TATA STEEL LTD. (SUCCESSOR-IN-INTEREST TO THE ERSTWHILE KALIMATI INVESTMENT COMPANY LTD.), MUMBAI V. DCIT 2(3)(1), MUMBAI

ITA 800/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5357 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 09-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPAIR
• Assessee Lawyers: RAJA A KAPADIA
• Keywords: Earning of tax free income; Wholly owned subsidiary; Rule 8D
• Section: 143(3); 234B; 14A; 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 800/MUM/2018 (ASSESSMENT YEAR 2013-14 ) TATA STEEL LTD. (SUCCESSOR-IN- INTEREST TO THE ERSTWHILE KALIMATI INVESTMENT COMPANY LTD.), BOMBAY HOUSE, 24 HOMI MODI STREET, FORT, MUMBAI-400001. PAN: AAACT2803M VS. DCIT - 2(3) (1) AAYAKAR BHAVAN, 5 TH FLOOR, ROOM NO. 552, M.K. MARG, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI RAJA A. KAPADIA (AR) RESPONDENT BY : SHRI S.K. BEPAIR (SR. DR) DATE OF HEARING : 06.08.2018 DATE OF PRONOUNCEMEN T : 25.10.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-6, MUMBAI DATED 04. 11.2017, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED UNDER SECTI ON 143(3) DATED 18.03.2016 FOR ASSESSMENT YEAR 2013-14. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: SR NO. GROUND(S) AMOUNT 1. DISSALLOWANCE UNDER SECTIO N 14 - A RS. 10,24,687 1.1 DEMAT CHARGES: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN UPHOLDING THE LEARNED ASSESSING OFFICER ('LD AO')'S SUBJECTING TO THE DISALLOWANCE UNDER SECTION 14-A, AS DIRECT EXPENDITURE, DEMAT CHARGES AMOUNTING TO RS. 3,172. RS. 3,172 ITA NO. 800 MUM 2018-TATA STEEL LTD. 2 1.2 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN UPHOLDING THE LD AO'S DISALLOWANCE UNDER SECTION 14-A, OF A SUM OF RS. 10,21,515. RS. 10,21,515 2. INCREASING OF BOOK PROFIT U/S. 115JB OF THE ACT, BY AMOUNT DISALLOWED UNDER SECTION 14-A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN UPHOLDING THE LD AO'S INCREASING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT, BY THE AMOUNT OF RS.10,24,687 DISALLOWED UNDER SECTION 14-A. RS. 10,24,687 3. INTEREST UNDER SECTION 234-B OF THE ACT ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE DETERMINED LD CIT(A) ERRED IN UPHOLDING THE LD AO'S CHARGING OF INTEREST UNDER SECTION 234-B OF THE ACT. AS MAY BE DETERMINED 4. INTEREST UNDER SECTION 234-C OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME LD CIT(A) ERRED IN UPHOLDING THE LD AO'S CHARGING OF INTEREST UNDER SECTION 234-C OF TH E ACT, WITH REFERENCE TO THE TAX DUE ON THE ASSESSED TOTAL INCOME INSTEAD OF WITH REFERENCE TO THE TAX D UE ON THE RETURNED TOTAL INCOME. AS PER RETURNED INCOME 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF TATA STEEL LTD., IS A NON-BANKING FINANCIAL COMPANY MERGED WITH PARENT COMPANY W.E.F 01.01.2013. THE ASSESSEE FILED ITS RE TURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 25.09.2013 DECLARING IN COME OF RS. 27,17,094/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 18.03.2016. T HE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE THE ADDITIO N UNDER SECTION 14A OF RS. 10,24,687/- WHICH INCLUDE OF DMAT CHARGES OF RS . 