Income Tax Appellate Tribunal - Mumbai
Dcit 1(1)(2), Mumbai vs Hdfc Asset Management Co. Ltd, Mumbai on 29 March, 2017
आयकर अपीलीय अधिकरण "जे" न्यायपीठ मुंबई में।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "J", MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER ITA NO. 3057/MUM/2015 : (A.Y : 2010-11) ITA NO. 3058/MUM/2015 : (A.Y : 2011-12) M/s HDFC Asset Management Co. Ltd. Vs. DCIT - Rg.1(1) HDFC House, 2nd Floor Aayakar Bhavan H.T. Parekh Marg, 165-166 M.K.Marg Backbay Reclamation Mumbai - 400 020 Churchgate, Mumbai - 400 020 PAN : AAACH7614L ITA NO. 3223/MUM/2015 : (A.Y : 2010-11) ITA NO. 3224/MUM/2015 : (A.Y : 2011-12) DCIT - Rg.1(1)(2) Vs. M/s HDFC Asset Management 579, Aayakar Bhavan Co. Ltd.
M.K.Marg HDFC House, 2nd Floor
Mumbai - 400 020 H.T. Parekh Marg, 165-166
Backbay Reclamation
Churchgate
Mumbai - 400 020
PAN : AAACH7614L
(अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent)
निर्ाा रिती की ओर से / Assessee by : Shri Arju Goradia िाजस्व की ओर से Revenue by : Shri Prakash Kotadia सुिवाई की तािीख / Date of Hearing : 29/03/2017 घोषणा की तािीख Date of Pronouncement : 29/03/2017 2 M/s HDFC Asset Management Co. Ltd.
ITA Nos.3057, 3058, 3223 &3224/Mum/2015 A.Ys.2010-11 and 2011-12 आदे श / O R D E R PER BENCH:
These appeals are filed by the Assessee and the Revenue against orders of the Ld. CIT (Appeals) for the assessment years 2010-11 and 2011-12 respectively and the only issue in both these appeals of the Assessee and the Revenue is in respect of disallowance made u/s 14A read with Rule 8D(2)(iii) i.e indirect expenditure for earning exempt income.
2. At the outset, the Ld. Counsel for the Assessee submits that all investments income from which is exempt were made in the schemes of HDFC Mutual Fund which are usually made out of business policy and does not require complex analysis by technical experts. The Ld.Counsel submits that this can be seen from the investment schedule furnished in the balance sheet. Therefore, it is submitted that since the Assessee has not incurred expenditure, these investments should not be considered for working out Rule 8(D)(iii) disallowance. The Ld. Counsel further submits that the Assessee has received dividends from 91 transactions all in the form of reinvestment of dividend i.e., the dividend amount was reinvested and was not physically received. The Ld. Counsel submits that the details furnished in Exhibit '2' shows the table of details of dividend receipts. Therefore, it is submitted that as it is seen from the table the transactions relating to earning dividend income are limited, therefore, no administrative expenses have been incurred by the Assessee for earning such exempt income. The Ld. Counsel further submits that on identical 3 M/s HDFC Asset Management Co. Ltd.
ITA Nos.3057, 3058, 3223 &3224/Mum/2015 A.Ys.2010-11 and 2011-12 facts, the Co-ordinate Bench of the Tribunal for the immediate preceding assessment year i.e. 2009-10 in ITA No.754/Mum/2013 has been decided in favour of the Assessee and restored for fresh consideration. A copy of the order is placed on record.
3. The Ld. Counsel further submits that the Ld. CIT (Appeals) sustained the disallowance to the expenditure of Rs.21,82,475/- for the assessment year 2010-11 and Rs.35,18,492/- for the assessment year 2011-12 being the expenditure with respect to investments made in HDFC (dividend plan). The Ld. Counsel further submits that the Ld. CIT (Appeals) deleted the disallowance in respect of the expenditure incurred on investments made in HDFC in Debt Oriented Mutual Funds (Growth Plan). He further submits that the revenue is in appeal in respect of the disallowance deleted by the Ld. CIT (Appeals) on the investments made in HDFC Mutual Fund (Growth Plan) and investment in foreign subsidy company.
4. The Ld. DR supports the orders of the lower authorities.
5. We have heard the rival submissions perused the orders of the authorities below and the case law relied on. We find that for the assessment year 2009-10 identical issues arose in Assessee's case and the Co-ordinate Bench decided the issue of disallowance made under 8D(2)(iii) observing as under :
"4. On the other hand the ld. A.R. brought to our notice distinguishing feature to the effect that strategic investment was made by the assessee during the year which should not be taken into account while computing disallowance under Rule 8D(2)(iii). It was submitted by the ld. A.R. that all the investments, 4 M/s HDFC Asset Management Co. Ltd.
ITA Nos.3057, 3058, 3223 &3224/Mum/2015 A.Ys.2010-11 and 2011-12 income from which is exempt, made by the assessee company are in the schemes of HDFC Mutual Fund. These investments made in the various schemes of HDFC Mutual Fund are usually made out of business policy and the same does not require complex analysis by technical experts and does not involve or requires any incurrence of expenditure. Hence, these investments should not be considered in working out disallowance under Rule 8D. Reliance was placed on the decision of Tribunal in Reliance Capital Asset Management Ltd. vs. DCIT (ITA No. 4459/Mum/2012) on identical sets of facts held that Rule 8D(iii) should not be applied as investments made by the assessee is mainly in schemes of Reliance Mutual Fund and group concern which does not requires incurrence of any major expenditure as these investment are driven by the central business policy and strategy.
5. Further reliance was placed on the following decisions of Mumbai Bench of ITAT:-
- Garware Wall Ropes Limited vs. Addl. CIT (I.T.A.No.4957/Mum/2012) .
- JM financial Ltd. vs. Addl. CIT (I.T.A. No.4521/Mum/2012).
- Interglobe Enterprises Ltd. vs. DCIT (I.T.A. No.1580/Del./2013).
6. We have considered the rival contentions and the judicial pronouncements cited at bar according to which calculation of disallowance as per Rule 8D(2)(iii) is erroneous, as the AO without assigning any reason did not reduce the investment in mutual funds and group concern which does not quire incurrence of major expenditure.
7. In view of the above, we restore this ground back to the file of A.O. for fresh consideration in terms of our above discussion."
6. As could be seen from the above, the Tribunal restored the issue back to the file of the Assessing Officer for fresh consideration in the light of the observation thereon. Therefore, following the said order, we restore this issue to the file of the Assessing Officer who shall consider the issue keeping in view the observation of the Tribunal for assessment year 2009-10 after providing adequate opportunity of being heard to the Assessee.
5M/s HDFC Asset Management Co. Ltd.
ITA Nos.3057, 3058, 3223 &3224/Mum/2015 A.Ys.2010-11 and 2011-12
7. As we have restored the appeals of the Assessee, we also restore the appeals of the revenue to the file of the Assessing Officer who shall consider the submissions of the Assessee that the dividend income from the investments in HDFC Mutual Fund (Growth Plan) is taxable when the dividend is received and also the capital gains is attracted for the gain received on sale of these investments. The Assessing Officer should also consider as to whether investment in foreign subsidiary company is also taxable or not. In case, the return from these investments are taxable, the question of applying disallowance under section 14A does not arise. The Assessing Officer should examine all these aspects and decide the issue in accordance with law after providing adequate opportunity to the Assessee.
Order pronounced in the open court on the 29th day of March 2017.
Sd/- Sd/- RAJENDRA C.N.PRASAD ले खा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER
मुुंबई / Mumbai; नििाुं क / Dated 29/03/2017 LR, SPS 6 M/s HDFC Asset Management Co. Ltd.
ITA Nos.3057, 3058, 3223 &3224/Mum/2015 A.Ys.2010-11 and 2011-12 आदे श की प्रधिधलधप अग्रे धिि / Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकि आयुक्त(अपील) / The CIT(A), Mumbai.
4. आयकि आयुक्त / CIT
5. नवभागीय प्रनतनिनर्, आयकि अपीलीय अनर्किण, मुुं बई / DR, ITAT, Mumbai
6. गार्ा फाईल / Guard file.
सत्यानपत प्रनत //True Copy// आदे शानसार/ BY ORDER, सहायक पुं जीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुुं बई / ITAT, Mum