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Income Tax Appellate Tribunal, “F BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
IN THE INCOME TAX APPELLATE TRIBUNAL “F BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
ITA no.5233/Mum./2017 (Assessment Year :2013–14)
Dy. Commissioner of Income Tax ……………. Appellant Circle–9(3)(2), Mumbai
v/s Future Consumer Ltd. (Formerly known as Future Consumer Enterprises Ltd.) Knowledge House, Off Jogeshwari– ……………. Respondent Vikhroli Link Road, Shyam Nagar Jogeshwari (E), Mumbai 400 060 PAN – AABCS0279B
ITA no. 5264/Mum./2017 (Assessment Year : 2013–14)
Asstt. Commissioner of Income Tax ……………. Appellant Circle–9(3)(2), Mumbai
v/s Future Human Development Ltd. Knowledge House, Off Jogeshwari– Vikhroli Link Road, Shyam Nagar ……………. Respondent Jogeshwari (E), Mumbai 400 060 PAN – AABCH8007Q
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ITA no. 5235/Mum./2017 (Assessment Year : 2013–14) Dy. Commissioner of Income Tax ……………. Appellant Circle–9(3)(2), Mumbai
v/s Future Media (India) Ltd. Knowledge House, Off Jogeshwari– Vikhroli Link Road, Shyam Nagar ……………. Respondent Jogeshwari (E), Mumbai 400 060 PAN – AAACF9652Q Revenue by : Miss Dipika Arora Assessee by : Shri Dinkle Haria
Date of Hearing – 08.01.2019 Date of Order – 30.01.2019
O R D E R PER BENCH
The aforesaid appeals by the Revenue pertaining to three different assessees arise out of separate orders passed by the learned Commissioner (Appeals)–16, Mumbai, for assessment year 2013–14.
ITA no.5235/Mum./2017
The only issue arising in this appeal relates to allowance of assessee’s claim of depreciation on purchase of advertisement rights.
Brief facts are, the assessee is a company engaged in the business of advertisement agency, consumer loyalty program and investments, telecommunication, etc. For the assessment year under
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dispute, the assessee filed its return of income on 29th November 2013, declaring nil income. In the course of scrutiny assessment proceedings, the Assessing Officer while examining the audited annual accounts of the assessee noticed that the assessee has claimed depreciation @ 25% amounting to ` 2,70,50,048, on the opening written down value (WDV) of intangible assets. Therefore, he called upon the assessee to justify its claim of depreciation. The Assessing Officer noted that the assessee had paid compensation of ` 25 lakh to Pantaloon Retail India Ltd. (PRIL) for which PRIL has given advertisement rights to the assessee. He noticed that as per the terms of the agreement, the aforesaid arrangement will stand terminated on expiry of ten years, unless, it is renewed. Further, PRIL is also at liberty to terminate the agreement in the event of any material breach on the part of the assessee. On analyzing the aforesaid facts, the Assessing Officer observed that the assessee has merely been assigned the advertising rights, whereas, ownership still remains with PRIL. Referring to the provisions of section 32 of the Income–tax Act, 1961 (for short "the Act"), the Assessing Officer held that depreciation is allowable only to the owners of the asset. Since, the assessee is not the owner of the asset, depreciation cannot be allowed. Further, he observed, assignment of advertising rights does not fall within the provisions of section 32(1)(iii) of the Act as it is not in the nature of
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knowhow, patents, copyrights, trademarks, license, franchise or any other business or commercial rights of similar nature. Thus, ultimately, he concluded that depreciation claimed of ` 2,70,50,048, on advertising rights is not allowable. Accordingly, he added back the aforesaid amount to the income of the assessee. Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and material on record, observed that in assessee’s own case for assessment year 2012–13, he has decided the issue in favour of the assessee by following the decision of the Tribunal in assessee’s own case for assessment years 2007–08 to 2009–10. Accordingly, following his decision for the preceding assessment year, he allowed assessee’s claim of depreciation.
The learned Departmental Representative relied upon the observations of the Assessing Officer.
The learned Authorised Representative submitted, the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment years 2007–08 to 2009–10 and again in assessment year 2012–13.
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We have considered rival submissions and perused material on record. As could be seen, the Assessing Officer has disallowed assessee’s claim of depreciation on advertising rights obtained from PRIL primarily on two grounds. Firstly; the assessee is not the owner of the asset and secondly; the asset cannot be termed as intangible asset under section 32(1)(iii) of the Act. Undisputedly, the Assessing Officer himself has observed that in the impugned assessment year, the assessee has claimed depreciation on the opening WDV of the asset. Meaning thereby, the assessee had been claiming depreciation on the advertising rights from the preceding assessment years. Notably, similar claim of depreciation made by the assessee on advertising rights by treating it as an intangible asset was disallowed by the Assessing Officer in assessment years 2007–08, 2008–09 and 2009–10. In assessment year 2012–13 also, he made similar disallowance. However, when the dispute ultimately came up for consideration before the Tribunal in assessment year 2007–08 to 2009–10 in ITAs no.1134 and 1135/Mum./2012 and ITA no.5404/Mum./2013, the Tribunal, in order dated 10th July 2015, allowed assessee’s claim of depreciation with the following observations:–
“10. We have given a thoughtful consideration to the orders of the lower authorities. We have also considered the judicial decisions relied upon by the assessee and brought to our notice
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during the course of the proceedings and with the assistance of the Ld. Counsel, we have perused various clauses of the compensation agreement dt. 19.9.2007. The entire dispute revolves around whether the compensation paid by the assessee to PRIL fits within the four wall of “intangible assets” eligible for depreciation u/s. 32(1)(ii) of the Act. Intangible assets acquired on or after the 1st day of April 1998 are eligible for depreciation. All we have to see is whether the impugned commercial right taken by the assessee from PRIL is eligible for depreciation or not. It is provided in the agreement dt. 19.9.2007 that PRIL has agreed to grant/assign Future Media various exclusive marking rights on a principal-to-principal basis in respect of these advertising rights in the form of advertising spaces and advertising media available in the PRIL Store. 10.1. Under the head „Definitions and Interpretation‟ advertising rights has been defined as under: “Advertising Rights” means all television, radio and Internet rights, as well as various places, things and material, including, but not limited to wall spaces, trolleys, carry bags, bill backs, unused spaces on floors, lift walls/ panels, washrooms/ restrooms, parking, corridors, glass panels, available with PRIL in the PRIL Stores which can be used for marketing or promotional purposes, by way of display, signages, logos, advertising, etc. and identified by PRIL as capable of being used for advertising. 10.2. Under the head rights duties and obligations, it is provided that future media shall have the following rights duties and obligations: “(a)Subject to the provisions of this Clause 4, Future Media shall be free to be engaged by whichever clients it deems fit, provided that all of Future Media‟s dealings with any client shall be at an arms length basis (“FM Clients”) and subject to the rights of PRIL under this Agreement. (b) Future Media shall use on its own account or rent or let on hire, any of the said Advertising Rights or provide such Services in any PRIL Stores to FM clients for any lawful use or purposes best suited to their needs for marketing of the FM clients‟ products. (c) Future Media shall be free to charge any rents, space hiring charges, marketing fees or any other service fees of any kind from FM Clients, and shall be entitled touninterruptedly enjoy
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and commercially exploit the benefits accruing in respect thereof for itself. (d) Future Media may do all such acts and deeds as may be required for effectively exploiting the Exclusive rights or providing the Services.” 11. After giving a thoughtful consideration to the aforementioned clauses of the agreement, a perusal of the statement of accounts of the assessee shows that the only source of income of the assessee is from advertisement. Therefore, it can be safely concluded that by taking such commercial right from PRIL, the assessee is doing its business which also means that the assessee‟s business totally depends on the advertisement right acquired from PRIL. By acquiring this commercial right, the assessee is doing its business. Therefore, in the light of the decisions referred to elsewhere, we have no hesitation to hold that the right acquired by the assessee is an intangible asset eligible for depreciation. 11.1. It is clear that the assessee has paid the consideration for the purpose of its business in the field of advertising by acquiring the rights and other advantages attached to the advertisement space. For the sake of completeness, the specific words used in Sec. 32(1)(ii) of the Act reveal the similarity in the sense that all the intangible assets specified are tools of the trade which facilitate the assessee carrying on the business. Therefore, in our considered opinion, the expression “any other business or commercial rights of similar nature” would include such rights which can be used as a tool to carry on the business. If this test is applied, then the rights acquired by the assessee under the agreement would fall within the expression mentioned above, since the right acquired by the assessee was used by it as a tool for enhancing its business. Therefore, we set aside the findings of the Ld. CIT(A) and direct the AO to allow the claim of depreciation on the right so acquired as intangible asset.”
Following the aforesaid decision, the Tribunal again decided the issue in favour of the assessee in assessment year 2012–13, while disposing off the Revenue’s appeal in ITA no.5162/Mum./2016, dated 14th March 2018. There being no material difference in facts involved
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in the impugned assessment year, the decision of the Tribunal in assessee’s own case for the preceding assessment years, as referred to above, squarely applies to the facts of the present case. Accordingly, finding no infirmity in the order of the learned Commissioner (Appeals) on the disputed issue, we dismiss the ground raised by the Revenue.
In the result, Revenue’s appeal is dismissed.
ITA no.5233/Mum./2017
The only dispute raised by the Revenue in this appeal relates to the issue of disallowance of expenditure under section 14A r/w rule 8D.
Brief facts are, the assessee company is engaged in the business of manufacturing, sourcing, distribution of fast moving consumer goods (FMCG) and food products. For the assessment year under dispute, the assessee filed its return of income on 29th September 2013, declaring loss of `73,16,63,345. During the assessment proceedings, the Assessing Officer noticing that in the relevant previous year, though, the assessee has earned substantial exempt income from shares and mutual funds, however, it has disallowed an amount of ` 5,08,830 under section 14A of the Act. Being of the view
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that disallowance made by the assessee is not correct, he called upon the assessee to show cause as to why disallowance under section 14A of the Act should not be made in accordance with rule 8D. In reply, the assessee filed a detailed submission objecting to any further disallowance. However, the Assessing Officer rejecting the explanation of the assessee held that the provisions of section 14A of the Act would apply irrespective of the fact whether shares are held as stock– in–trade or investment. Accordingly, he proceeded to compute the disallowance under rule 8D at ` 5,70,99,908. The assessee challenged the aforesaid disallowance before the first appellate authority.
Before the learned Commissioner (Appeals), the assessee submitted that most of the investments made were in subsidiary associates and joint ventures as a business strategy and not for earning dividend income. Thus, it was submitted that investments in shares cannot be considered as investment activity for earning of dividend income to make disallowance under section 14A of the Act. The learned Commissioner (Appeals), after considering the submissions of the assessee and taking note of the fact that while deciding assessee’s appeal in assessment year 2012–13, he has deleted further disallowance made by the Assessing Officer considering that investments made by the assessee in subsidiary and associates were for strategic purpose followed the same and restricted the
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disallowance under section 14A of the Act to ` 18,14,185.
The learned Departmental Representative relying upon the decision of the Hon'ble Supreme Court in Maxopp Investments Ltd. v/s CIT, 91 taxmann.com 154 (SC) submitted that provisions of section 14A r/w rule 8D are attracted to strategic investments.Therefore, disallowance made by the Assessing Officer should be restored.
The learned Authorised Representative submitted, considering the fact that strategic investments are no longer excluded from the purview of section 14A of the Act in view of the decision of the Hon'ble Supreme Court in Maxopp Investments Ltd. (supra), the decision of ld. Commissioner (Appeals) cannot be sustained. However, she submitted, various other submissions made by the assessee before the learned Commissioner (Appeals) against the disallowance made under section 14A r/w rule 8D were not taken note of since he decided the issue only on the applicability of section 14A of the Act to strategic investment. She submitted, other contentions of the assessee that it has sufficient interest free funds to make investments as well as exclusion of investment which have not yielded any exempt income during the year were not dealt by the learned Commissioner (Appeals). She submitted, while deciding similar issue in assessee’s own case in assessment year 2010–11, 2011–12 and 2012–13, the
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Tribunal has restored the issue to the Assessing Officer to apportion the expenditure between taxable and non–taxable income as held by the Hon'ble Supreme Court in Maxopp Investment Ltd. (supra). Thus, she submitted, the issue may be restored back to the Assessing Officer with similar direction.
We have heard rival submissions and perused material on record. Admittedly, learned Commissioner (Appeals) has reduced the disallowance made under section 14A r/w rule 8D substantially purely on the reasoning that the investments made by the assessee in shares and mutual funds are strategic investments. Further, the Hon'ble Supreme Court in Maxopp Investments Ltd. (supra) has held that provisions of section 14A of the Act would also apply to investments made in group companies for strategic purpose and shares held as stock in trade. That being the case, the decision of the learned Commissioner (Appeals) on the issue deserves to be set aside. However, while deciding assessee’s own case on identical issue for assessment years 2010–11, 2011–12 and 2012–13, in ITA no.5554/Mum./2016 &Ors., the Tribunal, vide order dated 30th November 2018, has restored the issue to the Assessing Officer with the following observations:–
“19.We have considered the rival submission of the parties and have gone through the orders of authorities below. During the
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assessment, the Assessing Officer noted that the assessee has earned the exempt income of Rs. 6,76,06,678/-. The assessee in its computation of income disallowed amount of Rs. 24,96,770/- as disallowance under section 14A. The Assessing Officer asked the assessee to furnish the working of disallowance under section 14A. The assessee furnished its working of disallowance under section 14A. The working of assessee was not accepted by Assessing Officer holding that the same is not as per Rule 8D and that only direct expenses relatable to exempt income have been considered for disallowance. The Assessing Officer invoked the provision of Rule 8D and disallowed .5% of average value of investment as per Rule 8D(2)(3). The Assessing Officer worked out the disallowance of Rs. 447.54 Lakhs. In addition to the suo-moto disallowance. On appeal before the ld. CIT(A), the disallowance was restricted to suo-moto disallowance offered by assessee. The ld. CIT(A) deleted the disallowance of Rule 8D (2)(3) by following the decision of his predecessor for Assessment Year 2010-11 & 2011-12, wherein investment in subsidiary, joint venture and associate and debentures were excluded from total investment. The Hon‟ble Court in Maxopp Investment Ltd. vs. CIT [91 Taxman.com 154 (SC) held that the applicability of section 14A is based on the theory of apportionment of expenditure between taxable and non-taxable income and the expenditure incurred in acquiring those share (acquired for controlling stake in group company) will have to be apportioned. Therefore, respectfully following the decision of Hon‟ble Apex Court, the grounds of appeal raised by Revenue is restored to the file of Assessing Officer to make the disallowance after following the decision of Maxopp Investment Ltd. (supra). Needless to order that before passing the order, the Assessing Officer shall allow the opportunity of hearing to the assessee before passing the order in accordance with law.”
In view of the aforesaid decision of the Co–ordinate Bench in assessee’s own case, we restore the issue to the Assessing Officer for deciding afresh keeping in view the ratio laid down by the Hon'ble Supreme Court in Maxopp Investments Ltd. (supra). It is open for the assessee to raise all issues concerning the applicability or otherwise of section 14A r/w rule 8D before the Assessing Officer. The Assessing
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Officer must not only afford reasonable opportunity of being heard to the assessee but should deal with all the contentions to be raised by the assessee. Ground raised is allowed for statistical purposes.
In the result, Revenue’s appeal is allowed for statistical purposes.
ITA no.5264/Mum./2017
The issue in this appeal relates to deletion of disallowance made under section 14A r/w rule 8D.
Brief facts are, the assessee company is engaged in the business of innovation in human development. For the assessment year under dispute, the assessee filed its return of income on 27th September 2013, declaring loss of ` 9,64,55,756. During the assessment proceedings, the Assessing Officer while examining the Balance Sheet of the company noticed that it has shown investment of ` 16,30,43,000, in unquoted shares. Whereas, the assessee has not disallowed any expenditure under section 14A of the Act in computation of total income. Therefore, he called upon the assessee to explain why disallowance under section 14A r/w rule 8D should not be made. In reply, it was submitted by the assessee, since in the relevant previous year the assessee has not earned any dividend income from the shares, no disallowance under section 14A of the Act can be made.
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Rejecting the explanation of the assessee, the Assessing Officer proceeded to disallow an amount of ` 1,11,30,649 under section 14A r/w rule 8D. Being aggrieved, the assessee challenged the aforesaid disallowance before the first appellate authority.
Learned Commissioner (Appeals) after considering the submissions of the assessee and taking note of the fact that in the relevant previous year, the assessee had not earned any exempt income, deleted the disallowance made by the Assessing Officer. Of– course, while doing so, the learned Commissioner (Appeals) also observed that since the investments were made for strategic purpose, the provisions of section 14A of the Act will not apply.
The learned Departmental Representative submitted, irrespective of the fact that the assessee has not earned any exempt income in the relevant previous year, disallowance under section 14A r/w rule 8D has to be made. In support of his contention, the learned Departmental Representative relied upon the following decisions:–
i) M.A. Alagappan v/s ACIT, [2017] 82 taxmann.com 276 (Chh.); ii) Maxopp Investments Ltd. v/s CIT, 91 taxmann.com 154 (SC); & iii) Lally Motors India Pvt. Ltd. v/s PCIT, [2018] 93 taxmann.com 39.
The learned Authorised Representative submitted, since in the relevant previous year, the assessee has not earned any exempt
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income no disallowance under section 14A r/w rule 8D can be made. Without prejudice to the aforesaid submissions, she submitted, the assessee had sufficient surplus fund for making the investment, hence, no disallowance of interest expenditure can be made under section 8D(2)(ii). Further, she submitted, the investments which have not yielded income during the relevant previous year should be excluded while computing disallowance under section 14A r/w rule 8D. In support of her contention, the learned Authorised Representative relied upon the following decisions:–
i) PCIT v/s Ballarpur Industries Ltd., ITA no.51/2016, dated 13.10.2016, (Bom.); ii) CIT v/s Delite Enterprises, ITA no.110 of 2009, order dated 26.02.2009 (Bom.) iii) CIT v/s Chettinad Logistics Pvt. Ltd., [2017] 80 taxmann.com 221 (Mad.); iv) Cheminvest Ltd. v/s CIT, [2015] 378 ITR 33 (Del.); v) CIT v/s Corrtech Energy Pvt. Ltd., [2015] 372 ITR 97 (Guj.); vi) CIT v/s Shivam Motors Pvt. Ltd., [2014] 272 CTR 277 (All.); vii) CIT v/s Lakhani Marketing Inc. [2014] 272 CTR 265 (P&H); viii) ACIT v/s Gini &Jony Ltd., [2018] 172 ITD 472 (Mum. Trib.); ix) ACIT v/s dish TV India Ltd. [2018] 194 TTJ 897 (Mum.); x) DCIT v/s Instant Traders Pvt. Ltd. [2018] 96 taxmann.com 378 (Mum.); xi) DCIT v/s Piramal Realty Pvt. Ltd., [2018] 100 taxmann.com 294 (Mum. Trib.);
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xii) Pyramid Consulting Engineers Pvt. Ltd. v/s DCIT, [2018] 90 taxmann.com 411 (Mum. Trib.); and xiii) ACIT v/s Janak Global Resources Pvt. Ltd., ITA no.470/ Chd./2018, order dated 16.10.2018 (Chd. Trib.).
We have considered rival submissions and perused material on record. The primary and fundamental issue which arises for our consideration is, if in the relevant assessment year the assessee has not earned any exempt income, whether disallowance under section 14A r/w rule 8D can at all be made? On a careful reading of section 14A of the Act we are of the view that disallowance of expenditure under the said provision can be made only if the assessee has earned exempt income in the relevant previous year. The aforesaid view has been expressed by the Hon’ble Delhi High Court in Cheminvest Ltd. v/s CIT, [2015] 378 ITR 33 (Del.). Following the aforesaid decision, the Hon'ble Jurisdictional High Court in PCIT v/s Ballarpur Industries Ltd., ITA no.15 of 2016, order dated 13th October 2016, has held that no disallowance under section 14A of the Act can be made if the assessee has not earned any exempt income in the relevant previous year. The Hon’ble Madras High Court in CIT v/s Chettinad Logistics Pvt. Ltd., [2017] 80 taxmann.com 221 (Mad.), held that where no exempt income was earned by the assessee in the relevant assessment year, provisions of section 14A of the Act could not be invoked. It is worth
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mentioning, SLP filed by the Department against the aforesaid decision in the Hon'ble Supreme Court was dismissed and the judgment of Hon’ble Madras High Court was upheld in CIT v/s Chettinad Logistics (P.) Ltd., 95 taxmann.com 250 (SC) and the decision of Hon’ble High Court was upheld. The Hon’ble Gujarat High Court in CIT v/s Corrtech Energy India Pvt. Ltd., [2015] 272 ITR 97, the Hon’ble Allahabad High Court in CIT v/s Shivam Motors Pvt. Ltd., [2014] 272 CTR 277, and Hon’ble Punjab & Haryana High Court in CIT v/s Lakshmi Marketing Inc., [2014] 272 CTR 265, have expressed similar view. Following the aforesaid decisions, different Benches of the Tribunal, including Mumbai Benches, have also held that no disallowance under section 14A of the Act can be made if the assessee has not earned any exempt income in the relevant assessment year. In this context, following decisions can be referred to.
i) ACIT v/s Gini &Jony Ltd., [2018] 172 ITD 472 (Mum. Trib.); ii) ACIT v/s Dish TV India Ltd. [2018] 194 TTJ 897 (Mum.); iii) DCIT v/s Instant Traders Pvt. Ltd. [2018] 96 taxmann.com 378 (Mum.); iv) DCIT v/s Piramal Realty Pvt. Ltd., [2018] 100 taxmann.com 294 (Mum. Trib.); and v) Pyramid Consulting Engineers Pvt. Ltd. v/s DCIT, [2018] 90 taxmann.com 411 (Mum. Trib.).
Thus, as per the ratio laid down in the aforesaid decisions, if no
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exempt income is earned by the assessee in the relevant assessment year, provisions of section 14A of the Act cannot be invoked. The learned Departmental Representative has attempted to distinguish these decisions by relying upon the decision of the Hon'ble Supreme Court in Maxopp Investments Ltd. (supra). However, on a careful reading of the said decision we are of the view, whether in absence of exempt income earned in the relevant assessment year provisions of section 14A of the Act can be invoked, was never an issue which fell for consideration of the Hon'ble Supreme Court. This fact becomes clear from Para–4 of the judgment wherein the Hon'ble Supreme Court has clearly set out the precise issue arising for consideration before them. For better appreciation, the said para is reproduced hereunder:–
“4. However, in these appeals, the question has arisen under varied circumstances where the shares/stocks were purchased of a company for the purpose of gaining control over the said company or as 'stock-in-trade'. However, incidentally income was also generated in the form of dividends as well. On this basis, the assessees contend that the dominant intention for purchasing the share was not to earn dividends income but control of the business in the company in which shares were invested or for the purpose of trading in the shares as a business activity etc. In this backdrop, the issue is as to whether the expenditure incurred can be treated as expenditure 'in relation to income' i.e. dividend income which does not form part of the total income. To put it differently, is the dominant or main object would be a relevant consideration in determining as to whether expenditure incurred is 'in relation to' the dividend income. In most of the appeals, including in Civil Appeal Nos. 104-109 of 2015, aforesaid is the scenario. Though, in some other cases, there may be little difference in fact situation. However, all these cases pertain to dividend income, whether it was for the purpose of investment in order to retain controlling interest in a company
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or in group of companies or the dominant purpose was to have it as stock-in-trade.”
On a thorough and careful reading of the aforesaid judgment of the Hon'ble Supreme Court we are unable to locate any observation / ratio laid down by the Hon'ble Supreme Court to indicate that even in the absence of exempt income earned by the assessee in the relevant assessment year provisions of section 14A of the Act can be invoked. The issue before the Hon'ble Supreme Court was completely different as to whether the disallowance under section 14A of the Act can be made in respect of shares / mutual fund held by the assessee as stock–in–trade or strategic investment in subsidiary company would not attract the provisions of section 14A of the Act. Therefore, it cannot be said that the Hon'ble Supreme Court in the aforesaid decision has laid down any ratio holding that even in the absence of any exempt income earned in the assessment year provision of section 14A of the Act would still be attracted. It is well settled proposition of law that what is binding is the ratio of a decision and not what can be inferred from the judgment by implication. Even, observations made by the Court as an obiter dicta do not constitute binding precedent. Considered in the aforesaid perspective, the contention of the learned Departmental Representative that the decision of the Hon'ble Supreme Court lays down the ratio that even in the absence of exempt income
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provision of section 14A of the Act is applicable, is unacceptable. Further, it is relevant to observe, the Special Bench of the Tribunal, Delhi Bench, in ACIT v/s Vireet Investment Pvt. Ltd. [2017] 165 ITD 27 (Del.), has held that for computing disallowance under section 14A r/w rule 8D, the investments not giving raise to any exempt income in the relevant assessment year have to be excluded. Thus, in view of the ratio laid down in the decisions of different High Courts including Hon'ble Jurisdictional High Court in Ballarpur Industries Ltd. (supra), as referred to above as well as the Special Bench decision of the Tribunal, Delhi Bench, in Vireet Investment Pvt. Ltd. (supra) and other decisions referred to above, it has to be concluded that in the absence of any exempt income earned in the relevant assessment year, no disallowance under section 14A of the Act can be made. Further, being bound by the decision of the Hon'ble Jurisdictional High Court as well as other High Courts as referred to above, we are unable to accept the proposition laid down in Lally Motors India Pvt. Ltd. (supra) and M.A. Alagappan (supra) cited by the learned Departmental Representative. In view of the aforesaid, we uphold the decision of the learned Commissioner (Appeals) in deleting the disallowance made under section 14A of the Act only on the proposition that in absence of any exempt income earned by the assessee in the relevant assessment year no disallowance under section 14A of the Act can be made.
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Ground raised is dismissed.
In the result, Revenue’s appeal is dismissed.
To sum up, two appeals are dismissed, namely ITA no.5235/ Mum./2017 and ITA no.5264/Mum./2017 and the appeal in ITA no.5233/Mum./2017 is allowed for statistical purposes. Order pronounced in the open Court on 30.01.2019
Sd/- Sd/- RAMIT KOCHAR SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 30.01.2019 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Sr. Private Secretary) ITAT, Mumbai