HINDUJA TELECOM INDIA LTD, V. DCIT CIR 6(3),

MA 136/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9061 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2000-2001
• Appeal Filed On: 28-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRADIP KEDIA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

MA NOS.136 & 137 OF 2012HINDUJA TELECOM INDIA LTD MU MBAI F BENCH PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI I.P.BANSAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER M.A.NOS.136 & 137/MUM/2012 (ARISING OUT OF ITA NOS. 4844/MUM/2007 & ITA NO.8702/MUM/2004 (ASSESSMENT YEAR2:2000-01 & 2001-02) HINDUJA TELECOM INDIA LTD., HINDUJA HOUSE, 171, DR. AB ROAD, WORLI, MUMBAI 400018 PAN NO.AAACH 2058 N (APPELLANT) VS. DY. CIT, CENTRAL CIRCLE -6(3), MUMBAI (RESPONDENT) ASSESSEE BY: SHRI PRADIP KEDIA, ASSESSEE DEPARTMENT BY: SHRI RAJARSHI DWIVEDY, DR DATE OF HEARING: 24/08/2012 DATE OF PRONOUNCEMENT: 31/08/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE TWO MISCELLANEOUS APPLICATIONS ARISING OU T OF THE COMMON ORDER PASSED BY THE ITAT F BENCH, MUMBAI DAT ED 27.11.2008. 2. ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINES S OF TELECOMMUNICATION. AS ASSESSEE HAS BORROWED FUNDS A ND INVESTED IN GROUP CONCERNS BY HOLDING THEIR SHARES, AO INVOK ED THE PROVISIONS OF SECTION 36(1)(III) AND DISALLOWED THE INTEREST. THE CIT (A) ACCORDINGLY CONFIRMED THE AMOUNTS UNDER SECTION 36(1)(III). THERE WAS NO EXEMPT INCOME OFFERED BY ASSESSEE AND WHEN AO INVOKED SECTION 14A IN ASSESSMENT YEAR 2000-01, ASS ESSEE OBJECTED TO THE SAME. CONSEQUENTLY THE DISALLOWANCE WAS MADE UNDER SECTION 36(1)(III). IN FURTHER APPEAL THE LEARNED C IT (A) AGREED WITH THE ORDERS OF AO. AND CONFIRMED THE DISALLOWANCE UN DER SECTION 36(1)(III). HOWEVER, IN ASSESSMENT YEAR 2001-02 HE OPINED THAT THE MA NOS.136 & 137 OF 2012HINDUJA TELECOM INDIA LTD MU MBAI F BENCH PAGE 2 OF 3 AO DISALLOWED AMOUNT BOTH UNDER SECTION 36(1)(III) AND SECTION 14A AND EVEN THOUGH THE SECTION 14A WAS NOT AN ISSUE BE FORE AO. WHILE PASSING THE CONSOLIDATED ORDER THE ITAT WHILE EXTRA CTING THE FACTS OBSERVED THAT AO ALSO INVOKED THE PROVISIONS OF SEC TION 14A VIDE PARA 2 OF THE ORDER. ON A QUERY BY THE BENCH WHETHE R THE ISSUE STANDS COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT (P) LTD IN ITA NO.8057/MUM/ 2003 DATED 20.10.2008 THE LEARNED COUNSEL SUBMITTED THAT THE S PECIAL BENCH DECISION DOES NOT APPLY TO THE FACTS OF THE CASE. V IDE PARA 14, ITAT CONSEQUENT TO THE SPECIAL BENCH DECISION IN THE DAG A CAPITAL MANAGEMENT P. LTD 26 SOT 603 SET ASIDE THE MATTER T O THE FILE OF AO FOR DISPOSING OF THE SAME AFRESH IN ACCORDANCE WITH THE LAW. THIS DIRECTION OF THE ITAT IS OBJECTED BY ASSESSEE NOW I N M.A. AS THE ISSUE OF SECTION 14A WAS NOT AT ALL RAISED BY REVEN UE, AND ISSUE ON DISALLOWANCE OF INTEREST WAS PURELY TO BE CONTESTED AS PER THE PROVISIONS OF SECTION 36(1)(III). 3. THE LEARNED COUNSEL PLACED ON RECORD THE JUDGMENT O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF TOPSTAR ME RCANTILE (P) LTD VS. ASSTT. CIT (2009) 225 CTR (BOM.) 351 WHEREIN IT WAS HELD AS UNDER: WHERE IN THE ASSESSMENT ORDER, NO FINDING WAS RECORDED BY AO WITH RESPECT TO THE DISALLOWANCE OF PART OF THE EXPENDITURE ON THE TOUCHSTONE OF SECTION 14A , THE TRIBUNAL WAS NOT JUSTIFIED IN RESTORING THE MATTER BACK TO AO OBSERVING THAT AO NEEDED TO RECONSIDER THE IS SUE, INCLUDING THAT OF THE DISALLOWANCE OF EXPENDITURE, ON THE TOUCHSTONE OF SECTION 14A APPLYING THE RATIO OF ITS OWN JUDGMENT IN THE CASE OF INCOME TAX OFFICER VS. DAGA CAPITAL MANAGEMENT (P) LTD (2008) 26 SOT 603 (MUM.) (SB); HENCE THE ORDER OF THE TRIBUNAL WAS TO BE SET ASIDE TO THE EXTENT IT DIRECTED CONSIDERATION OF APPLICAB ILITY OF SECTION 14A. 4. IT WAS PRAYED THAT IN VIEW OF THE JURISDICTIONAL HI GH COURT ORDER, SINCE THE ISSUE OF SECTION 14A WAS NOT BEFOR E AO AT ALL IN THE MA NOS.136 & 137 OF 2012HINDUJA TELECOM INDIA LTD MU MBAI F BENCH PAGE 3 OF 3 ASSESSMENT PROCEEDINGS, THE ORDER OF THE ITAT REQUI RE MODIFICATION ACCORDINGLY. 5. AFTER CONSIDERING THE SUBMISSIONS AND EXAMINATION O F THE RECORD AND ALSO KEEPING IN MIND THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TOPSTAR MERCANTILE (P) LT D VS. ACIT, 225 CTR 361 (BOM.) DATED 26.08.2009, WE ARE OF THE OPIN ION THAT THE DIRECTION GIVEN TO AO TO CONSIDER THE SECTION 14A I S NOT CORRECT. THEREFORE, WE DIRECT THE AO CONSIDER THE ISSUE, TO THE LIMITED EXTENT OF CONSIDERING THE DISALLOWANCE UNDER SECTION 36(1) (III) ONLY ON FACTS AND LAW. PARA 14.2 OF THE ORDER STANDS MODIFIED TO THAT EXTENT. 6. IN THE RESULT THE MISCELLANEOUS APPLICATIONS FILED BY ASSESSEE ARE CONSIDERED ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2012. SD/- SD/- ( I.P. BANSAL ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 31 ST AUGUST, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI