SUN-N-SAND HOTELS PVT. LTD., MUMBAI V. DCIT - 8(3), MUMBAI

MA 162/MUM/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5462 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 13-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt; Revenue expenditure
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI B R BASKARAN ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER M.A NO. 162 & 163/MUM/2016 (ARISING OUT OF ITA NOS.2390 & 2041/MUM/2014 FOR A Y: 2008-09) SUN-N-SAND HOTEL (SHIRDI) PRIVATE LTD., 39, JUHU BEACH, MUMBAI 400 049 PAN AABCS3521J VS. DCIT 8(3) MUMBAI (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI NITIN WAGHMARE DATE OF HEARING :21.10.2016 DATE OF PRONOUNCEMENT : 1 0.03.2017 O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER: IN THE AFORESAID MISCELLANEOUS APPLICATIONS THE APP LICANT ASSESSEE HAS POINTED OUT THAT THERE ARE SOME MISTAKES APPARENT FROM RECORD, WHICH NEEDS TO BE RECTIFIED. 2. IN MA NO. 162/MUM/2016, THE NATURE OF MISTAKES POI NTED OUT READS AS UNDER: RE: GROUND NO.1 OF THE APPEAL: TAXING OF SALES TAX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF WINDMILLS : THE GROUND NO.1 WAS IN RESPECT OF TAXING OF SALES T AX BENEFIT. THE APPELLANT HAS CLAIMED IT TO BE CAPITAL IN NATUR E NOT TAXABLE, WHILE THE AO TAXED IT AS REVENUE INCOME. SIMILAR GROUND WAS INVOLVED IN EARLIER YEARS. THE APPELLAN T HAD MADE AN APPLICATION U/S. 158A(1) OF THE ACT FOR AVO IDING REPETITIVE APPEALS ON THE GROUND THAT THE ISSUE COV ERED IN THE GROUND NO.1 WAS PENDING BEFORE THE BOMBAY HIGH COUR T IN THE APPELLANTS OWN CASE FOR AY 2005 -06. THE AO GAVE HIS MA NO.162 & 163/MUM/2016 SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. 2 REPORT U/S. 158A(2), WHICH HAS BEEN REPRODUCED IN T HE ITAT ORDER. THE HONBLE TRIBUNAL OUGHT TO HAVE PASSED A N ORDER AS REQUIRED U/S. 158A(4) OF THE ACT BUT NO SUCH ORD ER WAS PASSED IN THE ITAT ORDER DATED 12-4-2016. INSTEAD THE GROUND WAS TREATED AS DISMISSED (REFER PAGE 5 OF TH E ORDER). THIS HAS RESULTED INTO MISTAKE WHICH IS APPARENT FR OM RECORD AND NEEDS TO BE CORRECTED BY PASSING A SPEAKING ORD ER TO THE EFFECT THAT WHATEVER IS THE DECISION OF THE HON HIG H COURT FOR A Y 2005-06 WILL BE APPLICABLE TO THIS YEAR ALSO. RE: NAME OF THE APPELLANT IN THE HEADER ON EACH PAG E: THE NAME OF THE APPELLANT HAS BEEN ERRONEOUSLY TYPE D AS SUN-N-SAND HOTEL (MUMBAI PVT. LTD. IN ENGLISH INS TEAD OF SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. THE SAME NEEDS CORRECTION. 2. BEFORE US, THE LD. COUNSEL, SHRI PRAKASH JOTWANI SUBMITTED THAT, IN RELATION TO THE GROUND NO.1, IT WAS PLEADED ON BEHALF OF THE ASSESSEE THAT, IT HAD MADE APPLICATION UNDER SECTION 158 (1) OF THE ACT BEFORE THIS TRIBUNAL FOR AVOIDING REPETITIVE APPEALS AS SIMILAR GROUNDS WERE DECIDED AGAINST THE ASSESSEE AND THE MATTER WAS SUB-JUDICE BEFORE THE HONBLE HIGH COURT IN THE ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER HAS A LSO GIVEN HIS REPORT UNDER SECTION 158AC (II) WHICH HAS BEEN REPROD UCED BY THE TRIBUNAL IN THE IMPUGNED ORDER. THE TRIBUNAL OUGHT TO HAVE HELD THAT WHATEVER THE DECISION OF THE HONBLE HIGH COURT GIVES O N THE ISSUE INVOLVED, THE SAME SHOULD BE APPLIED IN THE APPEAL UN DER CONSIDERATION INSTEAD OF THAT, THE TRIBUNAL HAS DISMISS ED THE ASSESSEES GROUND. 3. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND O N PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT IN GROUND NO.1, TH E ASSESSEE HAS CHALLENGED TAXABILITY OF SALES-TAX BENEFIT WHICH HAS B EEN TREATED AS REVENUE EXPENDITURE RECEIPT BY THE DEPARTMENT AS AGAINST THE CAPITAL RECEIPT CLAIMED BY THE ASSESSEE. THIS ISSUE WAS DECID ED AGAINST THE ASSESSEE BY THE TRIBUNAL IN AY 2005-06 AGAINST WHICH MATTER IS MA NO.162 & 163/MUM/2016 SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. 3 PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. THE ASS ESSEE HAD MADE A DECLARATION UNDER SECTION 158(1) ON WHICH A RE PORT FROM DEPARTMENT WAS CALLED FOR AND ACCORDINGLY, THE ASSESSI NG OFFICER HAS GIVEN ON HIS REPORT UNDER SECTION 158A(2) CONTENT OF W HICH HAS BEEN INCORPORATED IN THE TRIBUNAL ORDER. HOWEVER, WE HAVE DISMISSED THE ASSESSEES GROUND INSTEAD OF HOLDING THAT, A DECISION OF HONBLE HIGH COURT ON THIS ISSUE SHOULD BE APPLIED. ACCORDINGLY, W E HOLD THAT WHATEVER WOULD BE THE DECISION OF THE HONBLE HIGH COU RT ON THE ISSUE INVOLVED IN THE APPEAL FOR THE ASSESSMENT YEAR 2 005-06 WHICH IS PENDING, SAME SHOULD BE APPLIED FOR THE APPEALS U NDER CONSIDERATION. THE ASSESSEE SHALL NOT BE ENTITLED FOR FURTHER RAISING THIS QUESTION IN APPEAL BEFORE HONBLE HIGH COURT IN T HIS YEAR. WITH THIS OBSERVATION, WE HOLD THAT, THOUGH THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE, HOWEVER, WHENEVER THE ISSUE IS D ECIDED BY THE HONBLE HIGH COURT THEN CONSEQUENTIAL ORDER SHOULD BE PASSED. IN FACT, IN SIMILAR APPEALS FOR ASSESSMENT YEARS 2006-07 AND 2007-08, THE TRIBUNAL, AFTER NOTING THE RELEVANT REPORT OF THE RE VENUE ON THE APPLICATION MADE BY THE ASSESSEE U/S. 158(1), HAD OBS ERVED AS UNDER:- 3. THUS, WE HOLD THAT, WHATEVER WOULD BE THE DECISI ON OF HONBLE HIGH COURT ON THE ISSUES INVOLVED IN THE AP PEAL FOR AY 2005-06 WHICH IS PENDING, THE SAME SHALL BE APPLIED FOR THE APPEALS UNDER CONSIDERATION. ACCORDINGLY, THE ASSES SEE SHALL NOT BE ENTITLED TO FURTHER RAISE THIS QUESTION IN A PPEAL BEFORE THE HONBLE HIGH COURT IN THIS YEAR. WITH THIS OBS ERVATION, WE HOLD THAT AS OF NOW, THE ISSUE STANDS DECIDED AGAIN ST THE ASSESSEE IN VIEW OF THE EARLIER DECISION OF THE TRI BUNAL. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS D ISMISSED IN BOTH THE APPEALS. ACCORDINGLY, A GROUND RAISED BY THE ASSESSEE FOR AY 2006-07 AND AY 2007-08 STANDS DISMI SSED. SIMILARLY IN THE IMPUGNED ORDER ALSO WE GIVE SIMILAR DIRECTIONS THAT WHATEVER MAY BE THE OUTCOME OF THE DECISION OF HONBLE HIGH COURT ON THE ISSUES INVOLVED IN THE APPEAL FOR AY 2005-06, THE SAME SHALL BE APPLICABLE FOR THE A Y 2008-09 ALSO. MA NO.162 & 163/MUM/2016 SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. 4 4. AS REGARDS THE MISTAKE IN THE TITLE OF THE CASE, WE FI ND IT TO BE CORRECT AND THE SAME SHOULD BE READ AS SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. WITH THESE OBSERVATIONS, THE MISCELLANEOUS APPLICATIO N NO.162/MUM/2016 IS ALLOWED. 5. AS REGARDS MA NO.163/MUM/2016, THE FOLLOWING ISS UES HAVE BEEN RAISED: 1. RE: GROUND NO.1 OF THE APPEAL: TAXING OF SALES T AX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF W INDMILLS: THE GROUND NO.1 WAS IN RESPECT OF TAXING OF SALES T AX BENEFIT. THE APPELLANT HAS CLAIMED IT TO BE CAPITAL IN NATUR E NOT TAXABLE, WHILE THE AO TAXED IT AS REVENUE INCOME. SIMILAR GROUND WAS INVOLVED IN EARLIER YEARS. THE APPELLAN T HAD MADE AN APPLICATION U/S. 158A(1) OF THE ACT FOR AVO IDING REPETITIVE APPEALS ON THE GROUND THAT THE ISSUE COV ERED IN THE GROUND NO.1 WAS PENDING BEFORE THE BOMBAY HIGH COUR T IN THE APPELLANTS OWN CASE FOR AY 2003-04. THE AO GA VE HIS REPORT U/S. 158A(2) DATED 23-9-2015. THE HONBLE T RIBUNAL OUGHT TO HAVE PASSED AN ORDER AS REQUIRED U/S. 158A (4) OF THE ACT BUT NO SUCH ORDER WAS PASSED IN THE ITAT OR DER DATED 12-4-2016. INSTEAD THE GROUND WAS TREATED AS DISMI SSED (REFER PAGE 9 OF THE ORDER). THIS HAS RESULTED INT O A MISTAKE WHICH IS APPARENT FROM RECORD AND NEEDS TO BE CORRE CTED BY PASSING A SPEAKING ORDER TO THE EFFECT THAT WHATEVE R THE DECISION OF THE HON HIGH COURT FOR AY 2003-04 WILL BE APPLICABLE FOR THIS YEAR ALSO. 2. RE: GROUND NO.2 OF THE APPEAL: DISALLOWANCE OF EXPENSES U/S. 14A READ WITH RULE 8-D: THE APPELLANT HAD FILED REVISED GROUND NO.2 VIDE LE TTER 8-4- 2016 INTER-ALIA CLAIMING THAT STRATEGIC INVESTMENTS IN SHARES OF SUBSIDIARY COMPANY AND JOINT VENTURE COMPANY AND IN PARTNERSHIP FIRM SHOULD BE EXCLUDED WHILE COMPUTING THE DISALLOWANCE. WHILE DISPOSING OFF THE GROUND, THE HON TRIBUNAL DIRECTED THE AO TO VERIFY THE EXTENT OF IN VESTMENT MADE IN PARTNERSHIP FIRM ONLY TO REMOVE THE SAME FR OM THE WORKING VALUE OF AVERAGE INVESTMENTS FOR THE PURPOS E OF CALCULATING THE DISALLOWANCE UNDER RULE 8D(2)(III). NO DIRECTIONS WERE GIVEN TIN RESPECT OF SIMILAR EXCLUS ION OF VALUE OF STRATEGIC INVESTMENTS IN SUBSIDIARY COMPANY AND JOINT VENTURE COMPANY, WHICH RESULTED INTO A MISTAKE APPA RENT FROM RECORD AND NEEDS TO BE RECTIFIED. MA NO.162 & 163/MUM/2016 SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. 5 6. AS REGARDS THE FIRST ISSUE, THE SAME OBSERVATION WHI CH HAS BEEN MADE ABOVE IN MA 162/MUM/2016 WOULD BE APPLICABLE. ACCORDINGLY, WE DIRECT THE AO TO FOLLOW THE OUTCOME OF THE DECISION OF THE HONBLE HIGH COURT ON THIS ISSUE. THUS, THE CONTEN TION RAISED BY THE ASSESSEE IN THE IMPUGNED APPLICATION IS ALLOWED. 