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Income Tax Appellate Tribunal, H BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI SHRI PRAMOD KUMAR, VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER (ASSESSMENT YEAR: 2015-16) Hathway Investment Private Limited, Rahejas, 4th Floor, Corner of Main Avenue & V.P. Road, Santacruz (West), Mumbai - 400054 [PAN: AAACH1675B] ……………… Appellant Vs The Assistant Commissioner of Income-tax Circle – 12(2)(2), Mumbai, Room No. 145, 1st Floor, Aayakar Bhavan, M. K. Road, Mumbai - 400021 …………….… Respondent Appearances For the Appellant/ Assessee : Shri Vijay Mehta For the Respondent/Department Ms. Neha Thakur : Date of conclusion of hearing : 24.02.2022 Date of pronouncement of order : 30.03.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 19.09.2019, passed by the Ld. Commissioner of Income Tax (Appeals)–20, Mumbai under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟] in appeal [CIT(A)- 20/IT-10193/2017-18] for the assessment year 2015-16, whereby the CIT(A) had partly allowed the appeal filed by the Assessee against the assessment order, dated 22.11.2017, passed under section 143(3) of the Act.
Appellant has raised the following grounds of appeal:
Assessment Year: 2015-16 1. The learned Commissioner of Income tax (Appeals) -20, Mumbai (the learned CITA) erred in upholding disallowance under section 14A of the Act amounting to Rs.39,02,754/-.
2. The learned CIT(A) erred in not directing the Assessing Officer to exclude shares held as stock-in-trade as well as shares held as strategic investments (i.e. investments in subsidiaries & investment in joint ventures) while calculating average investment for the purpose of disallowance under section 14A.
3. Without prejudice to what has been stated above, the learned CIT-A ought to have restricted disallowance under section 14A of the Act at Rs.10,31,593/- considering only those investments which yielded exempt dividend income and as per Rule 8D(2)(iii) of the Income-tax Rules, 1962.
4. The appellant submits that the Assessing Officer be directed: (i) to delete the disallowance under section 14A of the Act amounting to Rs. 39,02,754/-. (ii) to exclude shares held as stock-in-trade as well as strategic investment while calculating average investment for the purpose of disallowance under section 14A. (iii) Without prejudice to what has been stated above, to restrict the disallowance under section 14A read with rule 8D at Rs.10,31,593/considering only those investments which yielded dividend income.”
Brief facts of the case are that during the relevant previous year the Assessee-company was engaged in the business of investment and dealing in shares & securities. The Assessee filed return of income on 30.09.2015 declaring total income of INR 12,88,11,960/-. The case of the Assessee was selected for scrutiny and assessment was framed under Section 143(3) of the Act vide order, dated 22.11.2017, whereby the total income of the Appellant was assessed at INR 14,31,57,201/- under the normal provisions of the Act after making Assessment Year: 2015-16 addition/disallowance of INR 1,43,45,238/- under Section 14A of the Act.
Being aggrieved, the Appellant filed appeal before the Ld. Commissioner of the Income Tax (Appeals) [hereinafter referred to as the „CIT(A)‟] challenging the additions of INR 1,43,45,238/- made by the Assessing Officer (hereinafter referred to as „the AO‟) under Section 14A of the Act. The CIT(A), partly allowing the said appeal, concluded as under:
“5.4.4. Respectfully following the case laws cited by the appellant, I direct the AO to exclude those shares which yielded exempt income during the relevant previous year form “specified investments” and re- compute the disallowance under Rule 8D(2)(iii). However, in case the disallowance so computed is below the sum of Rs.39,02,754/- which was disallowed by the appellant in its return of income, the AO will sustain the disallowance made by the appellant and disallowance computed under Rule 8D(2) will be ignored” (emphasis supplied)
Not being satisfied with the relief granted by the CIT(A), the Appellant has preferred the present appeal.
The Ld. Authorised Representative of the Appellant appearing before us stated he would be pressing only Ground No. 3 of the appeal with stands decided in favour of the Appellant in Appellant‟s own case for the Assessment Year 2012-13 (i.e. ITA No. 7106/Mum/2019). In response the Ld. Departmental Representative relied upon the order passed by CIT(A) and submitted that the CIT(A) has rightly restricted the addition made by the AO under Section 14A of the Act to the amount of suo moto disallowance of INR 39,02,754/- offered to tax by the Appellant in its return of income.
Assessment Year: 2015-16 7. We have heard the rival submissions and examined the material on record including the orders of authorities below. We have also perused the decision of Tribunal in the case of Appellant for the Assessment Year 2012-13 in wherein identical issue has been decided in favour of the Appellant. The relevant extract of the aforesaid decision read as under:
“9. We have heard the submissions made by rival sides and have examined the orders of authorities below. The short issue in appeal before us is whether the disallowance under section 14A should be restricted to suo-moto disallowance made by the assessee at Rs. 28,96,745/- or the disallowance under section 14A of the Act can be below the suo-moto disallowance after re- computing disallowance in accordance with the decision of Special Bench in the case of ACIT Vs. Vireet Investments (P.) Ltd. (supra).
The quantum of suo-moto disallowance made by assessee in return of income under section 14A is not disputed. Subsequently, in the light of decision of Special Bench, the assessee re-computed its disallowance under section 14A of the Act Rs. 10,31,598/- after considering only investments yielding exempt income. The CIT(A) in principle agreed with the proposition that for the purpose of computing disallowance under rule 8D(2)(iii), only those shares which yielded exempt income during the relevant previous year should be considered, but expressed his reservation in applying the above principle as after accepting the above proposition disallowance would have reduced to Rs. 10,31,598/- i.e. below the suo-moto disallowance made by the assessee at Rs. 28,96,745/-.
We are of considered view that if by virtue of law expounded by Courts the disallowance u/s 14A is reduced below suo-moto disallowance made by the assessee, there would not be any impediment in assessee getting the benefit.
Similar issue had come up before the Co-ordinate Bench in the case of Tejaskiran Pharmachem Industries Pvt. Ltd. Vs. DCIT (supra), the Co-ordinate Bench decided the issue in favour of assessee by observing as under:
Assessment Year: 2015-16 “The last grievance under these appeal is of the assessee as to whether the disallowance u/s 14A can fall below disallowance suo motu voluntarily made by the assessee in the return of income filed with the Revenue. The assessee has claimed that if his several contentions are favourably considered by tribunal keeping in view legal position, the disallowance u/s 14A can fall below the voluntary disallowance made by the assessee suo motu in return of income filed with the Revenue. The assessee has relied on decision of Hon‟ble Gujarat High Court in the case of Principal CIT v. UTI Bank Limited (2017) 398 ITR 514(Guj) and decision of ITAT, Mumbai in the case of Rupee Finance and Management Private Limited v. DCIT (2017) 57 ITR(Trib.) 205(Mumbai). We find merit in the contention of the assessee that once tribunal has adjudicated matter in assessee‟s favour then merely because disallowance was made in return of income voluntarily under a wrong belief , the assessee cannot resile from its position is not acceptable . The mandate of the 1961 Act is to tax real income and not an income which was never the income chargeable to tax in the hands of the assesseee but was declared under a wrong belief or notion . The mandate of the 1961 Act is to tax real income and tax can only be levied under the authority of law. Thus, if after verifications and following the ratio of law decided by the tribunal in the instant case, if the disallowance falls below the disallowance u/s 14A offered by the assessee in return of income, be it may the Revenue cannot charge tax on income which never was the income of the assessee chargeable to tax within the mandate and provisions of the 1961 Act as the tax can only be levied by the authority of law. The Hon‟ble Andhra Pradesh High Court in the case of CIT v. Bakelite Hylam Limited(1999) 237 ITR 392(AP) as well Hon;ble Gujarat High Court in the case of Gujarat Gas Company Limited v. JCIT reported in (2000) 245 ITR 84(Guj) has taken a similar view. Hon‟ble Gujarat High Court in the case of Gujarat Gas Company Limited(supra) has arrived at the said decision after considering CBDT circular No. 549 dated 31-10-1989 (1990) 182 ITR (st) 1 while arriving at the said Assessment Year: 2015-16 decision that assessed income can fall below returned income in proceedings u/s 143(3) r.w.s. 143(2). The Hon‟ble Supreme Court decision in the case of CIT v. Sun Engineering Work Private Limited (1992) 198 ITR 297(SC) was in context of re-assessment proceedings initiated u/s 147 wherein Hon‟ble Supreme Court held that reassessment proceedings initiated u/s 147 are for the benefit of revenue and not the assessee, wherein the mandate is to bring to tax income which has escaped assessment while presently we are concerned with proceedings initiated u/s 143(3) r.w.s. 143(2). We order accordingly.” Thus, in view of our above observations, we find merit in ground no.3 of the appeal, hence, the same is allowed.” (Emphasis Supplied)
Respectfully following the abovesaid decision of the Tribunal in the case of the Appellant for the Assessment Year 2012-13, we decide Ground No. 3 in favour of the Appellant. Rest of the grounds [i.e. Ground No. 1, 2, 4(i)/(ii)/(iii) and 5] are disposed of as being not pressed in view of the statement made by the Ld. Authorised Representative of the Appellant.
In the result, appeal is partly allowed. Order pronounced on 30.03.2022.