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Income Tax Appellate Tribunal, “J”
Before: HON’BLE SH.SHAMIM YAHYA, AM & HON’BLE SH. SANDEEP GOSAIN, JM
आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the assessee is against the order of Ld. Commissioner of Income Tax (Appeals)-4, Mumbai, dated 18.08.16 for AY 2012-13 on the grounds mentioned herein below:-
M/s Siti Networks Ltd.. 1. (i) The Ld. CIT(A) erred in law and facts in disallowing Rs. 10,61,425/- out of expenses u/s 14A of the Act. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law.
(ii) The Ld. CIT(A)/ AO erred in law and facts in mechanically disallowing Rs. 10,61,425/- u/s 14A of the Act out of expenses 0,5% of average investments on assumption without recording his dissatisfaction with the correctness of claim made by the appellant that no expenditure was incurred for earning exempt income.
(iii) The Ld. AO erred in law and facts in mechanically disallowing expenses without proving any of the expenses have been incurred in relation to investments and none of the expenses of the company are proved to have been incurred for the purposes other than business, hence the disallowance u/s 14 A is unwarranted.
2. The appellant craves the leave to add, amend or alter all or any grounds of the appeal.
As per the facts of the present case, the assessee is a Multi System Operator (MSO) and engaged in distribution/ telecasting/
M/s Siti Networks Ltd.. "re-broadcasting of Television Channels through cable operators on its analogue and / digital cable distribution network, primary internet and allied services. The assessee receives agreed Subscription from Cable Operators and pays Pay Channel Charges to channels. The assessee has filed its original return of income on 28.09.2012 declaring loss of Rs. 51,88,24,064/- and claiming refund of Rs. 6,91,53,050/-. The return was revised on 31.03.2014 declaring loss of Rs. 71,67,95,470/- and claiming refund of Rs. 7,08,33,600/-. Thereafter assessment u/s 143(3) of the Act was completed after making disallowances on account of the following:
(1) Pay Channel Charges of Rs. 85,62,23,223/- (2) Disallowance u/s 14A of Rs. 2,21,78,835/-
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal of the assessee. Now before us, the assessee has preferred the appeal by raising the above grounds.
M/s Siti Networks Ltd.. 3. The solitary ground raised by the assesseerelates to challenging the order of Ld. CIT(A) in making disallowance u/s 14A of the I.T. Act.
At the very outset, Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised before Ld. CIT(A) and restricted his arguments by submitting that the purpose of disallowance u/s 14A of the I.T. Act, only those investments are to be considered from which exempt income has been received during the year. It was further submitted that the AO had taken into consideration of the investments, even though from which no exempt income was received during the year, therefore in such a way, the revenue has committed an illegality. In support of his submissions, Ld. AR relied upon the judgment passed by Coordinate Bench of Hon’ble ITAT in the case of ACIT Vrs. Vireet Investment Pvt. Ltd. (82) taxmann.com 415 (T. Del).
On the other hand, Ld. DR relied upon the orders passed by revenue authorities.
M/s Siti Networks Ltd..
We have heard the counsels for both the parties and after having gone through the facts of the present case, material placed on record as well as judgment cited by the parties and the orders passed by the revenue authorities, we find that Coordinate Bench of Hon’ble ITAT had passed orders in the case of ACIT Vrs. Vireet Investment Pvt. Ltd. (82) taxmann.com 415 (T. Del), wherein it was held that ‘Only those investments are to be considered for computing average value of investment which yielded exempt income during the year.’ In our considered view, this proposition was not considered by the revenue authorities while making disallowance u/s 14A of I.T. Act. Therefore, considering the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to pass afresh order while considering the facts of the present case as well as considering the orders passed by the Coordinate Bench of Hon’ble ITAT in the case of ACIT Vrs. Vireet Investment Pvt. Ltd. (82) taxmann.com 415 (T. Del)
M/s Siti Networks Ltd.. Before parting, we may make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law. Resultantly, this ground is allowed for statistical purposes.