Income Tax Appellate Tribunal - Mumbai
Dcit - 3(3)(1), Mumbai vs Reliance Nippon Life Asset Management ... on 26 February, 2019
1 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15 आयकर अपीलीय अिधकरण "बी बी"
बी यायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI ौी मनोज कुमार अमवाल, लेखा सदःय एवं ौी र"वश सूद, याियक सदःय केसम%।
BEFORE SHRI MANOJ KUMAR AGGARWAL, AM AND SHRI RAVISH SOOD, JM आयकरअपील सं./ I.T.A. No.6444/Mum/2017 ( िनधा&रण वष& / Assessment Year: 2014-15) Dep u t y C o m mi ss io n e r o f In c o m e Re li an ce N ip p o n L if e As s e t T ax - 3( 3) ( 1) M an ag e me n t L t d .
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ःथा यीलेखासं . / जीआइआरसं . /P AN/GIR No. AAACR-2668-G (अपीलाथ*/Appellant) : (ू,यथ* / Respondent) Assessee by : Sh. Jitendra Sanghavi, Ld. AR Revenue by : Sh. Manoj Kumar Singh, Ld. DR सुनवाई क- तार/ख/ : 14/02/2019 Date of Hearing घोषणा क- तार/ख / : 26/02/2019 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by revenue for Assessment Year [AY] 2014-15 contest the order of Ld. Commissioner of Income-Tax (Appeals)-8, 2 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15 Mumbai, [CIT(A)], Appeal No. CIT(A)-8/IT-390/16-17 dated 26/07/2017 on following effective grounds of appeal: -
i. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income tax(Appeals) is justified in not considering the fact that the amount of disallowance u/s 14Ar.w. Rule 8D(2)(iii) to the amount of Rs.38,86,138/- over and above the suo-moto disallowance of Rs.82,71,741/- made by the Assessee was on the basis of CBDT Circular No.5 of 204 dated 11.02.2014 and provisions of Rule 8D?
ii. Whether on the facts and in the circumstances of the case and in law the Ld. Commissioner of Income tax(Appeals) is justified in deleting the amount of disallowance u/s 14A r.w. Rule 8D(2)(iii) to the amount of Rs.38,86,138/- over and above the suo-moto disallowance of Rs.82,71,741/- made by the Assessee in view of the recent decision of the Hon'ble High Court of Karnataka in the case of United Breweries Ltd. vs. Deputy Commissioner of Income tax Central Circle-2(3), Bangalore [2016] 72 taxmann.com 102 (Karnataka) wherein it has been held that section 14A is applicable even where motive in acquiring shares is to obtain controlling interest in companies.
iii. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income tax(Appeals) was justified in restricting the adjustment made to Book Profit u/s 115JB of the Act to Rs.35,00,000/- on estimate basis and giving relief of Rs.3,86,138/- on account of expenses relatable to exempt income u/s 14A of the Act without appreciating the fact that the issue stands squarely covered by the decision of the Hon'ble ITAT "D" Bench in the case of ITO vs. RBK Share Broking pvt. Ltd. -37 taxman 128(2013) and the decision of the Hon'ble ITAT "F" Bench in the case of D.C.I.T. Cen. Cir. 8 & 19, Mumbai vs. Viraj Profiles Ltd. (205) 64 taxmann.com 52 (Mumbai-Tib.)-206, 56 ITD 72(Mumbai-Trib.) wherein it is clear that the provisions of section4A r.w.r. 8D is applicable for computation of book profit u/s 115JB of the Act.
2.1 Facts in brief are that the assessee being resident corporate assessee stated to be engaged in the business of Investment Management & Portfolio Management Services during impugned AY was assessed in scrutiny assessment u/s 143(3) on 29/12/2016 by Ld. Deputy Commissioner of Income Tax-3(3)(1) [AO] wherein the income of the assessee was determined as Rs.133.97 Crores under normal provisions after certain disallowances / adjustments as against returned income of Rs.133.55 Crores e-filed by the assessee on 28/11/2014. The 3 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15 Book Profits u/s 115JB was determined at Rs.318.29 Crores as against Rs.317.90 Crores computed by the assessee.
2.2 During assessment proceedings, it transpired that the assessee earned exempt dividend income of Rs.497.04 Lacs and offered suo-moto expense disallowance against the same u/r 8D(2)(iii) for Rs.82.71 Lacs. The said disallowance was worked out by taking into consideration those investments which yielded exempt income during the year. The disallowance worked out by the Tax Auditor was Rs.121.57 Lacs which was arrived at by considering those investment which were capable of yielding exempt income. Finding the disallowance worked out by Tax Auditor in line with CBDT Circular No. 5/2014 dated 11/02/2014, the same was accepted which resulted into additional disallowance of Rs.38.86 Lacs in the hands of the assessee. The additional disallowance was added while computing income under normal provisions as well as while computing book profits u/s 115JB.
3. Aggrieved, the assessee agitated the same with success before Ld. CIT(A) vide impugned order dated 26/07/2017 wherein the additional disallowance under normal provisions was deleted on the ground that strategic investments in subsidiaries should be excluded from calculation under Rule 8D. The ground relating to adjustment of the same u/s 115JB was allowed by relying upon appellate orders for AY 2008-09 to 2012-13 in the case of assessee's sister concern namely M/s Reliance Capital Ltd. Aggrieved, the revenue is in further appeal before us. 4.1 We have carefully heard the rival contentions and perused relevant material on record. The undisputed position that emerges is that the assessee has worked out expense disallowance u/r 8D(2)(iii) while 4 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15 computing income under normal provisions by considering only those investments which actually yielded exempt income during the year. The said disallowance, in the opinion of Ld. AO, was to be worked out by considering the total investments irrespective of the fact that whether these investments yielded any exempt income during impugned AY or not. We find that the disallowance worked out by the assessee is well in line with the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415] wherein it has been held that only exempt income yielding investments were to be considered to arrive at the said disallowance. Therefore, the additional expense disallowance made under normal provisions, as made by Ld. AO, could not be sustained and the stand of first appellate authority, though on different reasoning, was to be confirmed. Accordingly, Ground Number- 1 stand dismissed.
4.2 So far as the plea of strategic investment as accepted by first appellate authority while granting relief to the assessee, is concerned, we find that the same stand overruled by the recent decision of Hon'ble Apex Court rendered in Maxopp Investment Ltd. Vs CIT [12/02/2018 91 Taxmann.com 154] and therefore, the same could not be sustained. Nevertheless, the assessee succeeds on another proposition as discussed by us in above para 4.1 and therefore, no interreference is, anyway, called for in the conclusion drawn in the impugned order. Technically, the revenue succeeds on Ground Number-2. 4.3 So far as the adjustment of disallowance u/s 14A while computing Book Profits u/s 115JB is concerned, Ld. AR fairly submitted that in terms of the cited decision of Special bench, disallowance was to be 5 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15 worked out with reference to expenses debited by the assessee in the Profit & Loss Account on actual basis and not by resorting to computational mechanism as provided in Rule 8D (2). For the same, the copy of recent decision of this Tribunal rendered in the case of assessee's sister concern namely M/s Reliance Capital Ltd., ITA No. 6396-97/Mum/2017 dated 30/01/2019 has been placed on record. After perusal of the same, we find that the Special Bench in the cited decision has held that disallowance u/s 14A was to be made in terms of Clause
(f) of Explanation-1 to Section 115JB. Therefore, the matter, in the similar manner, stand restored back to the file of Ld. AO to ascertain the actual expenses debited in the Profit & Loss Account to earn the exempt income and make disallowance u/s 115JB accordingly. The assessee is directed to provide the details thereof. Ground No. 3 stands allowed for statistical purposes.
5. The appeal stands partly allowed for statistical purposes.
Order pronounced in the open court on 26th February, 2019.
Sd/- Sd/-
(Ravish Sood) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member मुब ं ई Mumbai; 3दनांक Dated : 26/02/2019 Sr.PS:- Thirumalesh / Sr.PS:-Jaisy Varghese आदे श क- ूितिल"प ूितिल"प अमे"षत/Copy षत of the Order forwarded to :
1. अपीलाथ* / The Appellant
2. ू,यथ* / The Respondent 6 ITA No. 6444/Mum/2017 Reliance Nippon Life Asset Management Ltd.
Assessment Year: 2014-15
3. आयकर आयु<(अपील) / The CIT(A)
4. आयकर आयु< / CIT - concerned
5. "वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड& फाईल / Guard File आदे शानुसार/ ार BY ORDER, उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण, मुंबई / ITAT, Mumbai