3,172/-. THE ASSESSING OFFICER ALSO INCREASED THE BOOK PROFIT UN DER SECTION 115JB TO THE ITA NO. 800 MUM 2018-TATA STEEL LTD. 3 EXTENT OF DISALLOWANCE OF SECTION14A. ON APPEAL BEF ORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. THUS, FU RTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRE SENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LD AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE. AT THE OUTSET OF HEARING, THE LD. (AR) OF THE ASSESSEE SUB MITS THAT THAT HE IS NOT PRESSING GROUND NO.1.1 OF THE APPEAL ON ACCOUNT OF SMALLNESS OF AMOUNT. CONSIDERING THE CONTENTION OF LD. AR OF THE ASSESSE E, GROUND NO.1.1 OF THE APPEAL IS DISMISSED. 4. GROUND NO.1.2 RELATES TO DISALLOWANCE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THAT THERE IS NO NEXUS ESTABLISHED BY THE ASSESSING OFFICER BETWEEN THE OTHER EXPENSES AND THE EXEMPT INCOME, T HEREFORE, SECTION 14A IS NOT APPLICABLE. THE ASSESSING OFFICER APPLIED TH E PROVISIONS OF SECTION 14A READ WITH RULE 8D IN A MECHANICAL WAY. THE ASSE SSING OFFICER HAS NOT RECORDED ANY SATISFACTION WITH REGARD TO THE CORREC TNESS OF CLAIM OF ASSESSEE. THEREFORE, NEITHER SECTION 14A(2) AND 14A(3) NOR RU LE 8D IS APPLICABLE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [394 ITR 449(SC)], MAXOPP INVESTMENT LTD. VS. CIT [402 ITR 640(SC)], H.T. MEDIA LTD. VS. PCIT IN ITA NO. 5 48/2015 DATED 23 RD AUGUST 2017 (DEL. HC), CIT VS. I.P. SUPPORT SERVICE S INDIA (P) LTD. [378 ITR 240 (DEL)]. ITA NO. 800 MUM 2018-TATA STEEL LTD. 4 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE ORDER OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS RECEIVED DIVIDEND OF RS. 30 .59 CRORE WHICH HAS BEEN CLAIMED AS EXEMPT. THE ASSESSEE WAS ASKED TO FURNIS H COMPUTATION REGARDING DISALLOWANCE UNDER SECTION 14A. THE ASSES SEE VIDE ITS SUBMISSION DATED 16.03.2016 FURNISHED ITS REPLY AND CONTENDED THAT NO EXPENDITURE IS ATTRIBUTABLE FOR EARNING EXEMPT INCOME. THE ASSESSE E WITHOUT PREJUDICE TO THEIR CONTENTION FURNISHED COMPUTATION UNDER SECTIO N 14A R.W. RULE 8D OF RS. 10,24,687/-. THE ASSESSEE ALSO CONTENDED THAT N O DISALLOWANCE UNDER SECTION 14A SHOULD BE MADE. SINCE, IT IS NOT WARRAN TED FOR THE YEAR UNDER CONSIDERATION. THE CONTENTION OF THE ASSESSEE WAS N OT ACCEPTED BY ASSESSING OFFICER HOLDING THAT THE ASSESSEE WHILE FILING REVI SED RETURN OF INCOME HAVE NOT MADE ANY DISALLOWANCE UNDER SECTION 14A. THE AS SESSING OFFICER WITHOUT RECORDING HIS DISSATISFACTION ABOUT THE WOR KING OF COMPUTATION OF DISALLOWANCE UNDER SECTION 14A, DISALLOWED RS. 10,2 4,687/- TO THE EXTENT OF ACTUAL EXPENDITURE SHOWN BY ASSESSEE. 7. THE LD. CIT(A) ON THE BASIS OF DECISION OF TRIBUNA L FOR ASSESSMENT YEAR 2009-10 CONFIRMED THE ACTION OF ASSESSING OFFICER. THE HONBLE APEX COURT IN MAXOPP INVESTMENT LTD. (SUPRA) HELD THAT I F EXPENDITURE INCURRED HAS NO CASUAL CONNECTION WITH THE EXEMPTED INCOME, THEN SUCH EXPENDITURE ITA NO. 800 MUM 2018-TATA STEEL LTD. 5 WOULD BE TREATED AS NOT RELATED TO THE INCOME I.E. EXEMPTED FROM TAX, AND SUCH EXPENDITURE WOULD BE ALLOWED AS BUSINESS EXPEN DITURE. FURTHER, THE HONBLE APEX COURT IN CASE OF GODREJ & BOYCE MFG. C O. LTD. (SUPRA) HELD THAT ASSESSING OFFICER SHOULD RECORD HIS DISSATISFA CTION BEFORE RESORTING TO THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. 8. WE HAVE NOTED THAT IN THE PRESENT CASE, THE ASSESSI NG OFFICER HAS NEITHER RECORDED DISSATISFACTION ABOUT THE CORRECTNESS OF C LAIM OF ASSESSEE NOR PROVED NEXUS OF EXPENDITURE BETWEEN OTHER EXPENSES AND EXEMPT INCOME. THEREFORE, CONSIDERING THE DECISION OF HONBLE APEX COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AND MAXOPP INVESTMENT L TD. (SUPRA), WE DO NOT FIND ANY JUSTIFICATION IN MAKING DISALLOWANCE O F EXPENSES WHICH HAS NO NEXUS WITH THE EXEMPT INCOME. HENCE, GROUND NO.1.2 OF THE APPEAL IS ALLOWED. 9. GROUND NO.2 RELATES TO INCREASING BOOK PROFIT UNDER SECTION 115JB. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPE AL IS COVERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 & 2 011-12 IN ITA NO. 436/MUM/2014 & 4982/MUM/2015 RESPECTIVELY, AND BY T HE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN ACIT VS. VIREET INVESTMENT PVT. LTD. AND BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CAS E OF CIT VS. BENGAL FINANCE & INVESTMENT PVT. LTD. 10. THE LD. DR FOR THE REVENUE NOT DISPUTED THE CONTENT ION OF LD. AR OF THE ASSESSEE. ITA NO. 800 MUM 2018-TATA STEEL LTD. 6 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER INCREASE D THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT BY THE DISALLOWANCE OF SEC TION 14A. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER DE SPITE REFERRING THE DECISION OF SPECIAL BENCH IN ACIT VS. VIREET INVEST MENT PVT. LTD. (SUPRA). CONSIDERING THE FACT THAT WE HAVE ALREADY DELETED T HE DISALLOWANCE UNDER SECTION 14A. HENCE, THE RAISING OF PROFIT UNDER SEC TION 115JB WOULD AUTOMATICALLY BECOME INFRUCTUOUS. 12. GROUND NO.3 RELATES TO INTEREST UNDER SECTION 234B OF THE ACT. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL A ND NEEDS NO ADJUDICATION. 13. GROUND NO.4 RELATES TO CHARGING INTEREST UNDER SECT ION 234C OF THE ACT. THE LD. AR OF THE ASSESSEE SUBMITS THAT CHARGING OF INT EREST UNDER SECTION 234C ON THE RETURNED TOTAL INCOME AND NOT ON ASSESSED TO TAL INCOME. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED U PON THE DECISION OF TRIBUNAL IN MORGAN STANLEY INVESTMENT MANAGEMENT PV T. LTD. VS. DCIT IN ITA NO. 5195/MUM/2014 DATED 20.09.2017, ARAMEX INDI A PVT. LTD. VS. DCIT IN ITA NO. 798/MUM/2014 DATED 28.11.2014 AND S LK SOFTWARE SERVICES PVT. LTD. VS. DCIT IN ITA NO. 604/BANG/201 5 DATED 7 TH AUGUST 2015. 14. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. ITA NO. 800 MUM 2018-TATA STEEL LTD. 7 15. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE PERUSA L OF SECTION 234C SHOWS THAT LEVY OF INTEREST UNDER SECTION 234C IS ON THE RETURN INCOME AND NOT ON THE TOTAL ASSESSED INCOME, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO LEVY AND COMPUTE INTEREST ON RETURN INCOME UNDER SECTION 234C OF THE ACT. WE DIRECT ACCORDINGLY. THUS, GROUND OF APPEAL IS ALLOW ED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2018. SD/- SD/- G.S. PANNU PAWAN SINGH VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 25.10.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI