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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year [AY] 2013-14 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-6 [CIT(A)], Mumbai, Appeal No.CIT(A)-6/IT-117/2015-16 dated 31/05/2016. The only grounds as pressed during hearing before us are Ground Numbers 1.7 & 2 which reads as under:-
Sheba Properties Ltd. Assessment Year-2013-14 1.7 Without prejudice to above, the learned AO has erred in law and on facts in considering the professional charges paid to consultants and auditors as Indirect Administrative charges for the purpose of making the disallowance under section 14A of the Act. 2. Disallowance under section 14A of the Act under section 115JB of the Act (MAT provisions)
It appears from the record that the name of the assessee has been changed from Sheba Properties Limited to Tata Motors Finance Limited. However, the Ld. Auhtorized Representative for assessee [AR] failed to point out the same. No revised Form No. 36 has been filed to reflect the afore-said change. Be that as the case may be, we proceed to dispose- off the same as argued before us.
The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax Circle-2(3)(2), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 15/02/2016 wherein the income of the assessee has been assessed at Rs.534.11 Lacs under normal provisions after certain adjustments as against returned income of Rs.451.92 Lacs e-filed by the assessee on 28/09/2013. The ‘book profits’ for the purpose of computing Minimum Alternative Tax [MAT] u/s 115JB has been computed at Rs.475.44 Lacs as against Rs.416.82 Lacs computed by the assessee. During impugned AY, the assessee being resident corporate entity earned income from the business of finance, leasing, loans, investments and income from house property. As evident from grounds of appeal, the sole subject matter of the present appeal is disallowance u/s 14A while computing normal income as well as while computing Book Profits for the purpose of Section 115JB.
Sheba Properties Ltd. Assessment Year-2013-14 3. During assessment proceedings, it was noted that the assessee earned exempt dividend income u/s 10(34) for Rs.317.66 Lacs, which called for disallowance u/s 14A. The assessee had not made any suo- moto disallowance against the same while computing its income. The assessee defended its stand vide replies dated 05/02/2016 & 11/02/2016, the relevant portions of which have already been extracted in the quantum assessment order. As per assessee’s submissions, no such disallowance was called for since the investments were strategic investments in group concerns and further no expenses were incurred to earn the exempt dividend income. The assessee, in the alternative, offered disallowance of Rs.2.79 Lacs. However, not convinced, Ld. AO, applying Rule 8D, worked out expense disallowance u/r 8D(2)(iii) as Rs.58.61 Lacs, being 0.5% of average investments held by the assessee during impugned AY. The said disallowance was made while arriving at the normal income as well as while computing Book Profits for the purpose of MAT u/s 115JB.
Aggrieved, the assessee reiterated the contentions with partial success before Ld. first appellate authority vide impugned order dated 31/05/2016 wherein Ld. CIT(A), relying upon the order of its predecessors for earlier years, held that the disallowance could not exceed the administrative expenses of Rs.5.13 Lacs incurred by the assessee, the details of which could be tabulated as follows:- No. Nature of addition Amount (Rs.) 1. Professional Charges Rs.4,63,374/- 2. Directors’ Sitting Fees Rs.30,000/- 3. Misc. Expenses Rs.19,907/- TOTAL Rs.5,13,281/- Sheba Properties Ltd. Assessment Year-2013-14 Still aggrieved, the assessee is in further appeal before us.
We have heard the rival submissions and perused relevant material on record. We find the issue to be in very compass i.e. whether the professional expenses / charges would form part of indirect expenditure for the purpose of computation of disallowance u/r 8D(2)(iii) or not. For the same, Ld. AR has placed reliance on the orders of Tribunal in earlier years. The perusal of order for AY 2009-10 dated 16/06/2017 as well as common order for AYs 2010-11, 2011-12 & 2012-13 ITA Nos. 660 to 664/Mum/2016 dated 20/04/2018, as placed on record, reveal that professional charges paid to consultants / auditors etc have been treated as indirect administrative expenditure and held to be includible for the purpose of computation of disallowance u/r 8D. The Ld. AR has drawn attention to the fact that the order for AY 2009-10 has subsequently been modified vide MA No. 835/Mum/2017 dated 23/05/2018 wherein these charges have been held to be not includible for the purpose of computation of disallowance. However, after considering both the decisions, we are of the opinion that professional charges were part of indirect administrative expenditure and includible for the purpose of computation of disallowance u/r 8D since it could not be said that these charges were exclusively incurred for the Truck Business of the assessee. We order so.
The Ld. AR has also raised a plea that total of these expenditure, being incurred for a business as a whole, could not be disallowed in toto rather the same was to be apportioned in the ratio of exempt income vis- à-vis taxable income as held by the Tribunal in AY 2009-10. We find strength in this plea of Ld. AR since the expenditure under question was Sheba Properties Ltd. Assessment Year-2013-14 not exclusively incurred to earn the exempt income. As submitted by Ld. AR, the proportion of exempt income in total income reflected in the Profit & Loss Account was 37% and therefore, the impugned disallowance would be restricted to 37% of Rs.5,13,281/-, which comes to Rs.1,89,914/-. The disallowance to that extent stand sustained by us.
Ground Number-2 is related with adjustment of disallowance u/s 14A while arriving at Book Profits u/s 115JB. We find that this issue stood squarely covered in assessee’s favor by the judgment of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415]. Upon perusal of the same, we find that Special Bench, after considering two contrary decision of Hon’ble Delhi High Court titled as CIT Vs. Goetze (India) Ltd. [2014 361 ITR 505] & PCIT Vs. Bhushan Steel Ltd. [ITA 593/2015 dated 29/09/2015], took the view favorable to the assessee in terms of ratio of decision of Hon’ble Supreme Court rendered in CIT Vs. Vegetable Products Limited [1973 88 ITR 192]. The decision in PCIT Vs. Bhushan Steel Ltd., in turn, placed reliance on the decision of Hon’ble Supreme Court rendered in Apollo Tyres Ltd. Vs. CIT [255 ITR 273] which held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115J. Similar view has been expressed by our jurisdictional Bombay High Court rendered in CIT Vs. JSW Energy Limited [2015 60 Taxmann.com 303], CIT v. Essar Teleholdings Ltd. [ITA No. 438 of 2012, dated 07/08/2014] & CIT Vs. Bengal Finance & Investments Pvt. Limited [ITA No. 337 of 2013 dated 10/02/2015]. Therefore, respectfully following the catena of judgment in assessee’s favor, we hold that adjustment of Sheba Properties Ltd. Assessment Year-2013-14 disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Ground Number 2 of the appeal stand allowed.
Resultantly, the assessee’s appeal stands partly allowed.
Order pronounced in the open court on 10th October, 2018.
Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated :10.10.2018 Sr.PS:-Thirumalesh आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.