Mandava Holdings Private Limited, Hyderabad V. Asst. Commissioner of Income Tax, Circle-16(2), Hyderabad

ITA 971/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7681 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO. 971 /H/20 18 ASSESSMENT YEAR: 2 0 1 3 - 1 4 MANDAVA HOLDINGS PVT. LTD., HYDERABAD. PAN A A FCM 4964M VS. ASST. COMMISSIONER OF INCOME - TAX , CIRCLE 16 ( 2 ), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHURAM REVENUE BY: S HRI ROHIT MUJUMDAR DATE OF HEARING: 2 5 /0 8 /2021 DATE OF PRONOUNCEMENT: 27 /0 8 /2021 O R D E R PER L.P. SAHU, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST CIT(A) 4 , HYDERABADS ORDER DATED 09 / 0 3 /201 8 FOR AY 20 1 3 - 1 4 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT , ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 4, HYDERABAD, DISMISSING THE APPEAL OF THE APPELLANT IS PERVERSE, ILLEGAL AND UNSUSTAINABLE ON FACTS AND IN LAW. I TA NO. 971 /HYD /20 18 M/S MANDAVA HOLDINGS PVT. LTD., HYD. : - 2 - : 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OF RS.1,40,75,043. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT IS A HOLDING COMPANY AND HENCE THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE APPLIED AS THE INVEST MENT MADE BY THE APPELLANT IS OUT OF BUSINESS NECESSITY. 3. WITHOUT PREJUDICE TO ABOVE, AND ON N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THERE IS NO FINDING ON PART OF THE ASSESSING OFFICER THA T THE APPELLANT HAD INCURRED EXPENDITURE TO EARN THE EXEMPTED INCOME, AND THEREFORE NO DISALLOWANCE COULD BE MADE UNDER SECTION 14A OF THE ACT. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL M AY BE PLEASED TO ALLOW THE APPEAL. 2 . BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2013 - 14 ON 29/09/2013 ADMITTING A LOSS OF RS. 5,71,78,185/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND THE STATUTO RY NOTICES WERE ISSUED TO THE ASSESSEE, AGAINST WHICH, THE AR OF THE ASSESSEE FURNISHED THE INFORMATION CALLED FOR. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENTS TO THE TUNE OF RS. 7,69,273.70 AS ON 31/03/2013. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A SHALL NOT BE APPLIED AS THE ASSESSEE COMPANY HAD MADE INVESTMENT IN SUBSIDIARY COMPANIES, WHICH YIELD EXEMPT I TA NO. 971 /HYD /20 18 M/S MANDAVA HOLDINGS PVT. LTD., HYD. : - 3 - : INCOME. THE AO NOTED THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE. RELYING ON THE CBDT CIRCULAR NO. 5/2014 IN F.NO. 225/182/2013 - ITA - II, DATED 11/02/2014, THE AO COMPUTED THE DISALLOWANCE OF RS. 1,40,75,042/ - U/S 14A R.W.R. 8D(20(II) OF THE ACT. 3. WHEN T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE AO FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT, 394 ITR 449 (SC). 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. BEFORE US, THE LD. AR REITERATED SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND RELIED ON THE CASE LAW FILED IN PAPER BOOK PAGE NOS. 1 TO 192, WHICH IS PLACED ON RECORD. 6. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF LOWER AUTHORITIES AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD., VS. CIT [2018] 402 ITR 640. 7. WE HAVE CON SIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT THE I TA NO. 971 /HYD /20 18 M/S MANDAVA HOLDINGS PVT. LTD., HYD. : - 4 - : ASSESSEE HAS INVESTED IN THE SUBSIDIARY COMPANIES WHICH YIELDED EXEMPT INCOME. THEREFORE, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF MAXOPP INVESTMENT LTD., VS. CIT (SUPRA) AND R ESPECTFULLY FOLLOWING THE ABOVE JUDGMENT, WE OBSERVE THAT SINCE THE ASSESSEE HAS INVESTED IN SUBSIDIARY COMPANIES, WHICH YIELDED EXEMPT INCOME, WE UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE A DDITION OF RS. 1,40,75,043/ - U/S 14A R.W.R. 8D(2)(II) OF THE ACT AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE ON THIS COUNT. 8. THIS ASSESSEE S APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST , 2021 . SD/ - SD/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 27 TH AUGUST , 20 2 1 . K V C OPY TO : 1 M/S MANDAVA HOLDINGS PVT. LTD., C/O S/SHRI AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2 AC IT, CIRCLE 16 ( 2 ) , IT TOWERS, AC GUARDS, HYDERABAD. 3 C I T(A) 4 , HYDERABAD. 4 PR. CIT - 4 , HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE. I TA NO. 971 /HYD /20 18 M/S MANDAVA HOLDINGS PVT. LTD., HYD. : - 5 - : S.NO. DETAILS DATE 1 DRAFT DICTATED ON 2 DRAFT PLACED BEFORE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER