Income Tax Appellate Tribunal - Mumbai
Eversmile Construction Company ... vs Dcit Cen Cir 1(4), Mumbai on 15 February, 2019
IN THE INCOME-TAX APPELLATE TRIBUNAL "E" BENCH MUMBAI
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No. 5696/Mum/2017 (Assessment Year 2012-13)
Eversmile Construction Co. DCIT, Central Circule-1(4),
Pvt. Ltd., DB House, 9th Floor, Old C.G.O.
Yashodham, Gen. A.K. Vaidya Building, Annex, M.K. Road,
Marg, Goregaon (East),
Vs. Mumbai-400020.
Mumbai-400063.
PAN: AAACE0875E
Appellant Respondent
Appellant by : Ms. Arati Vissanji (AR)
Respondent by : Shri D.G. Pansari (DR)
Date of Hearing : 10.01.2019
Date of Pronouncement : 15.02.2019
ORDER UNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
1. This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-47, Mumbai (the ld. CIT(A) dated 31.07.2017, which in turn arises from the order passed by Assessing Officer under section 143(3) dated 24.03.2015 for Assessment Year 2012-13. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have restricted the inadmissible expenditure under section 14A at Rs. 6,13,076/-, being the amount disallowed by the appellant itself and consequently, ought to have directed the Ld. AO to delete the additional disallowance of Rs. 64,38,117/- made under section 14A by invoking Rule 80(2)(iii).
ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd. 1.1 Without prejudice to the above and in the alternate, on the facts and circumstances of the case and in law, if at all inadmissible expenditure had to be quantified under section 14A by invoking Rule 80(2)(iii), then, the Ld. CIT(A) ought to have directed to the Ld. AO to consider only those investments on which exempt income has been received during the year and consequently, ought to have directed the Ld. AO to restrict the additional disallowance under section 14A at Rs. 32,73,005/- .
2. Brief facts of the case are that the assessee-company is engaged in the business of Construction and Real Estate Development, filed its return of income for Assessment Year 2012-13 on 27.09.2012 declaring Nil income. The return of income was selected for scrutiny. The Assessing Officer while passing the assessment order noted that assessee has made investment as capital in partnership firm and arrive tax free income as share of profit from the Firm. Therefore, the Assessing Officer issued show-cause notice as to why disallowance under section 14A r.w. Rule 8D should not be made. The assessee filed its reply dated 20.02.2015. In the reply, the assessee contended that the assessee has offered suo-motu disallowance under section 14A of Rs. 6,13,076/- which is attributed in holding of investment in share, income whereof is claimed as exempt income. The assessee further contended that no interest expenditure under Rule 8D(2)(ii) is required. The assessee has incurred interest of Rs. 53,944/- which represent the interest on Car Finance and other interest of Rs. 3,602/- represent the interest paid on delayed income tax dues. For Administrative Expenses, the assessee contended that the assessee has not 2 ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd. incurred any expenditure to hold the investment in share, hence no disallowance of expenditure @ .5% of average value of investment is required. The contention of assessee was not accepted by Assessing Officer holding that the assessee has not provided any evidence that all the managerial and administrative expenses not incurred for earning exempt income. The expenditure on Administrative and Managerial Head are cumulative and paid for all type of work and activities undertaken by employee of assessee. The actual cost attributable for earning exempt income out of the expenses have not been worked out by the assessee and no data has been provided. The Assessing Officer worked out the disallowance of Administrative Expenses of Rs. 70,51,193/-. As the assessee has already made the suo-motu disallowance of Rs. 6,13,076/-, therefore, the Assessing Officer made further disallowance of Rs. 64,38,117/-. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Hence, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
3. We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the Assessing Officer before applying Rule 8D has not recorded its satisfaction that suo-motu disallowance offered by the assessee is not correct. The ld. AR of the assessee submits that employee 3 ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd. cost of the assessee was furnished to the Assessing Officer and details of which are filed at page no. 19 of Paper Book. The ld. AR of the assessee further submits that suo-motu disallowance under section 14A is offered by assessee of Rs. 6,13,076/-, the working of which is provided as per details available on page no. 55 of Paper Book.
4. The ld. AR further submits that the similar disallowance was made for Assessment Year 2009-10 and on appeal before the ld. CIT(A), the suo- motu disallowance of assessee of Rs. 7,28,280/- was accepted. On further appeal before the Tribunal, the order of ld. CIT(A) was confirmed. Again the Assessing Officer for A.Y. 2010-11 made similar disallowance and on appeal before the ld. CIT(A), the suo-motu disallowance was accepted. And on further appeal before Tribunal, Tribunal followed the order for A.Y. 2009-10. By following the order of Tribunal for A.Y. 2009-10 & 2010-11, the disallowance for A.Y. 2011-12 was restricted to 10% of total expenses incurred by assessee. The ld. AR of the assessee filed copy of Tribunal in Assessment Year 2009-10, 2010-11 & 2011-12 in ITA No. 6142/Mum/2012 dated 19.08.2015, ITA No. 7630/Mum/2014 dated 27.07.2016 and ITA No. 7733/Mum/2014 dated 14.02.2018 respectively. The ld. AR also relied upon the decision of Hon'ble Bombay High Court in PCIT vs. Reliance Capital Asset (400 ITR 217 (Bombay) and decision of Special Bench of Delhi Tribunal in Vireet Investment (P.) Ltd. vs. ACIT [2017] 82 taxmann.com 415 (Del-Trib.).
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ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd.
5. On the other hand, the ld. DR for the Revenue relied upon the order of Assessing Officer/ld. CIT (A).
6. We have considered the submission of both the parties and have gone through the orders of authorities below. During the assessment, the Assessing Officer noted that assessee has made investment as capital in partnership firm and arrive tax free income as share of profit from the Firm, the Assessing Officer issued show-cause notice as to why disallowance under section 14A r.w. Rule 8D should not be made. The assessee filed its reply dated 20.02.2015. In the reply, the assessee contended that the assessee has offered suo-motu disallowance under section 14A of Rs. 6,13,076/- which is attributed in holding of investment in share, income whereof is claimed as exempt income. The assessee further contended that no interest expenditure under Rule 8D(2)(ii) is required. The assessee has incurred interest of Rs. 53,944/- which represent the interest on Car Finance and other interest of Rs. 3,602/- represent the interest paid on delayed income tax dues. For Administrative Expenses, the assessee contended that the assessee has not incurred any expenditure to hold the investment in share, hence no disallowance of expenditure @ .5% of average value of investment is required. The contention of assessee was not accepted by Assessing Officer holding that the assessee has not provided any evidence that all the managerial and administrative expenses not incurred for earning 5 ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd. exempt income. The expenditure on Administrative and Managerial Head are cumulative and paid for all type of work and activities undertaken by employee of assessee. The actual cost attributable for earning exempt income out of the expenses have not been worked out by the assessee and no data has been provided. The Assessing Officer noted recorded the satisfaction regarding the correctness of suo-motu disallowance offered by assessee. The Assessing Officer invoke the provision of Rule 8D and worked out the disallowance of Rs. 70,51,193/-. The assessee has already made the suo-motu disallowance of Rs. 6,13,076/-, therefore, the Assessing Officer after giving a set off of suo-motu disallowance made further disallowance of Rs. 64,38,117/-.
7. We have noted that on similar fact in Assessment Year 2009-10, 2010-11 & 2011-12, the Assessing Officer made disallowance in Assessment Year 2009-10, 2010-11 & 2011-12, however, on appeal before the ld. CIT(A) the disallowance was restricted to suo-motu disallowance made by assessee. And on appeal before Tribunal, the appeal of revenue was dismissed vide in ITA No. 6142/Mum/2012 dated 19.08.2015, ITA No. 7630/Mum/2014 dated 27.07.2016 and ITA No. 7733/Mum/2014 dated 14.02.2018 for A.Y. 2009-10, 2010-11 & 2011-12 respectively.
8. We have noted that on the basis of suo-motu disallowance offered by assessee under section 14A for A.Y. 2009-10, 201-11 & 2011-12, the assessee has offered suo-motu disallowance @ 10% of expenses i.e. Rs. 6
ITA No. 5696 Mum 2017-Eversmile Construction Co. Pvt. Ltd. 6,13,076/- incurred on salary and welfare expenses of staff, contribution to Provident Funds, Gratuity and Printing, Stationary, postage, telegram, telephone and other expenses of aggregate of Rs. 61,30,764/- (as per page no.55 of PB). Considering the decision of co-ordinate bench wherein consistent view was taken for disallowance under section 14A, therefore, respectfully following the decision of co-ordinate bench, the Assessing Officer is directed to accept the suo-motu disallowance offered by assessee.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 15/02/2019.
Sd/ Sd/-
SHAMIM YAHYA PAWAN SINGH
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 15.02.2019
SK
Copy of the Order forwarded to :
1. Assessee
2. Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. DR "E" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
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