SHAH MEHTA HOLDINGS PVT LTD., Mumbai v. DY. CIT CIRCLE-4(3)(2), Mumbai

ITA 4901/MUM/2019 | 2015-2016
Pronouncement Date: 15-03-2021 | Result: Dismissed

Appeal Details

RSA Number 490119914 RSA 2019
Assessee PAN AAACS7608F
Bench Mumbai
Appeal Number ITA 4901/MUM/2019
Duration Of Justice 1 year(s) 7 month(s) 21 day(s)
Appellant SHAH MEHTA HOLDINGS PVT LTD., Mumbai
Respondent DY. CIT CIRCLE-4(3)(2), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 15-03-2021
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 15-03-2021
Last Hearing Date 22-02-2021
First Hearing Date 22-02-2021
Assessment Year 2015-2016
Appeal Filed On 24-07-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI C.N. PRASAD JUDICIAL MEMBER AND SHRI S. RIFA UR RAHMAN ACCOUNTANT MEMBER IT A NO. 4901 /MUM./2019 ( ASSESSMENT YEAR : 20 15 16 ) SHAH MEHTA HOLDINGS PVT. LTD. 1616 PRASAD CHAMBERS OPERA HOUSE MUMBAI 400 004 P AN AAACS7608F . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 4 (3)( 2 ) MUMBAI . RESPONDENT ASSESSEE BY : SHRI NITESH JOSHI REVENUE BY : SHRI VIJAY KUMAR MENON DATE OF HEARING 22 .0 2 .202 1 DATE OF ORDER 15.03.2021 O R D E R PER S. RIFAUR RAHMAN A.M. THE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 19 TH JU NE 2019 PASSED BY THE LEARNED COMMISSIONER (APPEALS) 9 MUMBAI FOR THE ASSESSMENT YEAR 20 15 16 . 2. THE ISSUE UNDER CONSIDERATION BEFORE US IS WHETHER THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT 1961 (FOR SHORT 'THE ACT') CAN EXCEED THE EXEMPT INCOME. 2 SHAH MEHTA HOLDINGS PVT. LTD. 3. FACTS IN BRIEF : T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED ITS E RETURN OF INCOME ON 30 TH SEPTEMBER 2015 DECLARING TOTAL INCOME OF ` 5 27 36 480. SUBSEQUENTLY THE EXEMPT INCOME WAS REVISED TO ` 8 550 WHICH WAS RECEIVED BY THE ASSESSEE IN THE FORM OF DIVIDEND INCOME RECEIVED FROM INVESTMENT IN EQUITY SHARES / MUTUAL FUND. T HE A SSESSEE AT THE TIME OF FILING RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT VOLUNTARY DISALLOWED AN AMOUNT OF ` 17 13 090 UNDER SECTION 14A OF THE ACT BEING 0.5% OF THE AVERAGE INVESTMENTS UNDER RULE 8D2(III) OF THE INCOME TAX RULES 1962 . THE ASSESSI NG OFFICER CONSIDERING THE RETURN OF INCOME FILED BY THE ASSESSEE AND ACCEPTED THE DECLARED AMOUNT OF INCOME AT ` 5 27 36 480. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN BEFORE THE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE OF ` 17 13 090 WAS MADE UNDER SECTION 14A OF THE ACT . T HE DIVIDEND INCOME EARNED WAS ONLY TO THE EXTENT OF ` 8 550 AND THEREFORE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD BE RESTRICTED TO THE EXTEN T OF EXEMPT INCOME EARNED AT ` 8 550 AND THE VOLUNTARY DISALLOWANCE OF ` 17 13 090 MADE UNDER SECTION 14A OF THE ACT AT THE TIME OF FILING OF RETURN OF INCOME SHOULD BE IGNORED. IN SUPPORT OF THIS CONTENTION THE ASSESSEE RELIED UPON VARIOUS DECISIONS. T HE LEARNED COMMISSIONER (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CASE LAWS RELIED 3 SHAH MEHTA HOLDINGS PVT. LTD. UPON RESTORED THE DISALLOWANCE OF ` 17 13 090 MADE UNDER SECTION 14A OF THE ACT AS OFFERED BY THE ASSESSEE IN THE COMPUTATION FILED AT THE TIME OF FIL ING ITS RETURN OF INCOME. FOR THE SAKE OF CLARITY T HE RELEVANT PORTION OF THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) ARE REPRODUCED BELOW: 4. 4. 1 IN THE INSTANT CASE IT IS SEEN THAT THE APPELLANT HAS VOLUNTARILY DISALLOWED AN AMOUNT OF RS.17 13090/ - U/S 14A TOWARDS EARNING OF EXEMPT INCOME. THE APPELLANT WHI L E FILIN G THE RETURN OF INCOME U/S 139(1 ) OF THE ACT HAD COME TO A CONCLUSION THAT THE EXPENDITURE OF RS.17 13 090/ - WAS ATTRIBUTABLE TOWARDS EARNING OF EXEMPT INCOME. THE APPELLANT WAS FREE TO ADOPT ANY METHOD IN ORDER TO ARRIVE AT IT CORRECT APPORTIONMENT OF EXPENSES NO METHOD WAS BINDING ON THE APPELLANT. THE REQUIREMENT AS PER THE LAW WAS TO NOT TO DEBIT EXPENSES RELATED TO EXEMPT INCOME. THE A O HAS POWERS TO ENHANCE THE AMOUNT O F DISALLOWANCE CLAIMED BY THE APPELLANT AS PER THE PROVISION OF SECTION 14A(2) OF THE ACT IF THE AO IS SATISFIED THAT THE DISALLOWANCE IS NOT CORRECT. HOWEVER THE A O OR FOR THAT MATTER THE APPELLATE AUTHORITY WOULD NOT BE HAVING ANY MANDATE AS SUCH TO GO BELOW THE AMOUNT OF DISALLOWANCE WHICH THE ASSESSEE ON IT'S OWN HAS CONSIDERED TO B E RELATED TO EXEMPT INCOME. 4.4.2 IN THE CASE UNDERHAND THE ISSUE IS NOT OF ALLOWING A CLAIM WHICH WAS REMAINED TO BE MADE INADVERTENTLY WHILE FILING THE RETURN OF INCOM E. THIS IS THE CASE IN WHICH THE APPELLANT ON ITS OWN HAS COME TO A CONCLUSION THAT CERTAIN AMOUNT OF EXPENDITURE WAS RELATED TO EXEMPT INCOME. NOW THE APPELLANT WANTS TO REVISE THE DISALLOWANCE ON THE BASIS OF VARIOUS JUDICIAL PRONOUNCEMENT OF COURTS. THE DECISIONS QUOTED AND RELIED UPON BY THE APPELLANT ARE CONSIDERED. IN ALL THESE DECISIONS THE DISALLOWANCE WAS MADE BY THE AO BY INVOKING PROVISIONS OF SECTION 14A(2) OF THE ACT. HOWEVER IN THE CASE OF THE APPELLANT THE DISALLOWANCE WAS MADE UNDER SECTIO N 14A(1) OF THE ACT. THE PROVISIONS OF SECTION 14A(1) MAKE IT MAN DATORY FOR THE APPELLANT TO NOT TO DEDUCT ANY EXPENDITURE INCURRED BY THE APPELLANT IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE INCOME TAX ACT HAS NOT PRESCRIBED A NY MECHANISM FOR DETERMINING SUCH EXPENDITURE. THE COURTS IN THE DECISIONS REFERRED TO BY THE APP ELL ANT HAVE ALSO RIOT MADE ANY COMMENT OR INTERPRETATION IN THIS REGARD. THE RATIOS OF THE DECISIONS RELIED UPON BY THE APPELLANT ARE THEREFORE NOT APPLICABLE TO THE FACTS OF THE CASE. 4 SHAH MEHTA HOLDINGS PVT. LTD. 4.4 . 3 THE APPELLANT IS TRYING TO REVISE IT'S OWN VOLUNTARY JUDGEMENT REGARDING THE EXPENDITURE RELATED TO EXEMPT INCOME BY RELYING ON DECISIONS WHICH ARE NOT APPLICABLE TO THE FACTS OF IT'S CASE. THUS THE CONTENTION OF THE APPELLANT TO REVISE THE EXPENSES DISALLOWED BY THE APPELLANT ON IT'S OWN IS NOT TENABLE. 4.4.4 THEREFORE IN VIEW OF THE ABOVE DISCUSSION AND CONCLUSIONS THE DISALLOWA NCE U/S 14A IS RESTORED TO RS.1 7 13 090/ - AS OFFERED BY THE APPELLANT IN THE COMPUTATION FILED AT THE TIME OF FILING IT'S RETURN OF INCOME . THE ASSESSEE BEING AGGRIEVED WITH T HE AFORESAID ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US THE LEANED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE ASSESSEE AT THE TIME OF FILI NG RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT HAD MADE DISALLOWANCE OF ` 17 13 090 VOLUNTARILY. THE DIVIDEND INCOME EARNED BY THE ASSESSEE WAS ONLY ` 8 550 THEREFORE THE IMPUGNED DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD BE RESTRICTED TO T HE EXTENT OF EXEMPT INCOME EARNED AT ` 8 550. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS AS BORNE OUT FROM THE ORDER OF THE REVENUE AUTHORITIES CLEARLY INDICATE THAT THE ASSESSEE DURING THE 5 SHAH MEHTA HOLDINGS PVT. LTD. IMPUGNED ASSESSMENT YEAR HAS INDEED EARNED DIVIDEND INCOME TO THE EXTENT OF ` 8 550. WE FIND THAT NOW IT IS A WELL SETTLED PRINCIPL ES OF LAW THAT THE DISALLOWANCE COMPUTED UNDER SECTION 14A OF THE ACT R/W RULE 8D OF THE RULES SHALL NOT EXCEED THE E XEMPT INCOME EARNED BY THE ASSESSEE. THIS PRINCIPLE OF LAW IS IN CONFORMITY WITH THE DECISION OF THE HONBLE DELHI HIGH COURT IN CHEMINVEST LTD . V/S CIT [2015] 378 ITR 33 (DEL.) WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT SHALL NOT EXCEED EXEMPT INCOME EARNED FOR THE YEAR UNDER CONSIDERATION. HOWEVER IN THE GIVEN CASE THE ASSESSEE HAS DISALLOWED SUO MOTU BY FOLLOWING THE PROVISIONS OF RULE 8D(2)((III) I.E. 0.5% ON AVERAGE INVESTMENT. IT IS SETTLED LAW THAT THE ADMINISTRATIVE EXPENSES OF 0.5% UNDER RULE 8D(2)(III) SHOULD BE ON THE INVESTMENT WHICH EARNED THE EXEMPT INCOME. THEREFORE WE DIRECT THE ASSESSING OFFICER TO CALCULATE THE DISALLOWANCE UNDER RULE 8D(2)(III) AS PER THE ABOVE DIRECTION AND RESTRICT THE DISALLOWANCE TO THE ABOVE AMOUNT OR EXEMPT INCOME WHICHEVER IS LESS. ACCORDINGLY WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE COMPUTED UNDER SECTION 14A R /W RULE 8D OF RULES AS PER THE ABOVE DIRECTION. CONSEQUENTLY THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 6 SHAH MEHTA HOLDINGS PVT. LTD. 8. IN THE RESULT APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2021 SD/ - C.N. PRASAD JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI DATED: 15.03.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR ITAT MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT MUMBAI