ACIT , CIRCLE 3 ( 4) , MUMBAI V. THE SUPREME INDUSTRIES LIMITED, MUMBAI

MA 91/MUM/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9219 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 14A; 115JB; 254(2)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) M.A. NO. 91/MUM/2021 ARISING OUT OF I.T.A. NO. 4754/MUM/2014 (ASSESSMENT YEAR 2009-10) ACIT, CIRCLE-3(4) CENTRE-1, 29 TH FLOOR, WORLD TRADE CENTRE CUFFE PARADE MUMBAI-400005. VS. THE SUPREME INDUSTRIES LIMITED 612, RAHEJA CHAMBERS 213, NARIMAN POINT MUMBAI-400 021. PAN : AAACT1344F (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI NITESH JOSHI DEPARTMENT BY SHRI VIJAY KUMAR MENON DATE OF HEARING 06.08.2021 DATE OF PRONOUNCEMENT 06.08.2021 O R D E R PER SHAMIM YAHYA (AM) :- BY WAY OF THIS MISCELLANEOUS APPLICATION THE REVENU E SEEKS RECTIFICATION OF MISTAKE UNDER SECTION 254(2) OF THE I.T. ACT IN THE ORDER OF THIS TRIBUNAL IN ITA NO. 4754/MUM/2014 FOR A.Y. 2009-10 VIDE ORDER D ATED 20.12.2019. 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT BY WAY OF THIS MISCELLANEOUS APPLICATION THE CONTENTIO N OF THE REVENUE IS THAT GROUND NO. 2 IN THE REVENUES APPEAL REMAINED TO BE UNADJUDICATED. THE SUBMISSION READ AS UNDER : GROUND NO. 2: ADDITION OF DISALLOWANCE MADE U/S. 14 A TO BOOK PROFITS U/S. 115JB BRIEF FACTS THE DISALLOWANCE OF RS. 1, 84,26, 413/- CALCULATED U/S. 14A WAS ADDED TO THE BOOK PROFITS U/S. 1 15JB OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE AO CLAUSE (F) OF EXPL ANATION 1 TO SECTION 115JB. HOWEVER, IN ALIGNMENT WITH HIS DECISION TO RE DUCE THE QUANTUM OF THE SUPREME INDUSTRIES LIMITED 2 DISALLOWANCE U/S. 14A FROM RS. 1,84,26,413/- TO RS. 16,98,745/-, THE LD. CIT(A) DIRECTED THAT THE ADDITION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB ALSO BE REDUCED ACCORDINGLY TO RS. 16,98,745/- . AGGRIEVED, REVENUE FILED THE INSTANT APPEAL BEFORE THE HON'BLE ITAT. DECISION OF HON'BLE ITAT THE HON'BLE ITAT HAS NOT SPECIFICALLY ADJUDICATED ON THIS GROUND IN ITS ORDER. IN THIS REGARD IT IS HUMBLY SUBMITTED THAT THIS IS A M ISTAKE APPARENT FROM RECORD SINCE THE HON'BLE ITAT HAS NOT ADJUDICATED ON THIS GROUND. 3. PER CONTRA, LEARNED AUTHORISED REPRESENTATIVE SU BMITTED THAT THE ITAT HAS ADJUDICATED THE ISSUE OF DISALLOWANCE UNDER SEC TION 14A OF THE ACT. HENCE, THIS ISSUE STANDS ADJUDICATED. 4. UPON CAREFUL CONSIDERATION WE FIND THAT REVENUE HAS RAISED FOLLOWING GROUND IN APPEAL BEFORE THE TRIBUNAL :- '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTERES T EXPENDITURE OF RS.1,67,27,608/- MADE UNDER RULE 8D(II), WITHOUT APPR ECIATING THE FACT THAT THE A.O HAS RIGHTLY COMPUTED THE DISALLOWANCE AS PER PROVISIONS OF SECTION 14A R.W.R 8D OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RE STRICT THE ADDITION TO RS.16,98,745/- AS AGAINST THE DISALLOWANCE OF RS.1,84 ,26,413/- MADE BY THE A.O FOR THE PURPOSE OF COMPUTING BOOK PROFIT AS PER TH E PROVISIONS OF SECTION 115JB OF THE I.T. ACT.' 5. THIS TRIBUNAL HAS ADJUDICATED THE ISSUE IN A COM BINED ORDER WHERE ASSESSEE HAD ALSO FILED APPEAL, AS UNDER AFTER NOTI NG THE ASSESSING OFFICERS AND LEARNED CIT(A)S ORDER :- 20. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS. AS REGARDS DISALLOWANCE ON ACCOUNT OF INTEREST, WE FIND THAT THE L EARNED CIT(A) HAS GIVEN THE FINDING THAT ASSESSEE'S OWN FUNDS ARE SUFFICIENT TO COVER INVESTMENT EARNING INTEREST FREE INCOME. THE ASSESSING OFFICER H AS NOT DISPUTED THIS CLAIM OF THE ASSESSEE. HE HAS HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO BRING ONE- TO-ONE NEXUS BETWEEN THE AVAILABLE INTERES T FREE FUNDS THE INVESTMENT EARNING EXEMPT INCOME. IN THIS REGARD, WE NOTE THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HDFC BANK LTD., 366 ITR 505 (BOM.) AND CIT VS RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM.) HAD EXPOUNDED THAT IF INTEREST FREE FUNDS ARE SUFFICIENT TO COVER THE IMPUGNED THE SUPREME INDUSTRIES LIMITED 3 INVESTMENT, NO DISALLOWANCE ON ACCOUNT OF DIVERSION OF INTEREST NEEDS TO BE DONE AND THE ASSESSEE IS NOT REQUIRED TO SHOW ANY ONE- TO-ONE NEXUS. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHEREIN HE HAS DIRECTED THA T DISALLOWANCE UNDER RULE 8D(II) OF THE RULES BE DELETED. 21. AS REGARDS THE DISALLOWANCE UNDER RULE 8D(III) O F THE RULES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE HAS R AISED GROUND BEFORE THE LEARNED CIT(A) THAT THE DISALLOWANCE ON THIS ACCOUNT SHO ULD NOT BE DONE IN ABSENCE OF ANY SATISFACTION BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE LEARNED CIT(A) HAD NOT ADJUDICATED THIS ASPECT. IN THI S REGARD, IT IS THE CLAIM OF THE ASSESSEE THAT IT WILL ACCEPT 0.5% DISALLOWANCE S USTAINED BY THE LEARNED CIT(A) IF IT'S CLAIM FOR THE STRATEGIC INVESTMENT AND SOME OF THE INVESTMENT NOT YIELDED ANY EXEMPT INCOME IS CONSIDERED AND PROPO RTIONATE REDUCTION IS DONE. 22. IN THIS REGARD, WE NOTE THAT THE ASSESSEE'S PLEA OF RELIEF ON ACCOUNT OF STRATEGIC INVESTMENT IS NO LONGER SUSTAINABLE IN VIEW O F THE HON'BLE COURT'S DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. VS CIT , 402 ITR 640 (SC). 23. AS REGARDS THE CLAIM TO CONSIDER ONLY THOSE INVES TMENTS WHICH YIELD EXEMPT INCOME, THE SAME IS ACCEPTABLE ON THE TOUCHSTONE OF THE SPECIAL BENCH DECISION IN THE CASE OF ACIT VS VIREET INVEST MENTS (P .) LTD., 58 ITR 313 (DELHI-TRIB.)(SB) 24. HOWEVER, SINCE THE ASSESSEE HAS NOT ACCEPTED THE L EARNED CIT(A)'S ORDER AND THE LEARNED CIT(A) HAS NOT ADJUDICATED THE ISSUE OF LACK OF SATISFACTION, WE REMIT THIS ASPECT OF THE ISSUE TO THE FILE OF THE L EARNED CIT(A). THE LEARNED CIT(A) IS DIRECTED TO PASS A SPEAKING ORDER ON THIS ISSUE RAISED BY THE ASSESSEE. 6. FROM THE ABOVE IT IS APPARENT THAT THE TRIBUNAL HAS NOT ADJUDICATED GROUND NO. 2 OF REVENUES APPEAL. LEARNED COUNSEL O F THE ASSESSEE PLEADED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY HON'BLE BOMBAY HIGH COURT DECISION THAT DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT BE IMPORTED IN SECTION 115JB. WE FIND THAT IN THE MISC ELLANEOUS APPLICATION IT IS NOT PERMISSIBLE TO DECIDE UPON THE MERITS OF AN ISS UE WHICH HAS NOT BEEN ADJUDICATED. 7. HENCE, WE RECALL THE GROUND NO. 2 IN REVENUES A PPEAL TO BE DECIDED AFRESH. HENCE, ORDER IN ITA NO. 4754/MUM/2014 FOR A .Y. 2009-10 IS RECALLED ONLY TO CONSIDER GROUND NO. 2 WHICH HAS NOT BEEN AD JUDICATED. THE SUPREME INDUSTRIES LIMITED 4 8. IN THE RESULT, MISCELLANEOUS APPLICATION IS ALLO WED AS ABOVE. PRONOUNCED IN THE OPEN COURT ON 6.8.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAM IM YAHYA) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI; DATED : 06/08/2021 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// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI