Caspian Impact Investments Private Limited, Hyderabad V. Dy. Commissioner of Income Tax, Circle-1(2), Hyderabad

MA 96/Hyd/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4743 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: NIKHIL
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 14A; 254(2)

Judgement Text

. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER M.A.NO.96/HYD/2018 (ARISING OUT OF ITA NO.1462/HYD/2017) (ASSESSMENT YEAR: 2013-14) CASPIAN IMPACT INVESTMENT (P) LTD (FORMERLY BELLWETHER MICROFINANCE FUND P LTD HYDERABAD PAN: AADCS4132K VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI NIKHIL FOR REVENUE : SHRI NILANJAN DEY, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS M.A. IS FILED BY THE ASSESSEE U/S 254(2) OF TH E I.T. ACT, 1961 BY STATING AS UNDER: MAY IT PLEASE YOUR HONOURS THIS IS A MISCELLANEOUS APPLICATION FILED U/S 254(2 ) OF THE INCOME-TAX ACT, ] 961 AGAINST THE ORDER PASSED BY T HE HON'BLE 'B' BENCH DATED AUGUST] 7, 2018 ('THE ORDER ') BEARING ITA NO.1462/HYD/ 2017. THE PRESENT APPLICATION SEEKS RECTIFICATION OF MISTAKES OF FACT S APPARENT FROM RECORD IN THE SAID ORDER. BRIEF FACTS LEADING TO THE PRESENT APPLICATION ARE PROVIDED AS UNDER: BRIEF BACKGROUND: FOR THE CAPTIONED YEAR, THE COMPANY EARNED DIVIDEND INCOME AMOUNTING TO RS. 24,55,248/FROM ITS INVESTME NT DATE OF HEARING : 25.01.2019 DATE OF PRONOUNCEMENT: 15.03.2019 . PAGE 2 OF 5 IN SONATA FINANCE PRIVATE LIMITED. THE APPELLANT. B EING AN NBFC, ALSO HAS MULTIPLE OTHER INVESTMENTS, WHICH HAVE NOT YIELDED EXEMPT INCOME DURING THE CAPTIONED YEAR. THE APPELLANT HAS A FUND MANAGER FOR PROVISIO N OF FUND MANAGEMENT SERVICES. DURING THE CAPTIONED YEAR , THE APPELLANT HAS PAID AN AMOUNT OF RS. 2,68,99,238 /- TOWARDS FUND MANAGEMENT FEE. IN ITS RETURN OF INCOM E, THE COMPANY SUO-MOTO DISALLOWED AN AMOUNT OF RS. 85,934/- U/S 14A OF THE ACT PERTAINING TO THE INVESTMENTS IN SONATA FINANCE PRIVATE LIMITED. SUBSEQUENTLY, THE ASSESSING OFFICER DISALLOWED A SU M OF RS. 2,88,27,079/- U/S 14A OF THE ACT IN THE ASSESSM ENT PROCEEDINGS, BY CONSIDERING THE ENTIRE FUND MANAGEM ENT FEE FOR CLAUSE (I) OF RULE 80(2) OF THE INCOME-TAX RULES, 1962 ('THE RULES'). AGAINST THE SAID DISALLOWANCE MADE BY THE AO, THE COMPANY PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) ('CIT(A)'). THE COMPANY HAD SUBMITTED THAT THE DISALLOWANCE UNDER CLAUSE (I) OF RULE 80(2) OF THE RULES SHOULD BE RESTRICTED TO THE EXPE NSES INCURRED IN RELATION TO THOSE INVESTMENTS WHICH HAV E ACTUALLY YIELDED EXEMPT INCOME DURING THE YEAR. TO SUPPORT THE SAID ARGUMENT, THE COMPANY REI IED ON T HE JUDGEMENT OF THE HON 'BLE IT AT IN ITS OWN CASE FOR THE AY 2009-10 [ITA NO. I 743/HYD/20 13]. CONSIDERING THE SAME, THE CIT(A) DIRECTED THE AO TO COMPUTE THE DISALLOWANCE UNDER CLAUSE (I) OF RULE 80(2) OF THE RULES, AS PER THE SAID ITA '1' ORDER. THE LD. AO PASSED A CONSEQUENTIAL ORDER GIVING EFFE CT TO THE DIRECTION OF THE CIT(A) ORDER AND CALCULATED A DISALLOWANCE OF RS. 57,32,707/- AGGRIEVED BY THE CIT(A) ORDER, THE DEPARTMENT PREFE RRED AN APPEAL BEFORE YOUR HONOURS, WHICH HAS BEEN DISPOSED OF BY THE HON'BLE IT AT VIDE ITS ORDER DAT ED AUGUST 17, 2018. THE SAID ITAT ORDER HAS CERTAIN MISTAKES APPARENT FROM RECORD, WHICH ARE EXPLAINED IN DETAIL AS FOLLOWS: J. PARAGRAPH 3 - 'BEING AGGRIEVED BY THE ABOVE DISALLOWANCES, AN APPEAL WAS FILED BEFORE THE CIT(A ), WHO VIDE THE IMPUGNED ORDER DIRECTED THE A.O. TO RE STRICT THE AMOUNT 0/ DISALLOWANCE MADE U/S 14A TO THE EXTE NT OF EXEMPT INCOME. ' IN THIS REGARD, THE ASSESSEE HUMBLY WISHES TO SUBMI T THAT AGGRIEVED BY THE ASSESSMENT ORDER, IT HAD PREF ERRED APPEAL BEFORE THE CIT(A) ON THE QUANTUM OF DISALLOW ANCE MADE UNDER CLAUSE (I) TO RULE 80(2) OF THE RULES. T HE . PAGE 3 OF 5 COMPANY'S CONTENTION BEFORE THE CIT(A) WAS THAT THE DISALLOWANCE UNDER CLAUSE (I) OF RULE 80(2) OF THE RULES SHOULD BE RESTRICTED TO THE EXPENSES INCURRED IN RE LATION TO SUCH INVESTMENTS WHICH HAVE ACTUALLY YIELDED EXE MPT INCOME DURING THE YEAR, AS AGAINST THE APPROACH OF THE AO TO CONSIDER ALL THE INVESTMENTS AS APPEARING IN THE BALANCE SHEET. THEREFORE, CONSIDERING THE ASSESSEE'S ARGUMENTS, TH E CIT(A) DIRECTED THE AO TO RE-COMPUTE THE DISALLOWAN CE U/S L4A OF THE ACT [RULE 80(2)(I)] BY TAKING INTO CONSIDERATION ONLY THOSE INVESTMENTS WHICH HAVE ACTUALLY YIELDED EXEMPT INCOME. 2. PARAGRAPH 5 - 'ON THE OTHER HAND, LEARNED AR PLA CED RELIANCE ON THE ORDER 0/ THE COORDINATE BENCH OF TH E TRIBUNAL IN THE CASE OF MA RENAISSANCE HOLDINGS & DEVELOPERS PVT LTD., (ITA NO. 848/BANG/2018, DT 06.07.2018) WHICH IS RELEVANT FOR THE PROPOSITION T HAT THE AMOUNT OF DISALLOWANCE CANNOT EXCEED EXEMPT INCOME. ' IN THIS REGARD, THE ASSESSEE WISHES TO SUBMIT THAT ITS AUTHORISED REPRESENTATIVE ('AR') HAS PLACED RELIANC E ON THE JUDGEMENT OF THE HON'BLE HYDERABAD TRIBUNAL IN THE COMPANY'S OWN CASE FOR THE AY 2009-10 WHEREIN THE FACTS ARE IDENTICAL. THE HON'BLE ITAT, FOR THE AY 2 00910, HELD THAT THE DISALLOWANCE UNDER CLAUSE (I) OF RULE 80(2) OF THE RULES SHALL BE COMPUTED ONLY IN RESPECT OF T HE INVESTMENTS WHICH HAVE ACTUALLY YIELDED EXEMPT INCO ME DURING THE YEAR. IN THE GIVEN BACKGROUND, THE HON'BLE ITAT HAS INADVERTENTLY MENTIONED THAT THE AR OF THE COMPANY HAS PLACED RELIANCE ON THE JUDGEMENT OF THE TRIBUNAL IN THE CASE OF M/S. RENAISSANCE HOLDINGS & DEVELOPERS PVT LTD., (ITA NO.848/BANG/20 18, DT 06.07.2018) WHICH DEALS WITH RESTRICTING THE DISALLOWANCE U/S 14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME EARNED. 