ADDL CIT RG 2(1), MUMBAI V. BIRLA GROUP HOLDING P. LTD, MUMBAI

ITA 9212/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84651 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 24-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2010
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV SR
• Keywords: Sale consideration of property below Jantri Value; Retrospective amendment
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO. 9212/M/2010 ( AY: 2007 - 2008 ) ./I.T.A. NO. 2608/M/2013 ( AY: 2009 - 2010 ) ADDL. CIT - 2(1) , R.NO.575 , 5 TH FLOOR AAYAKAR BHAVAN, MUMBAI 400 020. / VS. M/S. BIRLA GROUP HOLDINGS P LTD, INDUSTRY HOUSE, 1 ST FLOOR, 159 CHURCHGATE RECLAMATION, CHURCHGATE, MUMBAI 400 020. ./ PAN : AAACR2250C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA YADAV, SR. AR / RESPONDENT BY : SHRI VIJAY MEHTA / DATE OF HEARING : 24.11 .2014 / DATE OF PRONOUNCEMENT : 19 .1 2 .2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THE APPEALS ARE FILED BY THE REVENUE INVOLVING THE AYS 2007 - 2008 AND 2009 - 2010. SINCE, THE GROUNDS RAISED BY THE REVENUE IN BOTH T HE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.9212/M/2010 FOR THE AY 2007 - 2008. THIS APPEAL FILED BY THE REVENUE ON 31.12.2010 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 5.10.2010. IN THIS APPEAL, REVENUE RAISED FOUR GROUNDS IN TOTO. GROUND NO.1 A ND 4 ARE GENERAL IN NATURE. GROUND NO.2 RELATES TO THE DETERMINATION OF THE ALV. GROUND NO.3 RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT. 2 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ISSUE RAISED IN GROUND NO.2 OF THE AP PEAL AND MENTIONED THAT THE SAID ISSUE RELATES TO DETERMINATION OF ALV IN RESPECT OF THE PROPERTY WHICH IS COVERED BY THE RENT CONTROL ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE FILED A LETTER FROM THE COOPERATIVE SOCIETY WHERE THE IMPUGNED PROPERTY IS SITUATED. AS PER THE SAME, THE RATEABLE VALUE IS RS. 9,340/ - . THE SAID AMOUNT IS LESSER THAN THE ACTUAL RENT RECEIVED OF RS. 80,000/ - PER MONTH BY FOUR PARTIES AND THE ASSESSEES SHARE COMES TO RS. 20,000/ - PER MONTH. ASSESSING OFFICER REJECTED THE SAME AND COMPUTED THE ALV AT RS. 77,17,248/ - RELYING ON THE FIGURES MENTIONED IN THE STAMP DUTY READY RECKONER (PARA 6 OF THE IMPUGNED ORDER IS RELEVANT). AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE MENTIONED THAT THE ASSESSING OFFICER IS NOT FREE TO ADOPT THE FIGURES AND THE SAME IS IN VIOLATION OF PROVISIONS OF SECTION 23(1)(B) OF THE ACT. CIT (A) CONSIDERED THE VARIOUS SUBMISSIONS OF THE ASSESSEE AND THE JUD ICIAL PRONOUNCEMENTS RELIED UPON BY HIM AND DISAPPROVED THE ASSESSING OFFICERS DECISION. IN THIS REGARD, CIT (A) RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. AKSHAY TEXTILE TRADING & AGENCY (P) LTD REPORTED IN 30 4 ITR 401 (BOM) AND HELD THAT ALV HAS TO BE DETERMINED ON THE BASIS OF THE ACTUAL RENT RECEIVABLE ON PROPERTY AS A RENT. PARA 6 IS RELEVANT IN THIS REGARD. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL WITH THIS ISSUE BEFORE THE TRIBUNAL FOR THE AYS 2007 - 08 AND 2009 - 2010 UNDER CONSIDERATION. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE, TO SUPPORT THE VIEWS OF THE CIT (A), FILED A COPY OF ANOTHER BINDING JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TOP T YPOGRAPHY [2014] 368 ITR 330 (BOM) FOR IDENTICAL PROPOSITION IN RESPECT OF THE PROPERTY COVERED UNDER THE RENT CONTROL ACT. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US, WE FIND, THE ORDER OF THE CIT (A) ON THIS ISSUE GIVEN IN PARA 6 OF THE IMPUGNED ORDER IS FAIR AND 3 REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 6. GROUND NO.3 RELATES TO THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT. IT IS UNDISPUTED FACT THAT THE ASSESSEE DERIVED DIVIDEND INCOME OF RS. 5,14,19,210/ - . IN THE ASSESSMENT, ASSESSING OFFICER REJECTED THE ASSESSEES QUANTIFICATION I.E., RS.2,31,42,534/ - AND APPLIED THE PROVISIONS OF RULE 8D AND QUANTIFIED THE DISALLOWANCE AT RS. 5,15,25,491/ - . AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 7. DURING THE PROCEEDINGS B EFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) DELETED THE ADDITION. PARA 9 AND 10 OF THE IMPUGNED ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE RAISED THE INST ANT GROUND NO.3 BEFORE THE TRIBUNAL. 8. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 9. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE SAID ORDER OF THE CIT (A), WE FIND THE CIT (A) VIDE PARA 9 HELD THAT RU LE 8D IS NOT APPLICABLE IN RETROSPECTIVE EFFECT AND THE AY 2007 - 2008 UNDER CONSIDERATION IS OUT OF SCOPE OF RULE 8D. FURTHER, WE FIND THE DECISION TAKEN BY THE CIT (A) VIDE PARA 10 OF HIS ORDER IS RELEVANT IN THIS REGARD. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PARA 10 OF THE CIT (A)S ORDER IS REPRODUCED WHICH READS AS UNDER: 10. I FIND THAT AUTHORIZED REPRESENTATIVE HAS ALREADY DISALLOWED A SUM OF RS. 2,31,42,534/ - WHEREAS THE ASSESSING OFFICER HAS FOLLOWED RULE 8D AND MADE THE DISALLOWANC E OF RS. 5,15,25,491/ - . I AGREE WITH THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE THAT RULE 8D IS NOT RETROSPECTIVE. HOWEVER, A REASONABLE DISALLOWANCE HAS TO BE MADE BY FOLLOWING REASONABLE METHOD. IN THIS CASE THE ASSESSING OFFICER HAS ALSO COMPUT ED THE DIRECT EXPENSES AT NIL EVEN BY FOLLOWING RULE 8D(2)(I). HOWEVER, INDIRECT EXPENSES HAVE BEEN COMPUTED AT RS. 4,87,99,128/ - WHICH IS NOT JUSTIFIED. NO PRUDENT BUSINESSMAN WOULD INCUR EXPENSES OF RS. 5.15 CRS TO EARN DIVIDEND INCOME OF RS. 5.14 CRS. THE ASSESSING OFFICER HAS ALSO COMPUTED 0.5% OF THE AVERAGE INVESTMENT AT RS. 74,17,634/ - AND THUS THE TOTAL DISALLOWANCE HAS BEEN COMPUTED AT RS. 5,15,25,491/ - . I FIND THAT THE ASSESSEE HIMSELF HAS DISALLOWED A SUM 4 OF RS. 2,31,42,532/ - BY PROPORTIONATE LY DISALLOWED THE INTEREST EXPENSES IN RELATION TO OTHER INCOME. HENCE, THE DISALLOWANCE MADE BY THE ASSESSEE WHICH IS MORE THAN 0.5% OF THE AVERAGE INVESTMENT IS REQUIRED TO BE ACCEPTED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THIS ADDITION. THIS G ROUND OF APPEAL IS PARTLY ALLOWED. 11. IT IS A SETTLED POSITION OF THE ISSUE THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE ONLY FROM THE AY 2008 - 2009 AND HAVE NO RETROSPECTIVE EFFECT. CONSIDERING THE SAME, THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REA SONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 12. GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE. CONSIDERING THE GENERAL NATURE OF THE SAID GROUND NOS.1 AND 4, THE SAME ARE DISMISSED AS GENERAL . 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2608/M/2013 (AY 2009 - 2010) 14. THIS APPEAL FILED BY THE REVENUE ON 5.4.2013 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 24.1.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, RE VENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE UNDER THE HEAD HOUSE PROPERTY. 2. ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, LD CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE ALV OF THE PROPERTY WAS ARRIVED BY THE ASSESSING OFFICER ON THE BASIS OF VALUE SHOWN IN STAMP DUTY READY RECKONER AND CONSIDERING THE LOCALITY IN WHICH THE PROPERTY IS S ITUATED AS THE ANNUAL VALUE SHOWN BY THE ASSESSEE WAS ABYSMALLY LOW. FURTHER, THE TENANT IN QUESTION IS RELATED PARTY OF THE ASSESSEE. 15. IN THIS APPEAL, GROUND NO.2 RAISED BY THE REVENUE RELATES TO THE DETERMINATION OF THE ALV. THE ISSUE INVOLVED IN G ROUND NO.2 IS IDENTICAL TO THAT OF THE GROUND NO.2 RAISED BY THE REVENUE FOR THE AY 2007 - 2008, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER WHILE DEALING WITH THE ITA NO.9212/M/2010. SINCE, THE ISSUE INVOLVED IN THE INSTANT GROUND NO.2 IS SIMILAR TO THAT OF THE GROUND NO.2 RAISED BY THE REVENUE FOR THE AY 2007 - 2008, THEREFORE, OUR DECISION GIVEN THEREIN APPLIES TO THE INSTANT GROUND TOO. CONSIDERING THE SAME, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO.1 IS GENERAL I N NATURE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED CONSIDERING ITS GENERAL NATURE. 5 17. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 19 TH DECEMBER, 2014. SD/ - SD/ - ( AMIT SHUKLA ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 19 /12/2014 . . ./ OKK , SR. PS / 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 ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI