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Facts
The Revenue appealed against the CIT(A)'s orders deleting disallowances under Section 14A and additions under Section 5 for Assessment Years 2020-21 and 2021-22. The assessee had made substantial investments and advanced loans to its subsidiary, for which it claimed no interest income was earned or expenses incurred to claim exemption.
Held
The Tribunal held that the CIT(A)'s decision to delete the disallowance under Section 14A and the addition under Section 5 was justified, following consistent precedents from earlier years and coordinate benches. The Tribunal found no change in facts or circumstances to deviate from these prior decisions.
Key Issues
Whether the CIT(A) was correct in deleting the disallowance under Section 14A and the addition under Section 5, considering the assessee's investments and loans to its subsidiary, in light of previous tribunal decisions.
Sections Cited
14A, 8D, 5, 143(3), 250
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Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 09.04.2025 घोर्णध की िधरीख/Date of Pronouncement 30.04.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- These appeals are filed by the revenue against the orders of the Learned Commissioner of Income-tax (Appeals), Mumbai-52 [hereinafter referred to as “CIT(A)”] passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Years [A.Y.] 2020-21 & 2021-22.
The revenue has raised the following grounds of appeal:
& 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. AY 2020-21 1. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the disallowance u/s. 14A of the Income Tax Act, 1961 of Rs. 2,22,16,000/- by ignoring the provisions of section 14A r.w.r 8D(2) which prescribes a methodology for disallowance to be made u/s.14A of the Income Tax Act, 1961." 2. "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO to delete the addition of Rs. 2,09,61,935/ being income u/s 5 of the Income Tax Act, 1961." 3. "On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in directing the AO to delete the addition of Rs. 2,09,61,935/ on the basis of resolution passed by the borrower company about non-payment of interest on loans taken whereas such resolution should be passed by the assessee company about non charging of interest on loan." 4. "On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in not taking the cognizance of the fact that the borrowing company is 100% subsidiary of the assessee company and the principle of the arms length is not followed.” AY 2021-22 “1. "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in directing the AO to delete the addition of Rs. 2,09,61,935/- being income u/s 5 of the Income Tax Act, 1961." 2. "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in directing the AO to delete the addition of Rs. 2,09,61,935/ on the basis of resolution passed by the borrower company about non-payment of interest on loans taken whereas such resolution should be passed by the assessee company about non charging of interest on loan." 3. "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not taking the cognisance of the fact that the borrowing company is 100% subsidiary of the assessee company and the principle of the arms length is not followed.”
Since similar issues are involved in the appeals, these are being disposed of by a common order. is being taken as a lead case. ITA No. 3985/Mum/2025 for AY 2020-21 4. Brief facts of the case are that the assessee has filed return declaring income of Rs. 75,50,55,770/- on 22.01.2021 from the business of retailing of household and consumer products through departmental stores. The case was & 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. selected for scrutiny and assessment u/s 143(3) was made on 15.03.2022 at an income of Rs. 80,55,42,650/- after making various disallowances/additions. 5. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A), who has allowed the assessee’s appeal on merits vide order dated 05.11.2024. 6. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal on the following grounds .
7. Ground No. 1: Disallowance u/s 14A r.w. Rule 8D – Rs. 2,22,16,000/- 7.1 Brief facts of the issue are that Ld. AO observed that besides the business activity, a huge amount of investments have been made by the assessee, and it has utilised the common infrastructure for earning the exempt income from these investments. He, accordingly, invoked the provisions of section 14A r.w. Rule 8D and worked out the disallowance @1% on annual average investment at Rs. 2,22,16,000/- out of the expenses debited to the P&L account. Ld. CIT(A) has deleted the same in view of the decision of the coordinate benches in the assessee’s own case for earlier years. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal. 7.2 Before us, Ld. AR has submitted that this is a recurring issue and has been decided in favour of the assessee for the last several years. Ld. AR has submitted & 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. a chart to show that the same issue has been decided repeatedly in favour of the assessee for more than 10 years. Specifically, in the consolidated order for AY 2018-19 (ITA No. 2512/Mum/2021), AY 2017-18 (2509/Mum/2021) and AY 2016-17 (ITA No. 2508/Mum/2021), the coordinate bench has discussed and decided the issue in favour of the assessee following the orders of earlier years with the following observations: 6.4. Page No. 174 “6.4 In view of the above discussion, respectfully following the finding of the Tribunal in the case of the assessee as well as finding of the Hon'ble Delhi High Court in the case of Era Infrastructure (India) Ltd. (supra), we do not find any error in the order of the Ld. CIT(A) on the issue-in-dispute and accordingly, we uphold the same. The ground No. 1 and 2 of the appeal in respect of all three appeals are dismissed.” 7.3 Ld. DR, on the other hand, has relied upon the order of Ld. AO and argued that the provisions of section 14A r.w. Rule 8D is squarely applicable in this case, and therefore, the disallowance made by the Ld. AO deserves to be upheld. 7.4 We have heard the rival submissions, and we find that the facts in the present year are identical to the facts of the earlier years. Therefore, respectfully following the decisions of the coordinate benches in earlier years, we hold that the decision of Ld. CIT(A) deleting the disallowance u/s 14A Rule 8D is justified. We, therefore, are not inclined to interfere with the order of Ld. CIT(A) as no change in facts and circumstances has been demonstrated by the Ld. DR for the year under consideration. The appeal of the revenue on this ground is, accordingly, dismissed.
Ground No. 2 – Addition u/s 5 of the Act – Rs. 2,09,61,935/- & 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. 8.1 Ld. AO observed from the notes of two financial statements furnished by the assessee that it had shown long-term loans and advances, wherein provisions for doubtful loans amounting to Rs 2309.01 lakh from Gateway Multi Channel Retail India Ltd. (its subsidiary company) were shown. As no interest from this loan was declared in the income, Ld. AO asked the assessee to show cause as to why the interest calculated @9% on this amount should not be treated as income u/s 5 of the Act. It was claimed by the assessee that this issue has been decided in the assessee’s own case for earlier years in its favour by the co-ordinate benches. However, Ld. AO did not accept the arguments of the assessee and proceeded to make an addition of Rs. 2,09,61,935/- after applying the rate of 9% on the amount of loan. 8.2 Ld. CIT(A) has deleted the addition following the orders of the coordinate benches for AYs 2018-19 and earlier years. 8.3 Ld. AR has argued that there is no change in facts and circumstances, and this issue has been consistently decided in favour of the assessee by the coordinate benches for the last several years. Specifically, in the consolidated order for AY 2018-19 (ITA No. 2512/Mum/2021), AY 2017-18 (2509/Mum/2021) and AY 2016-17 (ITA No. 2508/Mum/2021). The issue has been decided in favour of the assessee predicated on earlier years with the following observations: 6.6 The Ld. CIT(A) in assessment year 2016-17 following the decision of the Tribunal in earlier years decided the issue in favour of the assessee observing as under:
& 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. "6.3 The assessee has made elaborate submissions on the issue. However, it is noted that this is a repetitive issue and Hon'ble Mumbal Tribunal has ordered the matter in favor of the of the appellant company for AY 2009-10, AY 2010-11. AY 2012-13, AY 2013-14 & AY 2014-15. The observations of the ITAT while dealing with the issue for AY 2014-15 are reproduced below: "14. We have considered the submission of both the parties and gone through the order of lower authorities. The Assessing Officer made addition on account of presumptive basis under section 5 on advances made by assessee to its subsidiaries. The Assessing Officer computed the disallowance/addition of Rs. 2.86 crore. We have noted that the assessee advanced the money to its subsidiary, which falls under the business expediency. Therefore, in the present case that the assessee advances to its subsidiary for business requirements, which may have impact on the objectives of the assessee for earning future revenue to the assessee. When it made in relation to advances Though, it is another fact that the business of such nature did not materialized in positive outcome and the subsidiary had to close such business operation. The Hon'ble Supreme Court in SA. Builders (288/TR 1 SC) held that whether expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. The case of the assessee is that the assessee has made advances to its subsidiary for business expediency. Therefore, considering the decision of Hon'ble Supreme Court in SA Builder (supra), we do not find any Infirmity in the order passed by Id. CIT(A). Even otherwise the Id. CIT(A) deleted the entire addition by following the decision of his predecessor in appeal for A. Y. 2010-11 & 2012-13.
No contrary fact or law to take other view is brought to our notice to take other view, nor any variations in facts brought to our notice. Therefore, we do not find any merit in the grounds of appeal
raised by revenue." 6.7 Identical findings have been given by the Ld. CIT(A) in respect of AY 2017-18 & 2018-19 on the issue-in-dispute.
7. We have heard rival submissions of the parties on the issue-in-dispute and perused the relevant material on record. We note that the Ld. CIT(A) has adjudicated the issue following the binding precedent on the issue-in-dispute and therefore we do not find any error in the order of the Ld. CIT(A) on the issue-in-dispute in all the three assessment years involved. Accordingly, the grounds No. 3 to 7 raised in all the three appeals are dismissed.”
9. Respectfully following the decision of the coordinate benches, we hereby hold that the decision of Ld. CIT(A) to delete the addition of Rs. 2,09,61,935/- u/s 5 is justified and therefore upheld. Accordingly, the appeal of the revenue on this ground is dismissed.
& 6986/Mum/2024 A.Y. 2020-21 & 2021-22 Shoppers Stop Ltd. AY 2021-22 10. Sole issue in this appeal is the addition made u/s 5 of the Act. This issue is squarely covered by the decision in AY 2020-21, therefore, the above order will apply mutatis mutandis in this year also. 11. In the result, both the appeals of the revenue are dismissed. Order pronounced in the open court on 30.04.2025.