3. PARAGRAPH 6 - 'THERE IS NO DISPUTE ABOUT THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A. NOW THE LAW IS QUITE SETTLED THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME. IN SUPPORT OF THIS VIEW RELIA NCE CAN BE PLACED ON THE FTAT. HYDERABAD SPECIAL BENCH IN THE CASE OF ACFT VS. M/S. PROGRESSIVE CONSTRUCTIONS PVT LID (ITA NO. 1845/HYD/2014, DT. 14.02.2017) WE FIND THAT THE ORDER OF THE CFT(A) IS IN CONSONAN CE WITH THE RATIOS LAID DOWN BY THE SPECIAL BENCHES AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE CFT(A). ' . PAGE 4 OF 5 IN THIS REGARD, THE HON'BLE ITA T IN THE ORDER CONC LUDED BY MENTIONING THAT SINCE THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE RATIO LAID DOWN BY THE SPECIAL BENCHES. THERE IS NO REASON TO INTERFERE WITH THE O RDER OF THE CIT(A). THE ASSESSEE WISHES TO RE-ITERATE AS MENTIONED IN S . NO. I & 2 OF THIS SUBMISSION THAT THE CIT(A) FOLLOWED T HE DECISION OF THE HON'BLE HYDERABAD TRIBUNAL IN THE COMPANY'S OWN CASE AND DIRECTED THE AO TO RE-COMPUT E THE DISALLOWANCE UNDER RULE 8D(2)(I) ACCORDINGLY. THEREFORE, IN THIS CONTEXT, THE HON'BLE ITAT INADVE RTENTLY MENTIONED THAT RATIO LAID DOWN BY THE SPECIAL BENCH IS FOLLOWED IN THE ORDER OF CIT(A), HENCE DOES NOT REQ UIRE INTERFERENCE. IN VIEW OF THE ABOVE, WE HUMBLY SUBMIT BEFORE YOUR HONOURS TO CONSIDER THE ABOVE SUBMISSION AND PASS A RECTIFICATION ORDER. THE COMPANY SHALL BE PLEASED TO PROVIDE ANY OTHER INFORMATION/ CLARIFICATIONS THAT YOUR HONOURS MAY H AVE IN THIS REGARD. HOWEVER, IN CASE YOUR HONOURS DECID E OTHERWISE. IT IS HUMBLY PRAYED THAT AN OPPORTUNITY OF PERSONAL HEARING MAY BE GRANTED TO THE COMPANY. DATED AT HYDERABAD THIS THE 23TH DAY OF NOVEMBER 2018. 2. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE IN THE M.A. 3. THE LEARNED DR WAS ALSO HEARD. THE LEARNED DR SUBMITTED THAT THERE IS NO MISTAKE APPARENT FROM TH E RECORD WHICH NEEDS RECTIFICATION. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE DISPOSAL OF THE ARGUMEN T RAISED BY THE ASSESSEE IN THE M.A. WOULD NOT AFFECT THE OUTCOME I N ITA NO.1462/HYD/2017. IT IS THE APPEAL OF THE REVENUE W HICH HAS . PAGE 5 OF 5 BEEN DISMISSED BY THE TRIBUNAL ON THE GROUND THAT O NLY INVESTMENTS WHICH YIELD EXEMPT INCOME ALONE SHOULD BE CONSIDERED FOR DISALLOWANCE U/S 14A. THEREFORE, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE AGAINST THE SAME. M.A. IS ACCORDINGLY REJECTED. 5. IN THE RESULT, M.A. IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH MARCH, 2019. VINODAN/SPS COPY TO: 1 CASPIAN IMPACT INVESTMENT P LTD , 8-2-596/5/B/1, 3 RD FLOOR, ROAD NO.10, BANJARA HILLS, HYDERABAD 500034 2 DY.CIT, CIRCLE 1(2) B BLOCK, 7 TH FLOOR, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD 3 CIT (A)-8 HYDERABAD 4 PR. CIT - 8 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER