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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Ravish Sood (JM)
O R D E R Per Shamim Yahya (AM):-
These are cross appeals by the assessee and Revenue arising out of orders of learned CIT(A) for concerned assessment years. Since issues are connected and appeals were heard together, these are being consolidated and disposed of by this common order, for the sake of convenience.
Assessee’s appeal
2 M/s. Kamat Hotels (India) Limited
One common issue raised relates to confirmation of disallowance of Rs. 40,34,894/- and Rs. 2,514/- for the respective assessment years out of disallowance made u/s. 14A of the I.T. Act.
It has further been urged that learned CIT(A) erred in failing to appreciate that the revised claim was duly made by the assessee during the assessment proceedings that there was no exempt income, hence no such disallowance u/s. 14A was called for.
Brief facts on this issue are that the Assessing Officer has made disallowance u/s. 14A read with Rule 8D of the I.T. Rules.
Upon assessee’s appeal, learned CIT(A) has deleted the addition made by the Assessing Officer by placing reliance upon the decision of Hon'ble Delhi High Court in the case of M/s. Cheminvests Ltd. (378 ITR 33) and decision of Hon'ble Bombay High Court in the case of Delite Enterprise (8 taxmann.com 10) for the proposition that where there is no exempt income provisions of section 14A cannot be affected. However, learned CIT(A) has sustained suo moto disallowance of Rs. 40,34,894/- and Rs. 2,514/-made by the assessee itself for the concerned assessment years. It has been claimed that sum of Rs. 41,240/- and Rs. 25,114/- respectively for two assessment years are not exempt income but sums offered by the assessee for taxation as they were taxable.
Against this order assessee is in appeal before us.
Assessee has contended that this issue is covered in favour of the assessee by the ITAT order dated 14.12.2017 for A.Y. 2011-12 in assessee’s own case. Further it has been contended that the assessee is entitled to make a revised claim before the Assessing Officer during the assessment as well as during appellate proceedings in view of Hon'ble Bombay High Court order in M/s. Pruthvi Brokers & Shareholders (349 ITR 396).
3 M/s. Kamat Hotels (India) Limited
Upon careful consideration and hearing both the counsel, we find considerable cogency in the submissions of learned counsel of the assessee. We find that as held in the case laws hereinabove no disallowance is required u/s. 14A when no exempt income has been earned. Furthermore, assessee is very much entitled to make a proper and revised claim as emanating from the decision of Hon'ble Bombay High Court in the case of M/s. Pruthvi Brokers & Shareholders (supra). Since no disallowance u/s. 14A is legally permissible and assessee has duly raised this issue, the concession by the assessee initially in making suo moto disallowance cannot act as estopple, against the assessee for challenging the same. Accordingly, in the background of the aforesaid discussion and precedent, we decide this issue in favour of the assessee.
Another common issue raised pertains to disallowance of prior period expenses.
By way of this ground it has been submitted that the assessee is entitled to deduction of Rs. 15,72,773/- for A.Y. 2012-13 and Rs. 13,58,578/- for A.Y. 2014-15 being prior period expenses. It has been claimed that these expenses pertain to previous year were booked in next year as prior period expenses and were neither claimed nor allowed in concerned assessment years. That most of these expenses were revenue expenditure for which liability was incurred in the concerned assessment year but could not be accounted for in the absence of bills, hence accounted for subsequent year. The assessee has further urged that the assessee entitled to make a claim for these expenses for the first time before the appellate authority in view of various decisions including National Thermal Power Company Ltd. (229 ITR 383) and M/s. Pruthvi Brokers & Shareholders (supra). Further it has been submitted that the matter may be sent back to the Assessing Officer for verification and allowance of the same.
We have heard both the counsel and perused the records. We find that the issue raised by the assessee in this ground is neither arising out the order of learned CIT(A) nor there is any disallowance in this regard by the Assessing
4 M/s. Kamat Hotels (India) Limited Officer. Hence in our considered opinion this ground raised by the assessee is bereft of any cogency whatsoever, when the matter has neither been dealt with by the Assessing Officer nor by learned CIT(A), in our considered opinion there is no occasion for the assessee to raise this issue before the ITAT. Furthermore, as admitted by learned counsel himself that it is a factual issue and he wants the issue to be remitted to the file of the Assessing Officer. In our considered opinion dehorse any findings by the authorities below, this issue cannot be adjudicated by us, hence this ground raised by the assessee stands dismissed.
Revenue’s Appeal :-
One common issue raised relates to the decision of learned CIT(A) that in absence of any exempt income no disallowance should be made u/s. 14A of the Act.
In this regard the Revenue has referred to the CBDT circular for the proposition that provisions of section 14A are applicable even in cases of investment in shares which has not been yield any exempt income.
Upon careful consideration, we find that we have already decided this issue in favour of the assessee following judicial precedence from Hon'ble High Courts. In this view of the matter CBDT circular referred by the Revenue cannot override higher court’s decision. Accordingly, this issue raised by the Revenue stands dismissed.
Another issue raised relates to the issue of learned CIT(A) not confirming the disallowance to book profit as per clause (f) to Explanation-1 of section 115JB of the Act.
On this issue the Assessing Officer has made disallowance u/s. 14A in normal computation as part of addition u/s. 115JB. Learned CIT(A) has decided the issue in favour of the assessee by following decision of the ITAT in 5 M/s. Kamat Hotels (India) Limited assessee’s own case, wherein Special Bench decision in the case of Vireet Investment was followed.
Against this order, the Revenue is in appeal before us.
We find that this issue duly covered in favour of the assessee by the decision referred above. It is not the case of Hon'ble Jurisdictional High Court has passed a contrary decision on this issue. In this view of the matter, we uphold the order of learned CIT(A) on this issue.
Another issue raised for A.Y. 2014-15 is that learned CIT(A) erred in deleting disallowance of expenditure of CSR, overlooking the judgment of Hon'ble Delhi High Court in the case of CIT Vs. D.T.T.D.C. Ltd. (350 ITR 1), which held that where income is utilized for self imposed obligation it signifies ‘application of income’, hence it is pleaded that this expenditure is not allowable u/s. 37 of the Act.
This issue relates to fresh claim before learned CIT(A). It was claimed before learned CIT(A) during assessment proceedings that Assessee vide order sheet date 23.12.2016 inadvertently stated that although expenses of CSR were incurred for business purposes, the same is offered for taxation in view of subsequent clarificatory amendment in section 37(1) of the Act. Learned CIT(A) has decided the issue in favour of the assessee by holding as under :- 'The Ministry of Corporate Affairs notified Section 135 and Schedule VII of the Companies Act 2013 as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 to come into effect from April 1, 2014. However, the provisions of Section 135 of the Companies Act, 2013 relating to amount to be spent on CSR activities are not applicable to the appellant for the previous year ended 31-3- 2014 relevant to the year under appeal due to incurring of losses. The clarificatory amendment in section 37 (1) of the Act, became applicable only from 1-4-2015 i.e., A Y 2015-16. Hence, expenses incurred by the appellant in the year under appeal for business purposes, would be allowable.
Against this order the Revenue is in appeal before us.
6 M/s. Kamat Hotels (India) Limited
We have heard both the counsel and perused the records.
Upon careful consideration, we find that the Revenue’s contention that it is an application of income as it is a self imposed obligation is totally incorrect. As evident hereinabove expenditure was incurred in accordance with mandate of provisions made under the Companies’ Act. Hence it is not at all self imposed obligation. Furthermore, section 37(1) has been amended subsequently for A.Y. 2015-16 to make these expenses not allowable u/s. 37(1). In the extant assessment year there was no provision u/s. 37(1) disallowing the same. It is not the case that it is personal expenses or capital expenses. Expenditure incurred in compliance of Companies’s Act cannot be said to be not for the purpose of business. Hence, in this view of matter, we are of the considered opinion that there is no infirmity in the order of learned CIT(A). Accordingly we uphold the same.
In the result, Revenue’s appeal stands dismissed and assessee’s appeal stand partly allowed as above.
Order has been pronounced in the Court on 1.7.2019.