSTRUCTION COMPANY PVT. LTD., DB HOUSE, YASHODHAM, GEN. A.K. VAIDYA MARG, GOREGAON (EAST) MUMBAI-400 063 PAN: AAACE0875E (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : MRS. ARATI VISSANJI, A.R. REVENUE BY : SHRI AARJU GARODIA, D.R. DATE OF HEARING : 18.01.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 24.10.2014 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: ON PERUSAL OF BOOKS OF ACCOUNTS, IT WAS OBSERVED T HAT ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.46,74,925/- FROM M/S. GOAN REAL ESTATE & CONSTRUCTION PVT. LTD. DURING THE YEA R UNDER CONSIDERATION. ASSESSEE HAS CLAIMED THE SAID DIVID END INCOME EXEMPT FROM INCOME TAX. THE ASSESSEE WAS SHOW CAUSE D AS TO WHY DISALLOWANCE UNDER SECTION 14A R.W.R. 8D(2)(III) SH OULD NOT BE MADE ITA NO.7733/M/2014 M/S. EVERSMILE CONSTRUCTION COMPANY PVT. LTD. 2 TO ITS TOTAL INCOME. IN RESPONSE, THE ASSESSEE FILE D ITS SUBMISSION OF COMPUTATION OF DISALLOWANCE U/S 14A AT 05% OF THE A VERAGE VALUE OF INVESTMENTS, INCOME FROM WHICH DO NOT FORM PART OF TOTAL INCOME. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS T HE AO) HAS CALCULATED THE DISALLOWANCE UNDER SECTION 14A BY OB SERVING AS UNDER: I EXPENDITURE DIRECTLY RELATED TO EARNING EXEMPT INCOME NIL II INTEREST EXPENDITURE NOT DIRECTLY ATTRIBUTABLE T O ANY INCOME OR RECEIPT=A*B/C A= INTEREST EXPENDITURE OTHER THAN MENTIONED AT SR. NO.I B= THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME. AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR AS PER TOTAL ( A*B/C) NIL III 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME AVERAGE INVESTMENTS OPENING INVESTMENTS RS.1077433420 CLOSING INVESTMENTS RS.1347167052 TOTAL :- RS.2424600472 AVERAGE INVESTMENTS RS.1212300236 IN QUANTIFYING AVERAGE VALUE OF INVESTMENTS, INVESTMENT IN PROPERTY OF RS.9086173/- IS EXCLUDED (0.5% OF RS.1212300236) 6061501 TOTAL (I+II+III) 6061501 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD . CIT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: ITA NO.7733/M/2014 M/S. EVERSMILE CONSTRUCTION COMPANY PVT. LTD. 3 6.1 THE WRITTEN SUBMISSIONS OF THE APPELLANT IS CA REFULLY CONSIDERED. BASED ON THE FACTS AS APPLICABLE FOR THE YEAR UNDER APPEAL, THE CIT(A)-36, MUMBAI MY PREDECESSOR, VIDE HIS ORDER DATED 20.7.2012 FOR THE A.Y. 2009-10 HAS ELABORATELY DISCUSSED IN DETAIL AND THEN CONFIRMED THE DISALLOW ANCE OFFERED BY THE APPELLANT OF RS.7,28,280/- AS HAVING BEEN INCURRED ON ADMINISTRA TIVE AND MANAGERIAL EXPENSES IN RELATION TO INVESTMENTS HELD, THE INCOME OF WHIC H IS EXEMPT UNDER CHAPTER III OF THE ACT (VIDE PARA 5.5 ON PAGE NO.6). THEREFORE, I N THE LIGHT OF THE DISCUSSION ABOVE, FOR THIS YEAR I.E. A.Y. 2011-12 ALSO, RESPECTFULLY FOLLOWING MY PREDECESSORS VIEW AS HELD FOR A.Y. 2009-10, I ALSO CONFIRM THE DISALLOWA NCE OFFERED BY THE APPELLANT OF RS.7,88,167/- REPRESENTING 10% OF RS.78,81,670/- AN D NOT RS.60,61,504/-. OUT OF TOTAL RS.60,61,504/-, RS.7,88,167/- IS CONFIRMED AN D BALANCE RS.52,73,337/- IS DELETED. 4. THE LD. D.R. RELIED UPON THE ORDER OF THE AO. 5. THE LD. A.R. HAS DRAWN MY ATTENTION TO PAGE 1 TO 4 OF THE RELEVANT EXTRACT FOR A.Y. 2009-10, 2010-11 & 2011-1 2. THE LD. A.R. SUBMITTED THAT FOR A.Y. 2009-10 THE MATTER WAS TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL HAS ACCEPTED THE DISA LLOWANCE OF RS.7,28,280/- AND FOR A.Y. 2010-11 NO APPEAL WAS FI LED BY THE DEPARTMENT. THE LD. CIT(A) HAS FOLLOWED THE ORDER OF 2009-10. THEREFORE, APPLYING THE PRINCIPAL OF CONSISTENCY, N O FURTHER DISALLOWANCE IS REQUIRED. 6. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. I HAVE GONE THROUGH THE ORDER OF LD. CIT(A) AND LD. CIT(A) HAS FOLLOWED THE ORDER OF 2009-10 AND HE HAS DISALLOWED 10% OF T HE TOTAL INVESTMENT. IN A.Y. 2009-10, THE MATTER WAS TRAVEL LED UP TO TRIBUNAL AND THE TRIBUNAL HAS DISMISSED THE APPEAL BY OBSERV ING AS UNDER: 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED THE RELEVANT DOCUMENTARY EVIDENCES REFERRED TO DURING THE COURSE OF THE PROC EEDINGS. UNDOUBTEDLY AND UNDISPUTEDLY ALL THE INVESTMENTS MADE BY THE ASSESS EE ARE IN SUBSIDIARY COMPANY/ASSOCIATED COMPANIES AS CAPITAL CONTRIBUTIO N IN PARTNERSHIP FINM'ASSOCIATION OF PERSONS. IN ITS NOTE TO ACCOUNT S AND AT POINT NO. 10, THE ASSESSEE HAS DISCLOSED THE RELATIONSHIP UNDER THE H EAD 'RELATED PARTY DISCLOSURE' ITA NO.7733/M/2014 M/S. EVERSMILE CONSTRUCTION COMPANY PVT. LTD. 4 WHICH IS AT PAGE-24 OF THE PAPER BOOK AND THE DETAI LS OF INVESTMENTS ARE AT PAGES 16 & 17 OF THE PAPER BOOK. CONSIDERING THE FA CTS IN TOTALITY, WE FIND THAT THE RELATED ISSUES ARE SQUARELY DECIDE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIB UNAL IN THE CASE OF JM FINANCIAL (SUPRA) WHICH HAS BEEN FOLLOWED BY THE TR IBUNAL DELHI BENCH IN ITA NO. 4245/DEL/201 1, AHMEDABAD BENCH IN ITA NO. 2839/AHD I201 1 AND RECENTLY BY THE TRIBUNAL, LUCKNOW BENCH IN ITA NO. 538/LKW/2012. 8.1. AS THE ASSESSEE HAS OFFERED THE DISALLOWANCE A T RS.7,28,280/- BEFORE THE FIRST APPELLATE AUTHORITY WHICH HAS BEEN ACCEPTED BY HIM, IN OUR CONSIDERED OPINION, THE SAME SHOULD BE TAKEN AS REA SONABLE ON THE FACTS OF THE CASE, NO INTERFERE IS CALLED FOR. 7. RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL FOR A.Y. 2009- 10, I DISMISS THE DEPARTMENTAL APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 14.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.