MIRAH HOSPITALITY & FOOD SOLUTONS P.LTD, MUMBAI v. ACIT CEN CIR 14, MUMBAI

ITA 7001/MUM/2012 | 2009-2010
Pronouncement Date: 26-10-2016

Appeal Details

RSA Number 700119914 RSA 2012
Assessee PAN AABCH0203Q
Bench Mumbai
Appeal Number ITA 7001/MUM/2012
Duration Of Justice 3 year(s) 11 month(s) 4 day(s)
Appellant MIRAH HOSPITALITY & FOOD SOLUTONS P.LTD, MUMBAI
Respondent ACIT CEN CIR 14, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-10-2016
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 26-10-2016
Date Of Final Hearing 29-02-2016
Next Hearing Date 29-02-2016
Assessment Year 2009-2010
Appeal Filed On 22-11-2012
Judgment Text
IN THE INCO ME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER AND SHRI RAVISH SOOD JUDICIAL MEMBER I.T.A. NO.7001/M/2012 (ASSESSMENT YEAR: 2009 - 2010 ) I.T.A. NO.7002/M/2012 (ASSESSMENT YEAR: 2010 - 2011 ) I.T.A. NO.7010/M/2012 (ASSESSMENT YEAR: 2008 - 2009 ) MIRAH HOSPITALITY & FOOD SOLUTIONS PVT LTD. 317/318 PARVATI INDUSTRIAL ESTATE SUNMILL COMPOUND LOWER PAREL (W) MUMBAI - 13. / VS. ACIT CENTRAL CIRCLE - 14 PRATISHTA BHAVAN 10 TH FLOOR MU MBAI 20. ./ PAN : AABCH0203Q ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI HIRO RAI / RESPONDENT BY : SHRI N.P. SINGH CIT - DR / DATE OF HEARING : 20.09.2016 / DATE OF PRONOUNCEMENT : 26 .10.2016 / O R D E R PER D. KARUNAKARA RAO AM: THERE ARE THREE APPEALS UNDER CONSIDERATION. ALL THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE CIT (A) - 37 MUMBAI DATED 25.9.2012 FOR THE ASSESSMENT YEARS 2008 - 09; 2009 - 10 AND 2010 - 11. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE IDENTICAL THEREFORE FOR THE SAKE OF CONVENIENCE THEY ARE CLUBBED HEARD COMBINEDLY AND DISPOSED OFF IN THIS CONSOL IDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. SINCE THE GROUNDS RAISED IN ALL THE THREE APPEALS ARE IDENTICAL THE ONLY DIFFERENCE IS IN FIGURES THEREFORE FOR THE SAKE OF REFERENCE AND ADJUDICATION PURPOSE THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL ITA NO.7001/M/2012 FOR THE AY 2009 - 2010 ARE EXTRACTED AS UNDER: - 1. THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY LD ACIT ON ACCOUNT OF DISALLOWANCE OF RS. 27 68 422/ - U/S 14A R.W. RULE 8D. 2. THE LD CIT (A) ERRED IN HOLDING THAT EXPENSES ATTRIBUTED TOWARDS EARNING EXEMPT INCOME EVEN THERE WERE NO NEXUS. 3. THE LD CIT (A) ERRED IN CONSIDERING THE FACTS THAT THE MAJOR INVESTMENTS WERE MADE FOR ACQUIRING STRATEGIC BUSINESS STAKE. 2 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF HOTELS & RESORTS FILED THE RETURN OF INCOME FOR THE AY 2009 - 2010 DECLARING THE TOTAL LOSS OF RS.43 15 534/ - AFTER SET OFF OF LTCG OF RS. 1 31 36 082/ - . A SSESSEE IS A GROUP CONCERN OF M/S. TWINKLE GROUP. THERE WAS A SEARCH AND SEIZURE ACTION ON THE SAID M/S. TWINKLE GROUP U/S 132 OF THE ACT. ACCORDINGLY IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT ASSESSEE FILED THE RETURN OF INCOME DECLARING THE SAME TOTAL LOSS (RS. ( - ) 43 15 334/ - ) . AO COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 153A OF THE ACT DETERMINING THE TOTAL LOSS OF RS. 3 82 977/ - WHICH INCLUDE CERTAIN DISALLOWANCES AND RS. 27 68 422/ - IS ONE SUCH DISALLOWANCE MADE U/S 14A R.W. RULE 8D OF IT RU LES 1962. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY ASSESSEE SUBMITTED THAT THE INVESTMENT WERE MADE WITH A VIEW TO ACQUIRING STRATEGIC BUSINESS STAKE AND NOT TO EARN EXEMPT INCOME IN THE FORM OF DIVIDEND. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS . 5. DURING THE PROCEEDINGS BEFORE US AT THE OUTSET LD COUNSEL FOR THE ASSESSEE FILED VARIOUS PRECEDENTS VIDE PAPER BOOK WHICH CONTAINS 65 PAGES. LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THE FACT THAT THE ASSESSEE IS HAVING EXCESS INTEREST FREE FUNDS / OWN FUNDS MORE THAN THE INTEREST BEARING FUNDS. HE FURTHER MENTIONED THAT SINCE THE ASSESSEE MADE THE INVESTMENTS OUT OF INTEREST FREE FUNDS NO DISALLOWANCE IS REQUIRED TO BE MADE U/S 14A OF THE ACT. IN SUPPORT OF HIS CONTENTION LD COUNSEL FOR THE ASSE SSEE BROUGHT OUR ATTENTION TO JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD VS. DCIT [2016] 383 ITR 529 (BOM) WHICH IS RELEVANT FOR THE PROPOSITION THAT WHEN THE ASSESSEE IS HAVING INTEREST - FREE FUNDS OR OWN FUNDS MORE THAN THE INTEREST BEARING FUNDS THEN THE PRESUMPTION IS THAT THE INVESTMENT IN TAX FREE SECURITIES HAS BEEN MADE FROM INTEREST FREE FUNDS AND THEREFORE NO DISALLOWANCE IS PERMISSIBLE U/S 14A OF THE ACT. LD COUNSEL FOR THE ASSESSEE FURTHER MENTIONED THAT THE INVESTMENTS A R E MADE BY THE ASSESSEE ONLY IN THE GROUP CONCERNS OF THE ASSESSEE AND NOT IN ANY UNRELATED PARTY. THE REFORE THE SAID INVESTMENTS C O N S T I T U T E ONLY PASSIVE INVESTMENTS MADE FOR THE PURPOSE ACQUIRING STRATEGIC BUSINESS STAKE AND NOR FOR THE PURPOSE OF EA RNING ANY DIVIDEND INCOME. LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT WHEN THERE IS NO EXPENDITURE 3 INCURRED DIRECTLY OR INDIRECTLY FOR THE PURPOSE OF EARNING THE EXEMPT INCOME A N D I N T H A T E V E N T U A L I T Y NO DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT. IN THIS REGARD L D COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS DECISIONS OF THE TRIBUNAL VIZ (I) M/S. TWINKE ENVIRO TECH LTD VS. DCIT IN ITA NOS. 1752 TO 1754/MUM/2013; (II) CIT VS. M/S. SMART CHIP LTD IN ITA NO.1923/M/2012; (III) M/S. J M FINANCIAL LTD VS. ADDL. CIT IN ITA NO.4521/MUM/2012; (IV) GARWARE WALL ROPES LTD VS. ADDL. CIT; (V) JIGAR P SHAH VS. JCIT IN ITA NO.4366/M/2014. BRINGING OUR ATT ENTION TO DECISIONS OF THE TRIBUNAL IN THE CASE OF GARWARE WALL ROPES LTD (SUPRA) WHEREIN THE TRIBUNAL CONCLUDED THAT WHEN THE ASSESSEE HAS PRIMA FACIE BROUGHT OUT CASE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME WHICH DOES NOT FORM PA RT OF TOTAL INCOME THEN IN THE ABSENCE OF ANY FINDING THAT EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME PROVISIONS OF SECTION 14A CANNOT BE APPLIED. LD COUNSEL FOR THE ASSESSEE FURTHER MENTIONED THAT IN THE YEAR UNDER CONSIDERATION ASSESSEE EARNED DIVIDEND INCOME OF RS. 2 47 613/ - WHEREAS T HE AO MADE DISALLOWANCE U/S 14A TO THE EXTENT OF RS. 27 68 422/ - . IN THIS REGARD IT IS THE CONTENTION OF THE ASSESSEE THAT AT BEST IF THE DISALLOWANCE U/S 14A COULD BE MADE THE SAME CANNOT EXCEED EXEMP T INCOME IE TO SAY DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME . FOR THIS PROPOSITION LD COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS PRECENETS. VIZ (I) JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS P LTD VS . CIT (372 ITR 694) (DELHI HC); (II) DECISION OF THE TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICAL P LTD VS. ACIT IN ITA NO.5592/M/2012 AND (III) ANOTHER DECISION OF THE TRIBUNAL IN THE CASE OF DILIGENT INVESTMENT LTD VS. ITO IN ITA NO.222/MUM/2012. LD COU NSEL FOR THE ASSESSEE ALSO BROUGHT OUR ATTENTION TO THE WORKING OF THE DISALLOWANCE U/S 14A OF THE ACT AND MENTIONED THAT THE DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE ONLY IN RESPECT OF THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME. IN THIS REGARD H E RELIED ON CERTAIN DECISIONS VIZ (I) THE ORDER OF THE ITAT KOLKATA IN THE CASE OF REI AGRO LTD VS. DCIT [2014] 144 ITR 141 (KOLKATA TRIB) DATED 19.6.2013 AND (II) DECISION OF THE ITAT MUMBAI IN THE CASE OF SYLVEX CABLE CO. PVT LTD VS. JCIT. 6. ON TH E OTHER HAND LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED DECISIONS OF THE TRIBUNAL AND THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE FACTS OF THE CASE WE FIND THE ISSUES INVOLVED IN 4 THIS APPEAL ARE (I) WHETHER THE ASSESSEE USED OWN AND INTEREST FREE FUNDS FOR INVESTMENT; (II) WHETHER THE INVESTMENTS ARE ONLY IN THE GROUP CONCERNS OF THE ASSESSEE FOR THE PURPOSE OF ACQUIRING STRATEGIC BUSINESS STAKE OR IN ANY UNRELATED COMPANIES WITH A MOTO TO EARN EXEMPT INCOME A N D ( I I I ) W H E T H E R T H E D I S A L L O W A N C E U / S 1 4 A R . W . R U L E 8 D C A N E X C E E D T H E E X E M P T I N C O M E E T C . CONSIDERING THE PRECEDENTS AS WELL AS THE DECISIONS OF THE TRIBUNAL (SUPRA) CITED BY THE LD COUNSEL FOR THE ASSESSEE BEFORE US WE FIND THE ISSUES INVO LVED IN THIS APPEAL ARE SETTLED IN NATURE AND THEREFORE IN OUR OPINION THE ISSUES ARE REQUIRED TO BE REMANDED TO THE FILE OF THE AO FOR DECIDING THEM AFRESH IN THE LIGHT OF THE ABOVE CITED DECISIONS AND COMPARING THE FACTS OF THE SAID CASES WITH THAT OF THE INSTANT APPEAL. WE ORDER ACCORDINGLY AND AO IS DIRECTED TO DECIDE THE ISSUES AFRESH AND GRANT RELIEF TO THE ASSESSEE IF THE FACTS ARE IDENTICAL. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE PRINCIPLES OF NATURAL J USTICE. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. REGARDING THE OTHER TWO APPEALS ITA NO.7010/M/2012 (AY 2008 - 2009) AND ITA NO. 7002/M /2012 (AY 2010 - 2011) SINCE THE ISSUES RAISED IN BOTH THESE APPEALS ARE IDENTICAL TO THAT OF THE ONES RAISED BY THE ASSESSEE IN ITS APPEAL ITA NO.7001/M/2012 (AY 2009 - 2010) WHICH IS ADJUDICATED IN THE ABOVE PARAS OF THIS ORDER OUR DECISION GIVEN THEREIN SQUARELY APPLIES TO THE INSTANT APPEALS TOO. CONSIDERING THE SAME ALL THE GROUNDS RAISED IN BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATI STICAL PURPOSES. 11. CONCLUS IVELY ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOU NCED IN THE OPEN COURT ON 2 6 T H OCTOBER 2016. S D / - S D / - ( RAVISH SOOD ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 6 .10.2016 . . ./ OKK SR. PS / COPY OF THE ORDER FORWARDED TO : 5 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. / DR ITAT MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI