Income Tax Appellate Tribunal - Mumbai
Sundaram Multicap Ltd, Mumbai vs Dcit 14(3)(2), Mumbai on 15 April, 2019
आयकर अपीलीय अधिकरण "G " न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL " G" BENCH, MUMBAI
श्री महावीर स हिं , न्याययक दस्य एविं श्री राजेश कुमार लेखा दस्य के मक्ष ।
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
Aayakr ApIla saM . / ITA No. 6269/Mum/2017
(inaQa- a rNa baYa- / Assessment Year 2013-14)
The Asst. Commissioner of Sundaram Multipap Ltd.,
Income Tax, Cicle-14(3)(2), 903, Dev Plaza, Opp.
Room No. 482(1), 4 t h Floor, Andheri, Fire Station, S.V.
Vs.
Aayakar Bhavan, M.K. Marg, Road, Andheri (W ),
New Marine Lines, Mumbai - Mumbai-400 058
400 020
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
स्थायी ले खा िं . / PAN No. AADCS7829K
प्रत्याक्षे प स M . / CO No. 128/Mum/2019
(Arising in ITA No. 6269/Mum/2017 for AY 2013 -14)
Sundaram Multipap Ltd., The Asst. Commissioner of
903, Dev Plaza, Opp. Andheri, Income Tax, Cicle -14(3)(2),
Fire Station, S.V. Road, Room No. 482(1), 4 t h Floor,
Vs.
Andheri (W ), Mumbai-400 058 Aayakar Bhavan, M.K.
Marg, New Marine Lines,
Mumbai-400 020
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
अपीलाथी की ओर े / Appellant by : Shri Chaudhary Arun Kumar Singh,
DR
प्रत्यथी की ओर े / Respondent by : Shri Anuj Kisnadwala, AR
ुनवाई की तारीख / Date of hearing: 15-04-2019
घोषणा की तारीख / Date of pronouncement : 15-04-2019
2
ITA s No . 6 26 9/ Mu m/ 2 01 7 &
Co No. 12 8 / Mu m/ 2 01 9
AadoSa / O R D E R
महावीर स हिं , न्याययक दस्य/
PER MAHAVIR SINGH, JM:
These cross appeals filed by the assessee are arising out of the order of Commissioner of Income Tax (Appeals)-22, Mumbai [in short CIT(A)], Appeal No. CIT(A)-22/IT/504/2015-16 vide order dated 14.07.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 14(3)(2), Mumbai (in short 'DCIT/ ITO / AO') for the A.Y. 2013-14 vide order dated 26.02.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The only issue in these cross appeals is against the order of CIT(A) in restricting the disallowance of expenses relatable to exempt income under the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter the 'Rules') as computed by the assessee suo moto . For the deletion of disallowance Revenue has raised the following ground No. 1: -
"1. Whether in the facts and circumstances of the case Ld. CIT(A) was justified din relying on the precedents cited which were distinguishable in as much as they were rendered in cases decided prior to introduction of rule 8D or prior to clarification issued by CBDT circular 5 of 2014."
And assessee has raised the following ground: -
3ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 "1. The learned CIT(A) has erred in law and in facts in upholding disallowance under section 14A r.w.Rule 8D(2)(iii) of the Income Tax Act, 1961 ("the Act"). The learned CIT(A) ought to have held that there should be no disallowance under section 14A r.w. Rule 8D(2)(iii) of the Act as the assessee has not earned any exempt income in this year."
3. Briefly stated facts are that as per the assessment order the assessee has offered a dividend income to the extent of ₹ 7500 and which was claimed as exempt under section 10(34) of the Act. The assessee has made suo moto disallowance for earning of this exempt income at ₹ 7,50,000/-. But the AO invoked the provisions of section 14A of the Act read with Rule 8D and thereby disallowed the expenses relatable to interest expenses under Rule 8D(2)(ii) at ₹ 89,22,483/- and under Rule 8D(2)(iii) being administrative expenses at ₹ 7,50,250/-. Accordingly, the AO computed the total disallowance under Rule 8D(2)(ii) and 8D(2)(iii) at ₹ 96,72,733/-. The AO after reducing the disallowance suo moto made by assessee at ₹ 7,50,000/- made addition to the returned income at ₹ 89,22,733/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) restricted the disallowance to the extent of ₹ 7,50,000/- which was suo moto disallowed by assessee by observing in para 6.30 as under:-
"6.3 I have considered the facts of the case and the appellant's submissions Perusal of the appellant's P & L account shows that the appellant had earned dividend income of Rs 5,000/- only. This dividend income was earned 4 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 from investment in co-operative ban which is taxable and is not exempt. It is seen that this dividend income has also been shown as income from other sources and has been offered to tax in the computation of income and has not been claimed as exempt. No exempt income was earned during the year under consideration. I also find that the appellant's own interest free funds were in excesr5fl e investments made. I find that the various Courts have held that section 14A cannot be invoked when no exempt income was earned. The Hon'ble Punjab and Haryana High Court in the case of CIT vs Lakharii Marketing (ITA No.97012008). the Hon'ble Bombay High Court in the case of CIT v. Delite Enterprises - (Income Tax Appeal No. 110 of 2009), Hon'ble Gujarat High Court in the case of CIT vs Cortech Energy (P) Ltd.12014) 223 taxmann 130(Guj) and the Allahabad High Court in the case of CIT vs Shivam Motors (P) Ltd. (ITA No. 88/2014) have all held that section 14A cannot be invoked when no exempt income was earned. The Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR 33 (Del) had also held as under:
23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the 5 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 expression 'does not form pail of the total income" in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year."
In view of the legal position on the issue as discussed above and also the fact that the appellant's own interest free funds are in excess of the investments made, the disallowance made by the Assessing Officer uls 14A of the Act over and above the suo moto disallowance made by the appellant is deleted. The appellant's ground of appeal is allowed."
Aggrieved, now Revenue and assessee both are in cross appeals before Tribunal.
4. We have heard rival contentions and gone through the facts and circumstances of the case. We find that the revenue is in appeal against deletion of disallowance of expenses relatable to exempt income under rule 8D(2)(ii) & 8D(2)(iii) assessee is in cross objection against sustenance suo moto disallowance made by CIT(A) at ₹ 7,50,000/-. The learned Counsel for the assessee stated that the fact is that the assessee has earned dividend income of ₹ 7500/- from investment in Abhyudaya 6 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 Co-operative Bank which is taxable under the head of income from other sources and this is not exempt income. When this fact was confronted to the learned Sr. Departmental Representative, he agreed that the income earned on account of dividend income a cooperative bank is taxable. Hence, there is no exempt income claimed by assessee under section 10(34) of the Act. We find that this issue is covered by Tribunal's decision in assessee's own case for AY 2012-13 in CO No. 272/Mum/2017 vide order dated 20.04.2018, wherein the Tribunal has been deleted the disallowance confirmed by CIT(A) on account of suo moto disallowance by observing in para 18 as under: -
"18. In the instant case also, the assessee has made voluntary disallowance u/s 14A of the Act even though it did not receive any dividend income. As per the decisions rendered by various courts, no disallowance is required to be made in the absence of exempt income. Hence the assessee has filed CO with the plea to delete the voluntarily disallowance made by it, which is supported by various decisions referred above. Accordingly, we allow the CO filed by the assessee. The relief granted to the assessee in CO may reduce the assessed income, which may also go below the returned income. This issue, i.e, whether the assessed income can go below the returned income (which was urged by Ld DR), has been examined and decided in favour of the assessee by the co-ordinate bench in the case of Tata Industries Ltd (supra), which has followed the decision rendered by another 7 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 co-ordinate bench in the case of Shri Chandrashekhar Bahirwani (supra). Consistent with the view taken in the above said decisions rendered by the co-ordinate benches, we reject the contentions of the Ld D.R. Accordingly we direct the assessing officer to exclude the disallowance voluntarily made by the assessee also u/s 14A of the Act."
5. Even, otherwise this issue is covered by the decision of Hon'ble Bombay High Court, Nagpur Bench in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgment of Hon'ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi) held as under: -
"On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression "does not form part of the total income" in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of Section 14A of the Income Tax Act, 1961 would not 8 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. In the facts of the case, the Authorities held that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they could not have been included in the total income."
6. Once there is no exempt income, the issue is squarely covered by the decision of Hon'ble Bombay High Court in the case of Ballarpur Industries Limited (supra). Respectfully following the Hon'ble Jurisdictional High Court, we delete the disallowance and affirm the order of CIT(A) in respect to deletion made by him of the expenses relatable to exempt income under Rule 8D(2)(ii) and 8D(2)(iii). We also delete the disallowance suo moto offered by assessee because there is no exempt income and once there is no exempt income no disallowance can be made relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules.
7. In the result, the appeal of Revenue is dismissed and CO of assessee is allowed.
Order pronounced in the open court on 15-04-2019.
Sd/- Sd/-
(राजेश कुमार / RAJESH KUMAR) (महावीर स ह
िं /MAHAVIR SINGH)
(लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER)
मुिंबई, ददनािंक/ Mumbai, Dated: 15-04-2019 सदीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS 9 ITA s No . 6 26 9/ Mu m/ 2 01 7 & Co No. 12 8 / Mu m/ 2 01 9 आदे श की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A)
4. आयकर आयुक्त / CIT
5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुिंबई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शािसार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai