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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE
2 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the Revenue for the Assessment Years 2008-09, 2010-11 to 2014-15 and assessee for the Assessment Year 2013-14 against different orders of the Learned Commissioner of Income Tax (Appeals)- 53, Mumbai dated 30.09.2016.
First we take up the appeals of the Revenue in ITA.No. 952, 954 & 955/Mum/2017 for the Assessment Years 2008-09, 2010-11 & 2011-12 as the issues are common.
Identical and common grounds have been raised by the Revenue in these appeals which are as under: - “1. "On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in setting aside the assessment made u/s 153(A) r.w.s 143(3) of the Income Tax Act, 1961 by relying upon the decision of ITAT, (S.B), Mumbai in the case of All Cargo Global Logistic Ltd. vs. DCIT 137 ITD 287, when the said decision has not been accepted by the department and has not yet attained finality." "2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made u/s 14A by the A.O by setting aside the assessment made u/s 153A r.w.s. 143(3) by relying upon the decision of ITAT (S.B), Mumbai in All Cargo Global Logistic Ltd v. DCIT 137 ITD 287 (Mum) without appreciating the fact that the assessee has made investments during the year, income from which shall not or does not form part of the total income of the assessee."
Briefly stated the facts are that, there was a search and seizure action u/s.132 of the Act in the case of the assessee group on 24.09.2013.
3 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., Notice u/s. 153A was issued on 02.02.2015 consequent to the search to file return of income and the assessee in response to the said notice filed its return of income on 21.04.2015 for the Assessment Years under consideration. Assessments were completed on 28.03.2016 u/s. 153A r.w.s. 143(3) of the Act. While completing the assessments the Assessing Officer disallowed expenditure attributable for earning the exempt income by invoking the provisions of section 14A r.w. Rule 8D of the Act.
On appeal the Ld.CIT(A) deleted the disallowance made u/s. 14A of the Act for the reason that there was no incriminating material seized in the course of search. Ld.CIT(A) held that in the absence of any incriminating materials the assessments u/s. 153A have to be made on originally assessed income only and no addition/disallowance can be made as no incriminating evidences recovered during the course of search. In holding so, the Ld.CIT(A) followed the decisions of the Hon'ble Jurisdictional High Court in the case of CIT v. Murli Agro Products Ltd., [ITA.No. 36 of 2009 dated 26.10.2010]; CIT v. Continental Warehousing Corporation [374 ITR 645] and the Special Bench decision of the Mumbai in the case of All Cargo Global Logistics Ltd. v. DCIT [137 ITD 287], against this order the Revenue is in appeal before us for the Assessment Years 2008-09, 2010-11 & 2011-12.
4 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., 6. Ld. DR vehemently supported the orders of the Assessing Officer in making the disallowance u/s. 14A of the Act. Ld. Counsel for the assessee strongly supported the orders of the Ld.CIT(A).
We have heard the rival submissions, perused the orders of the authorities below. It is an undisputed fact that there was no incriminating material found in the course of search leading to addition/disallowance made u/s. 14A of the Act. It is the finding of the Assessing Officer that assessee had filed return of income making suomotu disallowance u/s. 14A of the Act which return was filed prior to the date of search and the assessment was completed u/s. 143 of the Act. The Revenue could not rebut the findings of the Ld.CIT(A). Therefore, in the absence of any incriminating material found in the course of search and in view of the of the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation (supra) and CIT v. Murli Agro Products Ltd., (supra) the Ld.CIT(A) has rightly deleted the disallowance made u/s. 14A of the Act. Thus we sustain the order passed by the Ld.CIT(A) for the Assessment Years 2008-09, 2010-11 & 2011-12.
Now we take up the appeals of the Revenue for the Assessment Years 2012-13, 2013-14 & 2014-15 and the cross appeal of the assessee for the Assessment Year 2013-14.
5 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., 9. The Revenue has raised following common grounds except for the figures in these Assessment Years. 1. "On the facts and circumstances of the case and in law, Ld. CIT(A) erred in excluding the value of investments that did not yield exempt income during the year for the purpose of calculation of disallowance as per rule 8D(2)(ii) and 8D(2)(iii) even after considering the fact that the said investment is an investment to earn tax free income."
2. "On the facts and circumstances of the case and in law, Ld. CIT(A) erred in taking only closing investment of other companies at Rs. 24,52,100/- representing 'B' in the formula under Rule 8D(2)(ii) as being the average of the value of investment income from which is exempt instead of Rs. 1,51,30,88,302/-."
3. "On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in holding that earning of exempt income from investment is a touchstone for making disallowance u/s 14A in-spite of fact that section 14A deals with disallowance of expenditure incurred in relation to income not includible in total income." 10. For the Assessment Year 2012-13, assessee earned dividend income of ₹.2,83,376/- from equity shares and long term capital gains of ₹.1.63 Crores which was claimed as exempt from taxation. Assessee also made suomoto disallowance of ₹.5,88,124/- being the expenditure attributable for earning the exempt income. In the course of Assessment Proceedings, the assessee filed detailed submissions as to why there should not be any further disallowance. However, not satisfied with the submissions of the assessee the Assessing Officer invoking the provisions of Rule 8D computed the disallowance under Rule 8D (2)(ii) and 8D (2)(iii) of the Act.
6 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., 11. On appeal the Ld.CIT(A) considering the submissions of the assessee and taking note of various judicial pronouncements sustained the action of the Assessing Officer in disallowing the indirect expenses under Rule 8D (2)(ii) of the Act. However, the Ld.CIT(A) accepted the alternate contentions of the assessee that only those investments which yielded dividend income shall be considered for the purpose of computing the disallowance under Rule 8D (2)(ii) and 8D (2)(iii) as per the ratio of Judgment of Hon'ble Delhi High Court in the case of Cheminvest Limited v CIT [378 ITR 33].
Ld. DR vehemently supported the orders of the Assessing Officer and the Ld. Counsel for the assessee placed reliance on the orders of the Ld.CIT(A).
We have heard the rival submissions, perused the orders of the authorities below. We do not find any infirmity in the order passed by the Ld.CIT(A) in holding that only those investments which yielded dividend income should be considered for the purpose of disallowance under Rule 8D (2)(ii) and 8D (2)(iii) of the Act. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue.
Coming to the appeal of the Department as well as assessee for the Assessment Year 2013-14, it is the submission of the Ld. Counsel for the 7 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., assessee that during this Assessment Year the assessee earned dividend income of ₹.750/- only and therefore the disallowance if any shall not exceed the dividend income. It is also further submitted that the assessee himself has made suomoto disallowance of ₹.5,00,000/-.
Ld. DR vehemently supported the orders of the Assessing Officer.
We have heard the rival submissions, perused the orders of the authorities below. We find that the Ld.CIT(A) upheld the action of the Assessing Officer in so far as the disallowance of indirect expenses under Rule 8D (2)(ii) of the Act is concerned. However, he directed the Assessing Officer to compute the disallowance under Rule 8D (2)(ii) and 8D (2)(iii) of the Act by taking only the average value of investments should be worked out considering only those investments which yielded dividend income during the relevant Assessment Year. It is the finding of the Assessing Officer that the assessee received dividend income of ₹.750/- and claimed as exempt income. In the circumstances, the disallowance shall be restricted only to the exempt income received by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance u/s. 14A r.w. Rule 8D to ₹.750/-. Grounds raised by the Revenue are dismissed and the grounds raised by the assessee for the Assessment Year 2013-14 are partly allowed.
8 952, 954 TO 958/MUM/2017 (A. Ys: 2013-14, 2008-09, 2010-11 TO 2014-15) M/s. Anand Rathi Financial Services Ltd., 17. Coming to the appeal of the Revenue for the Assessment Year 2014-15, facts being identical for the Assessment Year 2013-14, we sustain the order of the Ld.CIT(A) and dismiss the grounds raised by the Revenue.
In the result, appeals of the Revenue are dismissed and appeal of the assessee is partly allowed as indicated above.
Order pronounced in the open court on the 26th September, 2018