ACIT CIRCLE 11(3)(2), MUMBAI V. TEJASKIRAN PHARMACHEM P.LTD, MUMBAI

ITA 881/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3378 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: SUBHASH C JALAN
• Keywords: Earning of tax free income; Tax effect; Rule 8D
• Section: 14A; 80G

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER AND ITA NO.881/MUM/2018 ASSESSMENT YEAR-2013-14 AC IT, CIRCLE-11(3)(1), ROOM NO.204, 02 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-40020 / VS. M/S TEJASKIRAN PHARMACHEM INDUSTRIES PVT. LTD. FP-145, RAM MANDIR ROAD, VILE PARLE (EAST), MUMBAI-400057 PAN NO. AAACT1641B ( / REVENUE) ( / ASSESSEE) / REVENUE BY SHRI CHAUDHARY ARUN KUMAR SINGH -DR / ASSESSEE BY SHRI SUBHASH C. JALAN / DATE OF HEARING : 14/02/2019 / DATE OF ORDER: 24/04/2019 / O R D E R PER SHAMIM YAHYA (ACCOUNTANT MEMBER) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDE R OF THE LD. CIT(A)-18, MUMBAI, DATED 29/09/2017 AND PERTAINS TO ASSESSMENT YEAR 2013-14. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- ITA NO.881MUM/2018, M/S TEJASKIRAN PHARMACHEM PVT. LTD. 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF THE ITAT FOR ASSESSMENT YEAR 2011-12 IN THE ASSESSEES OWN CASE. DEPARTMENT HAD NOT ACCEPTED THE DECISION OF HONBLE ITAT FOR ASSESSMENT YEAR 2011-12 ON MERIT. HOWEVER, THE APPE AL WAS NOT FILE BECAUSE OF LOW TAX EFFECT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS IGNORED THE DECISION GIVEN IN ASSESS MENT FOR THE EARLIER YEAR ARE NOT BINDING EITHER ON THE ASSESSEE OR THE DEPARTMENT IN SUBSEQUENT YEAR. IN THE DECISION OF R ADHASAOMI SATSANG, (2002-TIOL-745-SC-IT) THE HONBLE SUPREME COURT ACKNOWLEDGED THAT THERE IS NO RES JUDICATA AS REGAR DS ASSESSMENT ORDERS AND ASSESSMENT FOR ONE YEAR MAY N OT BIND THE OFFICER FOR THE NEXT YEAR. THIS IS CONSISTENT W ITH VIEW OF THE HONBLE SUPREME COURT THERE IS NO SUCH THING AS RE S JUDICATA IN INCOME TAX MATTERS. 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSESS EE HAS E- FILED ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 26/0 9/2013 DECLARING TOTAL INCOME OF RS.10,31,30,930/- FURTHER THE CASE WAS SELECTED FOR SCRUTINY HENCE, NOTICE U/S. 1 43(2) WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE FILED BASIC DETAILS SUCH AS COPY OF RETURN, AUDIT REPORT, PROFIT & LOSS ACCOUNT, BALANC E SHEET AND ACCOMPANYING ENCLOSURES. THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF INVESTMENT AND FINANCE. FOR THE REL EVANT YEAR, THE ASSESSEE HAS CREDITED TO THE PROFIT & LOS S ACCOUNT RECEIPTS AGGREGATING TO RS.56,01,85,732/- ON ACCOUN T OF INCOME FROM PMS, COMMISSION, INTEREST ETC. AFTER DE BITING VARIOUS EXPENSES SUCH AS EXPENSES RELATING TO PMS A ND OTHER EXPENSES, NET PROFIT OF RS.52,15,61,232/- HAS BEEN ITA NO.881MUM/2018, M/S TEJASKIRAN PHARMACHEM PVT. LTD. 3 DEBITED TO THE PROFIT & LOSS ACCOUNT. AFTER CLAIMIN G EXEMPTION IN RESPECT OF DIVIDEND RECEIPTS, DEDUCTIO N UNDER CHAPTER VIA ON ACCOUNT OF DONATION U/S. 80G ETC., T OTAL INCOME OF RS.10,31,30,930/- HAS BEEN OFFERED FOR TA XATION. IN THE ASSESSMENT U/S 143(3), TOTAL INCOME IS DETER MINED AT RS. 10,94,00,380/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE APPELLANT HAD MADE INVESTMENTS IN EXEMPT INCOME YIELDING ASSETS AMOUNTING TO RS. 1,77,03,02, 692/- AS ON 31/03/2013. THE ENSUING DIVIDEND OF RS. 41,87,68,957/- HAS BEEN CLAIMED AS EXEMPT BY VIRTUE OF SECTION 10(38) OF THE ACT. IN THE COMPUTATION OF TO TAL INCOME, THE ASSESSEE HAS SUO MOTO MADE DISALLOWANCE OF RS. 45,028/- U/S. 14A OF THE ACT. IN THIS REGARD, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILED WORKING OF THE DISALLOWANCE OF RS. 45,028/- WORKED OUT U/S. 14A WITH RESPECT TO EXPENS ES INCURRED IN RELATION TO EXEMPT INCOME. FROM THE DET AILS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER, IT WAS NOTICED THAT THE SAID DISALLOWANCE HAS NOT BEEN WORKED OUT IN ACCORDANCE WITH THE METHOD PRESCRIBED IN RUL E 8D OF ITA NO.881MUM/2018, M/S TEJASKIRAN PHARMACHEM PVT. LTD. 4 THE INCOME-TAX RULES, 1962. FURTHER, IT WAS SEEN TH AT IN THE COMPUTATION OF INCOME THE ASSESSEE HAS RESTRICT ED DISALLOWANCE U/S. 14A TO RS. 45,028/- I.E. 100% OF CERTAIN EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT ONLY ADMINISTRATIVE EXPENSES AND NOT PORTFOLIO RELATED E XPENSES SHOULD HE CONSIDERED FOR DISALLOWANCE U/S. 14A OF T HE ACT. HOWEVER, THE AO REJECTED THESE CONTENTIONS AND COMP UTED DISALLOWANCE AS PER RULE-8D AMOUNTING TO RS.63,13,1 00/-. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITIONS HOLDING AS UNDER:- I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN THAT THE APPELLANT HAS RECEIVED DIVIDEND INCOME OF RS.41,87,68,957/- F ROM INVESTMENT AND CLAIM THE SAME AS EXEMPT U/S. 10(34) OF THE INCOME TAX ACT, 1961. BESIDES THE ABOVE, INVESTMENT HAS BEEN MADE IN PARTNERSHIP FIRMS. FURTHER, THE APPELL ANT HAS ALSO HELD CERTAIN INVESTMENTS AS PER PORTFOLIO MANA GEMENT SCHEME AND TREATED THE SAME AS STOCK-IN-TRADE. THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT HAS N OT WORKED OUT THE DISALLOWANCE U/S 14A IN ACCORDANCE WITH RULE 8D AND THEREFORE BEING DISSATISFIED WITH THE WORKING OF TH E APPELLANT RECOMPUTED THE DISALLOWANCE U/S 14A RESOR TING TO THE METHOD LAID DOWN IN RULE 8D. ON THE OTHER HAND, THE APPELLANT CONTENDED THAT THE APPELLANT IS A FINANCI NG COMPANY, AND HAS EXECUTED PORTFOLIO MANAGEMENT ACTIVITIES AN D THERE ARE NO EXPENSES INCURRED FOR THE INVESTMENTS MADE I NCOME FROM WHICH IS NOT TAXABLE. THEREFORE, APPORTIONING OF OTHER EXPENSES DEBITED IN THE P&L A/C HAVE BEEN CONSIDERE D FOR COMPUTING DISALLOWANCE U/S 14A IN THE CASE OF M/S. VIDITI INVESTMENT PVT. LTD. FOR A.Y. 2011-12. I HAVE PERUS ED THE ITA NO.881MUM/2018, M/S TEJASKIRAN PHARMACHEM PVT. LTD. 5 ORDER DATED 17.12.2015 OF THE HON'BLE MUMBAI ITAT I N THE CASE OF M/S. VIDITI INVESTMENT PVT. LTD, FOR A.Y. 2011-1 2. 1 FIND THAT THE HON'BLE ITAT HAD DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A TO THE AMOUNT OF OTHER EXPENDI TURE DEBITED TO P & L A/C FOLLOWING THE STAND OF THE REVENUE TAK EN FOR PRECEDING THREE YEARS THE RELEVANT PARAS OF WHICH H AVE BEEN REPRODUCED BY THE APPELLANT ABOVE. 6.3.1 THE FACTS AND CIRCUMSTANCES IN THIS ASSESSMEN T YEAR ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF ASSESSMEN T YEAR 2011- 12, THEREFORE,, RESPECTFULLY FOLLOWING THE MAXIM LA ID DOWN BY THE HONBLE ITAT IN THE DECISION REFERRED SUPRA, I DIRE CT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE MADE U/S 14A TO THE EXTENT OF OTHER EXPENSES DEBITED TO THE PROFI T & LOSS ACCOUNT AT RS.67,468/-. ACCORDINGLY, GROUND NO.1 TO 3 ARE ALLOWED. 5. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE LD. CIT(A) H AS FOLLOWED THE EARLIER TRIBUNAL ORDER FOR THE PROPOSI TION THAT THE DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED TH E EXPENDITURE INCURRED AND BOOKED IN THIS REGARD. THE REVENUE IS NOW AGGRIEVED THAT IT HAS NOT ACCEPTED T HOSE ITAT ORDERS. WE FIND THAT IT IS NOT THE CASE THAT THOSE ITAT ORDERS HAVE ANY DEFECT OR THEY ARE REVERSED B Y HONOURABLE HIGH COURT. JUST BECAUSE REVENUE HAS NOT ACCEPTED THOSE ITAT ORDERS THE SAME DOES NOT CEASE TO HAVE VALUE AS PRECEDENT. SINCE, THE ISSUE IS COVERE D BY THE ORDER OF ITAT, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE LD. CIT(A) FOLLOWING THE SAME. ITA NO.881MUM/2018, M/S TEJASKIRAN PHARMACHEM PVT. LTD. 6 7. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A). 8. IN THE RESULT, THE APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2019 SD/- S D/- (PAWAN SINGH) (SHAMIM YAHYA) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; DATED : 24/04/2019 F{X~{T? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI, 5. ()*# !+ , $# # + - , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI