DCIT, CENTRAL CIRCLE-18, NEW DELHI vs. MONTAGE ENTERPRISES P.LTD, DELHI

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ITA 4909/DEL/2017Status: DisposedITAT Delhi14 December 2020AY 2011-1215 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A was to be deleted. Following the findings of a Coordinate Bench in the assessee's own case, the Tribunal noted that the CIT(A) had correctly deleted the disallowance of interest expenditure after verifying that investments were made from the assessee's own funds and not borrowed funds. Regarding administrative costs, the Tribunal found that the assessee had provided a categorical explanation that no expenditure was attributable to earning exempt income, especially since investments were made in earlier years and only one dividend cheque was received during the year. The Tribunal emphasized that the Assessing Officer failed to record the mandatory satisfaction as required by Section 14A(2) read with Rule 8D(1) before mechanically applying Rule 8D, citing the decisions in *HT Media Ltd. vs. Pr.CIT* and *Godrej & Boyce Manufacturing Co. Ltd. vs. Dy.CIT & Anr.*. The Tribunal also held that the excise duty refund, being capital in nature, could not be part of book profit under Section 115JB. The Tribunal's decision was based on the peculiar facts and circumstances, including no investment during the year for earning exempt income, receipt of only one dividend cheque, and the AO's failure to record satisfaction. The Tribunal clarified that this decision would not operate as an exemplar in cases with different facts. The appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue (DCIT, Central Circle-18, New Delhi) filed two appeals (ITA Nos. 4907 & 4909/DEL/2017) against orders of the CIT(A)-29, New Delhi, dated 11.05.2017, concerning Assessment Years (AY) 2009-10 and 2011-12. The appeals challenged the CIT(A)'s decisions regarding disallowance under Section 14A and eligibility of excise duty refund for deduction under Section 80IB. The assessee is M/s. Montage Enterprise Pvt. Ltd. The ITAT heard both appeals together due to common grounds. The assessee's counsel submitted that identical issues were decided by the Tribunal in previous years in favour of the assessee, a concession the DR fairly made. The Tribunal noted that the grounds raised in the present appeals were also considered by a Coordinate Bench in the assessee's own case and the Revenue's appeals for earlier AYs.

What were the issues?

1. Whether the Tribunal has erred in law and on fact in holding that no interest-bearing funds were used by the assessee in making investments giving rise to tax-exempt income, thereby restricting the disallowance under Section 14A to Rs. 35,78,530/- (AY 2009-10) and Rs. 82,66,124/- (AY 2011-12) against the disallowances made by the AO under Rule 8D? (Question of law and fact, concerning Section 14A and Rule 8D). 2. Whether the Tribunal has erred in law and on facts in holding that excise duty refund of Rs. 2,46,79,790/- (AY 2009-10) and Rs. 2,80,82,949/- (AY 2011-12) is eligible for deduction under Section 80IB? (Question of law and fact, concerning Section 80IB). Assessee's Contention: The assessee argued that identical issues were decided by the Tribunal in previous years in favour of the assessee, citing specific ITA numbers. The assessee also contended that investments were made from own funds, not borrowed funds, and no expenditure was incurred for earning dividend income. For the excise duty refund, the assessee argued it was a capital receipt and not part of book profit for MAT purposes. Revenue's Contention: The Revenue relied on the orders of the Assessing Officer and CIT(A). The DR fairly conceded to the assessee's submission regarding the Tribunal's previous decisions on identical issues.

Which sections of the Income-tax Act were involved?

Section 14A,Section 80IB,Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,

Before: SHRI N.K. BILLAIYAAND

For Appellant: Ms. Pramita M. Biswas, CIT (DR)
Hearing: 14.12.2020Pronounced: 14.12.2020

Heard together (4 matters)

ITA No.4907/Del/2017
ITA Nos. 5124/Del/2011
ITA No.6963/Del/2014
ITA No.556/Del/2015

Read from the judgment's own cause title. This page is filed under one of them.

PER N. K. BILLAIYA, AM:

1.

by the revenue preferred against two separate orders of the CIT(A)-29, New Delhi dated 11.05.2017 pertaining to A.Y.2009-10 and 2011-12.1.

2.

Since common grounds are involved in both these appeals, though, quantum may differ, both these appeals were heard together and are being disposed of by this common order and brevity.

3.

The grievance of the revenue in A.Y. 2009-10 read as under :-

1. The Ld. CIT(A) has erred in law and on fact in holding that no interest

bearing funds were used by the assessee in making investment giving rise to tax exempt income and thus restricting the disallowance u/s. 14A to Rs.35,78,530/- against the disallowance of Rs.2,51,751/- made by the AO in accordance with the provisions of Rule

8D of the Income Tax Rules.

2. The Ld. CIT(A) has erred in law and on facts in holding that excise duty

refund of Rs.2,46,79,790/- is eligible for deduction u/s. 80 IB.

4.

The grievance of the revenue in A.Y. 2011-12 read as under :-

1.

The Ld. CIT(A) has erred in law and on fact in holding that no interest

bearing funds were used by the assessee in making investment giving rise to tax exempt income and thus restricting the disallowance u/s. 14 A to Rs.82,66,124/- against the disallowance of Rs.1,06,79,240/- made by the AO in accordance with the provisions of Rule 8D of the Income Tax Rules.

2. The Ld. CIT(A) has erred in law and on facts in holding that excise duty refund of Rs.2,80,82,949/- is eligible for deduction u/s. 80 IB.

5.

At the very outset the counsel for the assessee stated that identical issues were considered by the Tribunal in 92/Del/2012, 144/Del/2013, 475/Del/2013, 4426/Del/2013 and 4986/Del/2013 for A.Y. 2008-09, 2009-10 and 2010-11 and the order of the Tribunal was followed in ITA No.6963/Del/2014 and 556/Del/2014 for A.Y.2011-12 in favour of the assessee and against the revenue. The DR fairly conceded to this.

6.

We have carefully considered the grievance of the revenue viz-a-viz the order of the Coordinate Bench (supra). We find force in the contention of the counsel. Grievance raised vide ground No.1 which is in respect of disallowance u/s. 14A, we find that an identical issue was considered by the Tribunal in assessee’s own case in vide ground No.2 of that appeal and grievance raised vide ground No.2 of the present appeal was considered by the Tribunal in revenue’s appeal in ITA No.556/Del/2015 for A.Y.2011-12 vide ground No. 3 of that appeal.

7.

The relevant findings of the coordinate Bench read as under :-

8.

Respectfully following the findings of the Coordinate Bench we decline to interfere. Ground No.1 is accordingly dismissed.

9.

Ground No. 2 of the present appeal has been considered by the Tribunal :

10.

Respectfully following the findings of the Coordinate Bench (supra). Ground No.2 is also dismissed.

11.

In the result, the appeals filed by the revenue are dismissed.

12.

Decision announced in the open court in the presence of representatives of both the sides on 14.12.2020.

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