CHANAKYA INTERNATIONAL PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE CIRCLE 5(1), MUMBAI

MA 134/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0885 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 23-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) M.A. NO. 134/MUM/2018 (ITA NO. 510/MUM/2015) ASSESSMENT YEAR: 2010 - 11 CHANAKYA INTERNATIONAL PVT. LTD. 101, RAHEJA XION, DR. BABASAHEB AMBEDKAR MARG, BYCULLA (EAST), MUMBAI - 400027. VS. THE DCIT, CIRCLE 5(1), MUMBAI PAN NO. AAACC4592Q APPELLANT RESPONDENT ASSESSEE BY : MR. PARESH SHAPARIA, AR REVENUE BY : MR. ANOOP HIWASE, DR DATE OF HEARING : 24/08/2018 DATE OF PRONOUNCEMENT : 16/11/2018 ORDER PER N.K. PRADHAN, AM BY MEANS OF THIS MISCELLANEOUS APPLICATION (MA), THE APPLICANT SEEKS RECALL OF THE ORDER DATED 18.08.2017 PASSED BY THE ITAT C BENCH MUMBAI (ITA NO. 510/MUM/2015) FOR THE ASSESSME NT YEAR (AY) 2010 - 11. IN PART - I ,HERE - IN - BELOW, WE MENTION THE CONTENTIONS OF THE LD. COUNSEL OF THE APPLICANT, IN PART - II, THE SUBMISSIONS OF THE LD. DR AND IN PART - III, THE REASONS FOR OUR DECISION. CHANAKYA INTERNATIONAL PVT. LTD. M.A. NO. 134/MUM/2018 2 I 2. THE CONTENTIONS OF THE LD. COUNSEL FOLLOW THE WRITTEN SUBMISSION DATED 20.02.2018 FILED BY THE APPLICANT BEFORE THE TRIBUNAL. THEREFORE, WE REFER BELOW THE SAID WRITTEN SUBMISSION. IT IS STATED THAT THE TRIBUNAL WHI LE DISPOSING THE 1 ST GROUND OF APPEAL IN RELATION TO DISALLOWANCE U/S 14A R.W. RULE 8D HAS RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. 328 ITR 81 (BOM). IT IS FURTHER STATED THAT IN APPELLANTS OWN CA SE, IN RELATION TO DISALLOWANCE U/S 14A R.W. RULE 8D, THERE HAVE BEEN ORDERS PASSED BY THE TRIBUNAL FOR AY 2008 - 09 DATED 21.11.2012 AND FOR AY 2009 - 10 DATED 17.04.2013. IT IS STATED THAT WHILE DISPOSING THE ORDER FOR AY 2010 - 11, THE TRIBUNAL HAS MENTIONED THE PREVIOUS ITAT ORDERS IN APPELLANTS OWN CASE FOR AY 2008 - 09 AND AY 2009 - 10, BUT HAS CONCLUDED OTHERWISE AND NOT IN LINE WITH PREVIOUS ITAT ORDERS. IT IS ALSO STATED THAT IN THE APPELLANTS OWN CASE FOR AY 2008 - 09 AND 2009 - 10, THE TRIBUNAL VIDE ORDER IN ITA NO.6285/MUM/2012 DATED 21.11.2012 AND ORDER IN ITA NO. 2244/MUM/2012 DATED 17.04.2013, HAS DIRECTED THE AO TO COMPUTE THE DISALLOWANCE NOT ONLY BY APPLYING THE PRESCRIBED RULE 8D BUT ALSO FOLLOWING THE SPIRIT OF THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA). IT IS STATED THAT THE TRIBUNAL FOR AY 2008 - 09 VIDE ORDER IN ITA NO. 7376/MUM/2014 DATED 16.11.2016, AFTER CONSIDERING THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) DELETED THE ADDITIONAL DISALLOWANCE U/S 14A R.W. RULE 8D AND DIRECTED THE AO TO RESTRICT THE DISALLOWANCE U/S 14A TO THE AMOUNT ALREADY WORKED OUT BY THE CHANAKYA INTERNATIONAL PVT. LTD. M.A. NO. 134/MUM/2018 3 APPELLANT. IT IS CLARIFIED THE APPEAL BEFORE THE TRIBUNAL FOR AY 2009 - 10 (ITA NO. 3214/MUM/2016) IS HEARD AND THE ORDER IS AWAITED. IT IS STATED THAT THE TRIBUNAL, WHILE P ASSING THE ORDER FOR THE AY 2010 - 11 HAS UPHELD THE ADDITIONAL DISALLOWANCE U/S 14A R.W. RULE 8D AND NOT FOLLOWED THE LATEST ITAT ORDER DATED 16.11.2016 FOR AY 2008 - 09, WHICH IS PASSED AFTER CONSIDERING THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA). IT IS THUS STATED THAT THE TRIBUNAL OUGHT TO HAVE FOLLOWED THE LATEST ITAT ORDER IN THE CASE OF THE APPELLANT (I.E. AY 2008 - 09 ORDER DATED 16.11.2016) WHEREIN THE ADDITIONAL DISALLOWANCE U/S 14A R.W. RULE 8D WAS DELETED AFTER CONSIDERING THE DECISION IN GO DREJ & BOYCE MFG. CO. LTD. (SUPRA). FINALLY IT IS STATED THAT THE TRIBUNAL MAY GIVE ONE MORE OPPORTUNITY TO THE APPELLANT TO PRESENT ITS CASE FOR NECESSARY ORDER TO THE AO. II 3. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE TRIBUNAL IN THE PRESENT CASE HAS FOLLOWED THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) AND RIGHTLY CONFIRMED THE DISALLOWANCE OF RS.31,38,078/ - MADE BY THE AO. THUS IT IS STATED THAT THERE IS NO MISTAKE IN THE IMPUGNED ORDER PASSED BY THE TRIBUNAL AND THEREFORE, THE QUESTION O F RECALLING THE ORDER DOES NOT ARISE. III 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE ISSUE IN THE INSTANT CASE IS THE DISALLOWANCE OF RS.31,38,078/ - MADE BY THE AO U/S 14A R.W. RULE 8D. THE ASSESSEE HAD CHANAKYA INTERNATIONAL PVT. LTD. M.A. NO. 134/MUM/2018 4 SHOWN DIVIDEND (EXEMPT) INCOME AT RS.80,10,029/ - DURING THE YEAR UNDER CONSIDERATION. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE FILED ON 06.11.2012 A COMPUTATION, WORKING OUT THE DISALLOWANCE U/S 14A R.W. RULE 8D AT RS.47,70,621/ - . OUT OF THE ABOVE A MOUNT OF RS.47,70,620/ - THE ASSESSEE HAD ALREADY OFFERED AN AMOUNT OF RS.16,32,542/ - FOR DISALLOWANCE IN ITS COMPUTATION OF INCOME. THEREFORE, THE AO BROUGHT TO TAX THE BALANCE AMOUNT OF RS.31,38,078/ - . IN THE ORDER DATED 18.08.2017, WE HAVE REFERRED TO THE FOLLOWING OBSERVATION OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA), WHICH READS AS UNDER: AS REGARD RULE 8D(2)(III), IT HAD BEEN SUBMITTED THAT SOME MECHANISM OR FORMULA HAD TO BE ADOPTED FOR ATTRIBUTING PART OF THE ADMINISTRATIVE / MANAGERIAL EXPENSES TO TAX - EXEMPT INVESTMENT INCOME. THE ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO TAX - FREE INVESTMENT INCOME HAVE A FIXED COMPONENT AND A VARIABLE COMPONENT. A VIEW WAS TAKEN THAT THE DISALLOWANCE SHOULD ALSO BE LINKED TO THE VALUE OF THE INVESTMENT RATHER THAN THE AMOUNT OF EXEMPT INCOME. UNDER PORTFOLIO MANAGEMENT SCHEMES (PMS), THE FEE CHARGED RANGES BETWEEN 2 AND 2.5 PER CENT OF THE PORTFOLIO VALUE WHICH WOULD BE INCLUSIVE OF A PROFIT ELEMENT FOR THE PORTFOLIO MANAGER. WHILE THE FIXED ADMINISTRATIVE EXPENSES WERE EXCLUDED ON THE GROUND THAT IN THE CASE OF A LARGE CORPORATE TAXPAYER THEY WOULD BE SPREAD OVER A LARGE NUMBER OF VOLUMINOUS ACTIVITIES, THE VARIABLE EXPENSES WERE COMPUTED AT ONE - HALF PER CENT OF THE VALUE O F THE INVESTMENT. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT, WE CONFIRMED THE DISALLOWANCE OF RS.31,38,078/ - MADE BY THE AO. CHANAKYA INTERNATIONAL PVT. LTD. M.A. NO. 134/MUM/2018 5 5. IT IS CRYSTAL CLEAR THAT THERE IS NO MISTAKE APPARENT FROM THE RECORD IN RESPECT TO THE ABOVE ISSUE. THEREFORE, THE MA BEING DEVOID OF MERIT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2018. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 16/11/2018 RAHUL SHARMA, SR. P.S. 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 . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI