ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, Jaipur V. M/S MAHINDRA WORLD CITY (JAIPUR) LTD., Jaipur

MA 44/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7216 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: ROHAN SOGANI CA DH
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM M.A. NO. 44/JP/2019 ( ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 697/JP/2018) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE ACIT, CIRCLE-2, JAIPUR. CUKE VS. M/S. MAHINDRA WORLD CITY (JAIPUR) LTD., 411, NEELKANTH ROAD, BHAWANI SINGH ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAECM 4950 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) & SHRI ROHAN SOGANI (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.10.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 18/10/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : BY WAY OF THIS MISCELLANEOUS APPLICATION, THE REVEN UE IS SEEKING CLARIFICATION IN RESPECT OF THE FINDING OF THE TRIBUNAL IN PARA 1 1 AND 12 OF THE ORDER DATED 4 TH FEBRUARY, 2019 WHEREBY THE ISSUE OF DISALLOWANCE MA DE UNDER SECTION 14A OF THE ACT WAS DECIDED. 2. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE REVE NUE IS THAT THE FINDING OF THE TRIBUNAL IN PARA 11 & 12 IS CONTRADICTORY WHICH REQ UIRES CLARIFICATION. AFTER CAREFUL PERUSAL OF THE FINDING OF THE TRIBUNAL IN PARA 11 & 12, WE FIND THAT THE TRIBUNAL HAS CONSIDERED THE DISALLOWANCE UNDER SECTION 14A ON AC COUNT OF INTEREST EXPENDITURE IN 2 MA NO. 44/JP/2019 M/S. MAHINDRA WORLD CITY (JAIPUR) LTD., JAIPUR. PARA 11 AND THEN THE DISALLOWANCE ON ACCOUNT OF ADM INISTRATIVE EXPENSES IN PARA 12 AS UNDER :- 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS W ELL AS RELEVANT MATERIAL ON RECORD. AS REGARDS THE DISALLOWANCE U/S 14A OF THE ACT ON ACCOUNT OF INTEREST EXPENDITURE, THIS ISSUE IS COMMON TO THE DISALLOWAN CE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER U/S 36(1)(III) OF THE ACT IN GROUND NO. 1 OF THE APPEAL. HENCE, IN VIEW OF OUR FINDING AND OBSERVATION ON GR OUND NO. 1 OF THE REVENUES APPEAL, THIS ISSUE IS SET ASIDE TO THE RECORD OF TH E ASSESSING OFFICER ON SAME TERMS FOR VERIFICATION OF THE MOMENT OF THE FUND AND ACTU AL SOURCE OF INVESTMENT IN THE MUTUAL FUNDS. 12. THE DISALLOWANCE ON ACCOUNT OF COMMON/INDIRECT ADMINISTRATIVE EXPENDITURE BEING 0.5% OF THE AVERAGE INVESTMENT AS PER RULE 8D (2)(III) OF THE RULES. SINCE THE DIVIDEND INCOME DURING THE YEAR IS ONLY RS. 1,81,39 2/-, THEREFORE, IN VIEW OF THE BINDING PRECEDENTS ON THIS ISSUE, THE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D(2)(III) OF THE RULES, CANNOT BE MORE THAN THE EX EMPT INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. COMMIS SIONER OF INCOME-TAX-IV 378 ITR 33 HAS HELD THAT IF THERE IS NO EXEMPT INCOME EARNE D BY THE ASSESSEE DURING THE YEAR, NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF ADM INISTRATIVE EXPENDITURE, THEREFORE, WE FIND THAT THE DISALLOWANCE RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF EXEMPT INCOME IS PROPER AND JUSTIFIED. THEREFORE, THESE TWO DISALLOWANCES MADE BY THE AO U NDER RULE 8D(2(II) AND (III) ARE SEPARATELY DISCUSSED AND ADJUDICATED. SO FAR AS TH E DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE, THE TRIBUNAL HAS SET ASIDE TH E ISSUE TO THE RECORD OF THE AO AS THE SIMILAR DISALLOWANCE WAS MADE BY THE AO UNDER S ECTION 36(1)(III) OF THE IT ACT WHICH WAS DECIDED IN GROUND NO. 1 OF THE APPEAL AND HENCE IN VIEW OF THE FINDING AND OBSERVATION OF THE TRIBUNAL IN GROUND NO. 1, TH IS ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 14A WAS SET ASIDE TO THE RECORD OF THE AO FOR NECESSARY VERIFICATION OF FACTS AND ADJUDICATION. AS REGARDS THE DISALLOWANCE OF ADMINISTRATIVE 3 MA NO. 44/JP/2019 M/S. MAHINDRA WORLD CITY (JAIPUR) LTD., JAIPUR. EXPENDITURE UNDER RULE 8D(2)(III) BEING .5% OF AVER AGE INVESTMENT, THE TRIBUNAL HAS DECIDED THIS ISSUE BY CONSIDERING THE FACT THAT THE SAID DISALLOWANCE CANNOT BE MORE THAN THE ACTUAL EXEMPT INCOME RECEIVED BY THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THERE IS NO AMBIGUITY OR CONTRADICTION IN THE FINDING OF THE TRIBUNAL WHICH REQUIRES ANY RECTIFICATION OR CLARIF ICATION. ACCORDINGLY, THE MISCELLANEOUS APPLICATION IS MISCONCEIVED AND DESER VES DISMISSAL. 5. IN THE RESULT, MISCELLANEOUS APPLICATION OF THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18/10/201 9. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 18/10/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-2, JAIPUR. 2. THE RESPONDENT M/S. MAHINDRA WORLD CITY (JAIPU R) LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (MA NO. 44/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 4 MA NO. 44/JP/2019 M/S. MAHINDRA WORLD CITY (JAIPUR) LTD., JAIPUR. 5 MA NO. 44/JP/2019 M/S. MAHINDRA WORLD CITY (JAIPUR) LTD., JAIPUR.