7. REGARDING THE DISALLOWANCE OF EXPENSES U/S. 14A READ WITH RULE 8D, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT, THE ASSESSEE HAD FILED REVISED GROUND NO.2, VIDE PETITION / LETTER DATED 08.04.2016 CLAIMING THAT STRATEGIC INVESTMENT IN SHARES OF SUBSIDIARY COMPANY AND JOINT VENTURE COMPANY AND IN T HE PARTNERSHIP FIRM SHOULD BE EXCLUDED WHILE CALCULATING THE DISALLOWANCE. WHILE DISPOSING OFF THE GROUND, THE TR IBUNAL HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE EXTENT OF INVESTMENT IN PARTNERSHIP FIRM ONLY AND REMITTED THE MATTER TO THE AO AND REWORK THE AVERAGE VALUE OF INVESTMENT FOR THE PURPOSE OF CALC ULATING THE DISALLOWANCE UNDER RULE 8D(2)(III). HOWEVER, NO SUC H DIRECTIONS HAVE BEEN GIVEN IN RESPECT OF SIMILAR EXCLUSION OR VALUE OF STRATEGIC INVESTMENT IN SUBSIDIARY COMPANY AND JOINT VENTURE COM PANY. THUS, NON-ADJUDICATION OF THIS ASPECT IS MISTAKE APPAR ENT FROM RECORD WHICH NEEDS TO BE RECTIFIED. 8. ON THE OTHER HAND, LD. DR OBJECTED TO THE SAME. 9. ON PERUSAL OF THE MATERIAL ON RECORD AND AFTE R CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE BEFORE US HA S TAKEN A REVISED GROUND, VIDE LETTER DATED 08.04.2016 CONTENDING THAT, STRATEGIC INVESTMENT IN SHARES OF SUBSIDIARY COMPANY; JOINT VENTU RE COMPANY AND IN PARTNERSHIP FIRM SHOULD BE EXCLUDED WHILE COM PUTING THE AVERAGE VALUE OF INVESTMENT FOR THE PURPOSE OF DISALLO WANCE UNDER RULE 8D (2)(III). WE FIND THAT, WHILE DISPOSING OFF THE SAID GROUND, THE ISSUE RELATING TO STRATEGIC INVESTMENT IN SHARES OF SUB SIDIARY COMPANY AND JOINT VENTURE COMPANY HAS BEEN INADVERTEN TLY LEFT OUT MA NO.162 & 163/MUM/2016 SUN-N-SAND HOTEL (SHIRDI) PVT. LTD. 6 TO BE ADJUDICATED. IT IS UNDISPUTED FACT THAT THESE ARE STRA TEGIC INVESTMENTS WHICH IN VIEW OF OUR FINDING GIVEN IN THE ORDER ITSELF SAME SHOULD BE REMOVED FROM THE WORKING FROM THE VALUE OF AVERAGE INVESTMENT AS PROVIDED UNDER RULE 8D (2)(III). ACCORD INGLY, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE SAME AND EXCLUDE THE SAID STRATEGIC INVESTMENT IN THE FORM OF THE SAID SUBSIDIARY A ND JOINT VENTURE AND CALCULATE THE DISALLOWANCE UNDER RULE 8D(2 )(III). WITH THIS DIRECTION, THE ORDER OF THE TRIBUNAL IS MODIFIED A ND MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS ALLOWED. WITH T HIS DIRECTION, GROUND NO.2 RELATING TO DISALLOWANCE OF EXPENSES U/S . 14A READ WITH RULE 8D IS MODIFIED TO THE EXTENT MENTIONED ABOVE. THUS, THE MA NO. 163/MUM/2016 IS ALLOWED. 10. IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FILE D BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2017. SD/- SD/- (B R BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED:10.03.2017. SA COPY TO: THE APPLICANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI