Loading judgment…
No AI summary yet for this case.
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under Section 253 of Income-tax Act is directed
against the order of ld. CIT(A)-6, Mumbai dated 04.11.2017, which in turn
arises from the assessment order passed under section 143(3) dated
18.03.2016 for Assessment Year 2013-14. The assessee has raised the
following grounds of appeal:
Sr Ground(s) Amount No. 1. DISSALLOWANCE UNDER SECTION 14-A Rs. 10,24,687 1.1 Demat Charges: Rs. 3,172 On the facts and in the circumstances of the case, the Ld CIT(A) erred in upholding the Learned Assessing Officer ("Ld AO")'s subjecting to the disallowance under Section 14-A, as direct expenditure, Demat Charges amounting to Rs. 3,172.
ITA No. 800 Mum 2018-Tata Steel Ltd.
1.2 Without prejudice to the above, on the facts and in Rs. 10,21,515 the circumstances of the case, the Ld CIT(A) erred in upholding the Ld AO's disallowance under Section 14-A, of a sum of Rs. 10,21,515. 2. Rs. 10,24,687 Increasing of Book Profit u/s. 115JB of the Act, by Amount Disallowed under Section 14-A On the facts and in the circumstances of the case, the Ld CIT(A) erred in upholding the Ld AO's increasing the Book Profit under section 115JB of the Act, by the amount of Rs.10,24,687 disallowed under Section 14-A. 3. Interest under Section 234-B of the Act As may be On the facts and in the circumstances of the case, determined the determined Ld CIT(A) erred in upholding the Ld AO's charging of interest under Section 234-B of the Act. 4. Interest under Section 234-C of the Act As per returned On the facts and in the circumstances of the case, income the income Ld CIT(A) erred in upholding the Ld AO's charging of interest under Section 234-C of the Act, with reference to the tax due on the Assessed Total Income instead of with reference to the tax due on the Returned Total Income.
Brief facts of the case are that the assessee is a wholly owned subsidiary of
Tata Steel Ltd., is a non-banking financial company merged with parent
company w.e.f 01.01.2013. The assessee filed its return of income for
relevant Assessment Year on 25.09.2013 declaring income of Rs.
27,17,094/-. The return of income was selected for scrutiny. The assessment
was completed under section 143(3) on 18.03.2016. The Assessing Officer
while passing the assessment order made the addition under section 14A of
Rs. 10,24,687/- which include of DMAT charges of Rs. 3,172/-. The
assessing officer also increased the book profit under section 115JB to the
ITA No. 800 Mum 2018-Tata Steel Ltd.
extent of disallowance of section14A. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Thus, further aggrieved by the
order of ld. CIT(A), the assessee has filed the present appeal before us. 3. We have heard the submissions of the ld authorised representative (AR) of the assessee and ld. departmental representative (DR) for the revenue. At the
outset of hearing, the ld. (AR) of the assessee submits that that he is not pressing Ground No.1.1 of the appeal on account of smallness of amount. Considering the contention of ld. AR of the assessee, Ground No.1.1 of the appeal is dismissed. 4. Ground No.1.2 relates to disallowance under section 14A. The ld. AR of the assessee submits that there is no nexus established by the Assessing Officer between the other expenses and the exempt income, therefore, section 14A
is not applicable. The Assessing Officer applied the provisions of section 14A read with Rule 8D in a mechanical way. The Assessing Officer has not recorded any satisfaction with regard to the correctness of claim of assessee.
Therefore, neither section 14A(2) and 14A(3) nor Rule 8D is applicable. In support of his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Supreme Court in case of Godrej & Boyce Mfg. Co.
Ltd. vs. DCIT [394 ITR 449(SC)], Maxopp Investment Ltd. vs. CIT [402 ITR 640(SC)], H.T. Media Ltd. vs. PCIT in ITA No. 548/2015 dated 23rd August 2017 (Del. HC), CIT vs. I.P. Support Services India (P) Ltd. [378
ITR 240 (Del)]. 3
ITA No. 800 Mum 2018-Tata Steel Ltd.
On the other hand, the ld. Departmental Representative (DR) for the
Revenue supported the order of authorities below. 6. We have considered the rival submission of the parties and perused the order of authorities below. During the assessment, the Assessing Officer
noted that assessee has received dividend of Rs. 30.59 Crore which has been
claimed as exempt. The assessee was asked to furnish computation
regarding disallowance under section 14A. The assessee vide its submission
dated 16.03.2016 furnished its reply and contended that no expenditure is
attributable for earning exempt income. The assessee without prejudice to
their contention furnished computation under section 14A r.w. Rule 8D of
Rs. 10,24,687/-. The assessee also contended that no disallowance under
section 14A should be made. Since, it is not warranted for the year under
consideration. The contention of the assessee was not accepted by Assessing Officer holding that the assessee while filing revised return of income have
not made any disallowance under section 14A. The Assessing Officer
without recording his dissatisfaction about the working of computation of
disallowance under section 14A, disallowed Rs. 10,24,687/- to the extent of
actual expenditure shown by assessee. 7. The ld. CIT(A) on the basis of decision of Tribunal for Assessment Year
2009-10 confirmed the action of Assessing Officer. The Hon’ble Apex
Court in Maxopp Investment Ltd. (supra) held that if expenditure incurred
has no casual connection with the exempted income, then such expenditure 4
ITA No. 800 Mum 2018-Tata Steel Ltd.
would be treated as not related to the income i.e. exempted from tax, and
such expenditure would be allowed as Business Expenditure. Further, the
Hon’ble Apex Court in case of Godrej & Boyce Mfg. Co. Ltd. (supra) held that Assessing Officer should record his dissatisfaction before resorting to
the disallowance under section 14A r.w. Rule 8D. 8. We have noted that in the present case, the Assessing Officer has neither
recorded dissatisfaction about the correctness of claim of assessee nor
proved nexus of expenditure between other expenses and exempt income.
Therefore, considering the decision of Hon’ble Apex Court in Godrej &
Boyce Mfg. Co. Ltd. (supra) and Maxopp Investment Ltd. (supra), we do
not find any justification in making disallowance of expenses which has no
nexus with the exempt income. Hence, Ground No.1.2 of the appeal is
allowed. 9. Ground No.2 relates to increasing book profit under section 115JB. The ld.
AR of the assessee submits that this ground of appeal is covered in
assessee’s own case for Assessment Year 2010-11 & 2011-12 in ITA No.
436/Mum/2014 & 4982/Mum/2015 respectively, and by the decision of
special bench of Delhi Tribunal in ACIT vs. Vireet Investment Pvt. Ltd. and
by the decision of Hon’ble Bombay High Court in case of CIT vs. Bengal
Finance & Investment Pvt. Ltd. 10. The ld. DR for the Revenue not disputed the contention of ld. AR of the
assessee. 5
ITA No. 800 Mum 2018-Tata Steel Ltd.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the Assessing Officer while passing the assessment order increased the book profit under section 115JB of the Act by the disallowance of section 14A. The ld. CIT(A) confirmed the action of Assessing Officer despite referring the decision of Special Bench in ACIT vs. Vireet Investment Pvt. Ltd. (supra). Considering the fact that we have already deleted the disallowance under section 14A. Hence, the raising of profit under section 115JB would automatically become infructuous. 12. Ground No.3 relates to interest under section 234B of the Act. We have noted that this ground of appeal is consequential and needs no adjudication. 13. Ground No.4 relates to charging interest under section 234C of the Act. The ld. AR of the assessee submits that charging of interest under section 234C on the returned total income and not on assessed total income. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in Morgan Stanley Investment Management Pvt. Ltd. vs. DCIT in ITA No. 5195/Mum/2014 dated 20.09.2017, Aramex India Pvt. Ltd. vs. DCIT in ITA No. 798/Mum/2014 dated 28.11.2014 and SLK Software Services Pvt. Ltd. vs. DCIT in ITA No. 604/Bang/2015 dated 7th August 2015. 14. On the other hand, the ld. DR for the Revenue supported the order of lower authorities. 6
ITA No. 800 Mum 2018-Tata Steel Ltd.
We have considered the rival submission of the parties and have gone
through the orders of authorities below. The perusal of section 234C shows
that levy of interest under section 234C is on the return income and not on
the total assessed income, therefore, we direct the Assessing Officer to levy
and compute interest on return income under section 234C of the Act. We
direct accordingly. Thus, Ground of appeal is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 25/10/2018.
Sd/- Sd/- G.S. PANNU PAWAN SINGH VICE PRESIDENT JUDICIAL MEMBER Mumbai, Date: 25.10.2018 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “SMC” Bench, ITAT, Mumbai 6. Guard File BY ORDER, Dy./Asst. Registrar ITAT, Mumbai