DCIT CC 6(4), MUMBAI V. MUMBAI SEZ LTD, MUMBAI

MA 567/MUM/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5189 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-02-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: WAY OF FILING AN APPEAL BEING ITA NO. AGAINST
• Keywords: Revision of order; Rule 8D; Set aside
• Section: 37; 10; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER MA No. 567 /Mum/2019 (in ITA No.3655 /Mum/2017) And MA No. 568/Mum/2019 (in ITA No 3072/Mum/2017) (Assessment Years: 2007-08/) The DCIT, Central Circle – 6(4) Roo m No. 1925, Air Ind ia Bldg, Nari man Point Mu mbai – 400 021 . बनाम/ Vs. Mu mbai SEZ Ltd. , Jai Cen tre, 1 s t Floo r, 34 , P D Mello Road, Opp. Red Gate, Masjid, Mu mbai – 400009 ./ज आइआर ./PAN/GI R No. : AABCG27 39C ( /Appellant) . . ( / Respondent) र / Revenue by : Mr.Milind Chavan. DR र / Assessee by : Mr. Madhur Agrawal. AR र / D a t e o f H e a r i n g 17/12/2022 !"# र /D a t e o f P r o n o u n c e m e n t 23/02/2022 आद श / O R D E R PER PAVAN KUMAR GADALE - JM: The revenue has filed these application miscellaneous (M.A) No. 567/Mum/2019 in ITA No. 3655/Mum /2017 in the revenue appeal and MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 2 - miscellaneous application (M.A) No. 568/Mum/2019 in ITA No. 3072/Mum/2017 in the assessee’s appeal seeking rectification of mistake apparent in the Honble Tribunal order. 2. The Ld.DR submitted that the revenue appeal and the assessee appeal were disposed off separately by the Hon’ble Tribunal and the assessee has not filed miscellaneous Application. Further the Ld.DR submitted that the revenue has filed these miscellaneous applications (M.A) in both the revenue and assessee appeals. Since, both the miscellaneous applications have common issues and grounds are similar. For the sake of convenience, we shall take up MA No.567/Mum/2019 as a lead case. We considered it appropriate to refer to the grounds raised by the revenue in the miscellaneous application (M.A) page 1 Para 1 to Para 7 as under: 1. It is respectfully submitted that vide para 7 Et 8 of the appellate order dated 26.04.2019, the Hon'ble ITAT, 'D' Bench, Mumbai has observed that since all the 3 issues viz. (1) Social Welfare expenses, (2) Disallowance u/s.14A r.w.Rule 8D and (3) Differential rate of interest, that had arisen out of the review order uls.263 dated 30.03.2012 have been set aside to the file of the Assessing Officer by the Hon'ble ITAT vide order dated 11.07.2018 for re- MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 3 - examination, the order passed u/s.143(3) r.w.s. 263 dated 11.02.2013 becomes infructuous. With these remarks, the Hon'ble ITAT, vide order dated 26.04.2019, has dismissed the Department's appeal. 1.1The above finding / observation of the Hon'ble ITAT vide order dated 26.04.2019 that all the above mentioned 3 issues have been set aside to the file of the A.O. by the Hon'ble ITAT vide order dated 11.07.2018 is not correct in so far as the fact that only issue in relation to Social Welfare Expenses was set aside to the file of the Assessing Officer. Hence, the present M.A. is being filed for rectification of the mistake apparent on the face of it in the Hon'ble ITAT's order dated 26.04.2019 in ITA No.3655/Mum/2019. The relevant facts of the case are as briefly discussed hereunder. 2. That pursuant to the order passed u/s.263 dated 30.03.2012 passed by the then Commissioner of Income Tax, the assessment was revised by way of passing an assessment order u/s.143(3) r.w.s. 263 on 11.02.2013, assessing the total income at Rs.44,11,71,913/-. In the assessment order, the additions were made on account of (1) Social Welfare Expenses of Rs.73,14,2001-, (2) Disallowance u/s.14A read with Rule 8D amounting to Rs.1,79,24,8951- and (3) Interest of Rs.12,62,19,359/-. Thus, after making the aforesaid adjustments, the Capital WIP was revised to Rs.394,19,25,2881-. 3. Being aggrieved by the assessment order u/s.143(3) r.w.s. 263 dated 11.02.2013, the assessee preferred an appeal. The ld.CIT(A)-54, Mumbai, vide order dated 16.02.2017, partly allowed the assessee's appeal being No.CIT(A)-54/DCCC-39/IT-516/12-13 whereby the MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 4 - additions on account of Social Welfare Expenses and Differential Interest were confirmed whereas the disallowance u/s.14A r.w.Rule 8D was restricted to Rs.96,03,789/thereby allowing relief to the extent of Rs.83,21,106/-. 4. Meanwhile, the assessee had filed an appeal against the then CIT's order u/s.263 dated 12.03.2012. The Hon'ble ITAT, "B" Bench, Mumbai, vide order dated 11.07.2018, partly allowed the assessee's appeal. The Hon'ble ITAT, on two issues viz. Disallowance u/s.14A r.w. Rule 8D and Differential rate of interest, held that the conditions of Section 263 are not satisfied, which is evident from para 7 & 12 of the appellate order dated 11.07.2018. Further, as per para 8 of the appellate order dated 11.07.2018, the issue relating to Social Welfare expenses has been set aside to the file of the A.O. to examine it afresh after affording opportunity to the assessee. 5.Now, coming back to the ld.CIT(A)'s order dated 16.02.2017, which was challenged by the department by way of filing an appeal being ITA No.3655/2017 against the partial relief allowed to the assessee on account of disallowance u/s.14A read with Rule 8D. It is respectfully submitted that on such an appeal of the Department, the Hon'ble ITAT, 'D' Bench, Mumbai, vide order dated 26.04.2019, has given a finding that since the above mentioned 3 issues have been set aside to the file of the A.O. by the Hon'ble ITAT vide order dated 11.07.2018 for re-examination, the order passed u/s.143(3) r.w.s. 263 dated 11.02.2013 becomes infructuous. With these remarks, the Hon'ble ITAT, vide order dated 26.04.2019, has dismissed the Department's MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 5 - appeal. 5.1 Similarly, the assessee's appeal being ITA No.3072/Mum/2017 against the ld.CIT(A)-54, Mumbai's order dated 16.02.2017 has also been decided by the Hon'ble ITAT, 'D' Bench, Mumbai, by a separate order dated 22.03.2019, with similar observations / findings. 6. Having discussed the sequence of events heretofore, it transpires that there is an error apparent on the face of it in the appellate order dated 26.04.2019 wherein the Hon'ble ITAT, vide para 7 a 8, has mentioned that the above mentioned 3 issues were set aside by the ITAT vide earlier order dated 11.07.2018 to the file of the A.O. for re-examination whereas the fact is that the Hon'ble ITAT, vide its order dated 11.07.2018 in ITA No.3429/Mum/2012, had set aside only one issue i.e. with respect to disallowance of social welfare expenses to the file of the A.O. for fresh examination and the other two issues were not set aside. Having regard to these facts on record, it is inferred that there is a gross error apparent from record, which needs to be rectified by the Hon'ble TAT by way of recalling its order dated 26.04.2019 in the Department's Appeal being ITA No. 3655/Mum/201 7. 7. It is, therefore, humbly prayed that; (a) the Hon'ble Tribunal be pleased to recall the order dated 26.04.2019 passed in the Department's appeal being ITA No.3655/Mum/2016 and rectify the mistake apparent from record as pointed out heretofore; and (b) both the appeals for A.Y. 2007-08 i.e. Department's MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 6 - Appeal being ITA No.3655/Mum/2017 and assessee's Appeal being ITA No.3072/Mum/2017 against order dated 16.02.2017 passed by the Id. CIT(A)-54, Mumbai, be tagged together, heard together and be decided 3. The Ld.DR submitted that while the Honble tribunal passing the order in the assessee and the revenue appeal has wrongly mentioned that 3 issues are set aside to the file of the A.O. for reexamination, but actually only one issue i.e. disallowance of social welfare expenses restored to A.O. by the Honble Tribunal in ITAno3429/Mum/2012 dated 11-07-2018. Wherea the Ld. AR also accepted the facts with respect to rectification and mistake apparent in both the orders dated 22/3/2019 & 26/04/2019. 4. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld. DR that there is a mistake in the Hon’ble Tribunal order in ITA No. 3655/Mum/2017 dated 26.04.2019, where the Hon’ble Tribunal has mentioned that three issues were set aside in the earlier order dated 11.07.2018 to the file of the A.O for reexamination. Whereas the Ld.DR has referred to the order of the Honble Tribunal dated 11.07.2018 in ITA NO. MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 7 - 3429/Mum/2012 A.Y 2007-08, where the Hon’ble Tribunal has restored the claim of social welfare expenses to the file of the Assessing Officer. We refer to the observations of the Hon’ble Tribunal in ITA No. 3429/Mum/2012 at page 7 Para 8 as under: “8. The second issue revised by ld. CIT relates to social welfare expenses of Rs. 60,40,238/-. We have noted that no quarry was raised by the assessing officer while passing assessment order under section 143(3). The assessee has not place any material before us to substantiate if any inquiry was made by assessing officer during assessment. However, the ld AR for the assessee in support of his submissions relied on the decision of Hon'ble Apex Court in Sri Venkata Satyanarayan Rice Mill Contractors Co Vs CIT [1997] (supra and Madras High Court in CIT Vs Velumanickum Lodge ITA No. 3429 Mum 2012-Mumbai Sez Limited (supra). In Sri Venkata Satyanarayan Rice Mill Contractors Co. the Hon'ble Apex Court held that contribution to Public welfare fund, whether voluntarily or at the instance of authorities for public cause in public interest not opposed to public policy is allowable expenditure. Further in CIT Vs Velumanickum Lodge (supra) Madras High Court held that construction of Hockey Stadium by assessee with a view for the use of Public at large and for generating goodwill and such construction is not prohibited by law, therefore, allowable under section 37 of the Act. Considering the contention of ld. AR for the assessee and the legal position mentioned above, we are in agreement with the contention of ld. AR that the expenses incurred on Social welfare are allowable expenses. However, as this issue was not examined by assessing officer during assessment. Therefore, in principal we allowing this issue in favour of assessee MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 8 - and direct the assessing officer to verify the facts and the expenses and allow relief to the assessee. Needless to direct that the assessing officer shall grant opportunity to the assessee to furnish the details and evidences thereof.” . 5. We find that the Honble Tribunal has considered the overall facts and has restored only one issue with respect to social welfare expenses to the file of the A.O to verify and pass the order. Whereas in the Hon’ble Tribunal order dated 26.04.2019, the Tribunal in revenue appeal has observed at page 3 Para 7 & 8 as under: 7. At the outset, the Ld. counsel for the assessee submitted that the ‘B’ Bench of the Mumbai Tribunal has allowed the appeal filed by the assessee against the order passed by the CIT u/s 263 of the Act, in assessee’s appeal ITA No 3429/Mum/2012 for the assessment year under consideration. Since, the Tribunal has set aside the order passed by the CIT directing the AO to reexamine the issue regarding i) capitalizing the disallowance under rule 8D, ii) social welfare expenses and iii) interest expenses borne by the assessee on borrowed funds, the assessment order passed u/s 143 (3) read with section 263 of the Act relating to the said issues, the present grounds of appeal do not survive. 8. We have perused the material on record. As pointed out by the Ld. counsel for the assessee, the coordinate Bench has set aside the order passed by the Ld. CIT u/s 263 of the Act, directing the AO to re-examine the three issues discussed above, the order passed by the AO u/s 143 (3) MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 9 - read with section 263 of the Act has become infructuous. Since, the order against which the assessee has filed the present appeal has become infructuous, the grounds of appeal raised by the assessee do not survive. Hence, we dismiss the appeal of the revenue as not pressed. 6. On comparison of the observations of the Honble Tribunal order dated 11.07.2018 and the order dated 26.04.2019, we found the submissions of the Ld.DR are to be accepted as there is a mistake apparent from the record in the paragraphs. Accordingly, we rectify the observations in the ITAT order in Para 7 by excluding (i) capitalizing the disallowance under Rule 8D and (iii) interest expenses borne by the assessee on the barrowed funds and in Para 8 to exclude –the three issues and incorporate “one issue”. The modified Para 7 & 8 has to be read as under: 7. At the outset, the Ld. counsel for the assessee submitted that the ‘B’ Bench of the Mumbai Tribunal has allowed the appeal filed by the assessee against the order passed by the CIT u/s 263 of the Act, in assessee’s appeal ITA No 3429/Mum/2012 for the assessment year under consideration. Since, the Tribunal has set aside the order passed by the CIT directing the AO to reexamine the issue regarding i)------- (ii) social welfare expenses --- (iii) - ----- the assessment order passed u/s 143 (3) read with MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 10 - section 263 of the Act relating to the said issues, the present grounds of appeal do not survive. 8. We have perused the material on record. As pointed out by the Ld. counsel for the assessee, the coordinate Bench has set aside the order passed by the Ld. CIT u/s 263 of the Act, directing the AO to re-examine the--one issue-- discussed above, the order passed by the AO u/s 143 (3) read with section 263 of the Act has become infructuous. Since, the order against which the assessee has filed the present appeal has become infructuous, the grounds of appeal raised by the assessee do not survive. Hence, we dismiss the appeal of the revenue as not pressed 7. In the result, the miscellaneous application filed by the revenue is allowed. MA No. 568/Mum/2021(In ITA no 3072/Mum/2017) 8. Similarly, in respect of the miscellaneous application M.A No. 568/Mum/2019. Where the facts are similar and the Honble Tribunal in the assessee appeal in ITA No.3072/Mum/2017 dated 22.03.2019 has observed at page 3 Para 6 & 8 as under: 6.At the outset, the Ld. counsel for the assessee submitted that the ‘B’ Bench of the Mumbai Tribunal has allowed the appeal filed by the assessee against the order passed by the CIT u/s 263 of the Act, in assessee’s appeal ITA No 3429/Mum/2012 for the assessment year under consideration. Since, the Tribunal has set aside the order passed by the CIT directing the AO to reexamine the MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 11 - issue regarding i) capitalizing the disallowance under rule 8D, ii) social welfare expenses and iii) interest expenses borne by the assessee on borrowed funds, the assessment order passed u/s 143 (3) read with section 263 of the Act relating to the said issues, the present grounds of appeal do not survive. 7.---- 8. We have perused the material on record. As pointed out by the Ld. counsel for the assessee, the coordinate Bench has set aside the order passed by the Ld. CIT u/s 263 of the Act, directing the AO to re-examine the three issues discussed above, the order passed by the AO u/s 143 (3) read with section 263 of the Act has become infructuous. Since, the order against which the assessee has filed the present appeal has become infructuous, the grounds of appeal raised by the assessee do not survive. Hence, we dismiss the appeal of the revenue as not pressed On comparison of the observations of the Honble Tribunal earlier order dated 11.07.2018 and the order dated 22.03.2019, we found the submissions of the LD.DR are to be accepted as there is a mistake apparent from the record in the paragraphs. Accordingly, we rectify the observations in the ITAT order in Para 6 by excluding (i) capitalizing the disallowance under Rule 8D and (iii) interest expenses borne by the assessee on the barrowed funds and Para 8 to exclude –the Three issues and incorporate MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 12 - “only issue”.. The modified Para 6 & 8 has to be read as under: 6.At the outset, the Ld. counsel for the assessee submitted that the ‘B’ Bench of the Mumbai Tribunal has allowed the appeal filed by the assessee against the order passed by the CIT u/s 263 of the Act, in assessee’s appeal ITA No 3429/Mum/2012 for the assessment year under consideration. Since, the Tribunal has set aside the order passed by the CIT directing the AO to reexamine the issue regarding i)------- (ii) social welfare expenses --- (iii) - ----- the assessment order passed u/s 143 (3) read with section 263 of the Act relating to the said issues, the present grounds of appeal do not survive. 7.---- 8. We have perused the material on record. As pointed out by the Ld. counsel for the assessee, the coordinate Bench has set aside the order passed by the Ld. CIT u/s 263 of the Act, directing the AO to re-examine the-only issue- discussed above, the order passed by the AO u/s 143 (3) read with section 263 of the Act has become infructuous. Since, the order against which the assessee has filed the present appeal has become infructuous, the grounds of appeal raised by the assessee do not survive. Hence, we dismiss the appeal of the revenue as not pressed. MA No.567 & 568 /Mum/2021 Mumbai SEZ ltd., Mumbai - 13 - Accordingly, the M.A. filed by the revenue is the assessee appeal is allowed. 8In the result, both the miscellaneous applications filed by the revenue are allowed. Order pronounced in the open court on 23.02.2022 Sd/- Sd/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER Mumbai, Dated 23/02/2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. & '( आ र आ ) / The CIT(A) 4. आ र आ ) ( ) / Concerned CIT 5. , - . / / '(, आ र '( र#, हमद & द / DR, ITAT, Mumbai 6. . 34 5 / Guard file. ान ु सार/ BY ORDER, , / //True Copy// 1. उ /सहाय ंजी ार ( Asst. Registrar) य र ी य !" र#, हम ाबा / ITAT, Mumbai