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Income Tax Appellate Tribunal - Mumbai

M.J. Exdports P. Ltd, Mumbai vs Dcit Cir 3(2), Mumbai on 11 November, 2016

              IN THE INCOME TAX APPELLATE TRIBUNAL
                   MUMBAI BENCH "B", MUMBAI

       BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND
             SHRI AMARJIT SINGH, JUDICIAL MEMBER

     ITA NO. 5983/MUM/2013            :            (A.Y : 2010-11)

M/s. M.J. Exports Pvt. Ltd.,         Vs. DCIT, Circle-3(2), Mumbai
C/o. H.N. Motiwalla & Co.,               (Respondent)
508, Sharda Chambers, 33,
New Marine Lines,
Mumbai 400 020 (Appellant)
PAN : AADCM7712M


                  Assessee by        : Shri H.N. Motiwala
                  Revenue by         : Shri Pradeep Kr. Singh

                  Date of Hearing : 20/10/2016
                  Date of Pronouncement : 11/11/2016

                                ORDER

PER G.S. PANNU, AM :

The captioned appeal by the assessee is directed against the order of CIT(A)-4, Mumbai dated 20.08.2013, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order passed by the Assessing Officer, Mumbai under section 143(3) of the Income Tax Act, 1961 (in short 'the Act').

2. In this appeal, assessee has raised the following Grounds of appeal :-

2 M/s. M.J. Exports Pvt. Ltd.

"1. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) 4, Mumbai, erred in confirming the order of the Assessing Officer in respect of disallowance of expenses amounting to Rs.1,31,209/- under section 14A r.w. Rule 8D of the Income tax Rules, 1962, particularly when the appellant has not incurred any expenses for earning exempted income and investment of Rs.2,85,73,491/- is out of its own capital and free reserves of Rs.8,37,07,557/-.

2. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) 4, Mumbai, erred in confirming the order of the Assessing Officer in respect of Shiv Sagar property amounting to Rs.33,63,676/- in the hands of the appellant, particularly when, the appellant is not owner of the property and the Bombay High Court has admitted this question on March 22, 2013 for the assessment year 2006/07 and therefore the appellant has filed a declaration under section 158A(1) of the Act, in Form no. 8 before the said learned Commissioner of income tax that whatever decision of question of law would be followed in the subsequent years, but not considering the same."

3. The aforesaid two Grounds of appeal raised by the assessee shall be dealt with in seriatim. The first issue is in relation to disallowance of Rs.1,31,209/- made by the income-tax authorities by invoking provisions of Sec. 14A of the Act. In this connection, the relevant facts are that assessee had earned dividend income of Rs.1,99,644/-, which was exempt. The Assessing Officer noted that expenditure relatable to the said exempt income has not been disallowed by the assessee, which was a requirement of Sec. 14A of the Act. On being show-caused, assessee asserted that it has not incurred any expenditure in relation to the exempt income and, therefore, no disallowance should be made. The Assessing Officer, however, disallowed a sum of Rs.1,31,316/-, which was computed in terms of the formula contained in Rule 8D(2)(iii) 3 M/s. M.J. Exports Pvt. Ltd.

of the Income Tax Rules, 1962. Before the CIT(A) also, assessee made a similar assertion as was made before the Assessing Officer and contested the disallowance. The CIT(A), however, disagreed with the assessee and noted that the Assessing Officer had correctly recorded his satisfaction about the incorrectness of the claim of assessee of not having incurred any expenditure in relation to the exempt income and, therefore, upheld the disallowance u/s 14A of the Act computed in terms of Rule 8D(2)(iii) of the Rules.

4. Before us also, the only plea of assessee is that the assessee has not incurred any expenditure in earning of the exempt income and, therefore, the disallowance is not justified. In our considered opinion, the Assessing Officer was justified in making the impugned disallowance because he was not satisfied, having regard to the accounts of the assessee, that no expenditure was incurred in relation to earning of the exempt income. No doubt, the proposition canvassed by the assessee is tenable, so however, it has to be examined in the context of facts of each case. In the present case, having regard to the discussion in the assessment order, we find no reason to delete the disallowance of Rs.1,31,316/- made by the Assessing Officer by invoking Sec. 14A of the Act. Thus, on this aspect, assessee fails.

5. In the second Ground, the issue relates to assessment of rental income of Rs.33,63,677/- pertaining to Shiv Sagar property, which has been assessed in the hands of the assessee, whereas the plea of assessee is that it is not the owner of such property. The dispute in this 4 M/s. M.J. Exports Pvt. Ltd.

Ground is a recurring dispute and in the past years also, similar dispute existed between the assessee and the Revenue. The CIT(A) has noticed that in Assessment Year 2006-07 vide ITA No. 6618/Mum/2009 dated 24.2.2012, Tribunal had affirmed the stand of the assessing authority.

6. The learned representative for the assessee pointed out that in Assessment Year 2006-07, the Hon'ble Bombay High Court had admitted the appeal of assessee and the dispute in this year is identical. The learned representative referred to pages 18 and 19 of Paper Book, wherein a Declaration u/s 158A(1) of the Act in the prescribed Form No.8 has been filed contending that in view of identical question pending before the Hon'ble Bombay High Court, in the instant year the Assessing Officer be directed to apply the ultimate decision on the said question of law as would be decided in the earlier year, thereby obviating the necessity for assessee to file appeal to the Hon'ble Bombay High Court in this year. To the aforesaid plea of assessee, there is no objection raised by the ld. DR.

7. In view of the aforesaid, insofar as the issue of assessability of rental income of Rs.33,63,677/- relating to Shiv Sagar property is concerned, same is directed to be assessed in the hands of the assessee as held by the income-tax authorities following the order of Tribunal dated 24.2.2012 (supra) in the case of assessee. Simultaneously, the Assessing Officer is directed to apply the final decision on the question of law, which is pending before the Hon'ble Bombay High Court in the earlier Assessment Year 2006-07 without requiring the assessee to file 5 M/s. M.J. Exports Pvt. Ltd.

appeal to the higher court in this year on the same issue. In this view of the matter, the issue is decided against the assessee, subject to the aforesaid observations.

8. Resultantly, appeal of the assessee is dismissed, as above.

Order pronounced in the open court on 11th November, 2016.

       Sd/-                                                Sd/-
 (AMARJIT SINGH)                                      (G.S. PANNU)
JUDICIAL MEMBER                                   ACCOUNTANT MEMBER
Mumbai, Date : 11th November, 2016
*SSL*

Copy to :
1)    The Appellant
2)    The Respondent
3)    The CIT(A) concerned
4)    The CIT concerned
5)    The D.R, "B" Bench, Mumbai
6)    Guard file
                                                          By Order


                                                     Dy./Asstt. Registrar
                                                     I.T.A.T, Mumbai