CREST VENTURES LTD,MUMBAI vs. DCIT OSD 2(3), MUMBAI

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ITA 3156/MUM/2016Status: DisposedITAT Mumbai04 June 2018AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed ground 1 as not pressed. For ground 2, following the Special Bench decision in Vireet Investments, the matter was restored to the Assessing Officer for re-computation of book profit under Section 115JB, excluding the disallowance under Section 14A.

What were the facts?

The assessee company filed appeals against the partial disallowance under Section 14A and its addition to book profit under MAT provisions. The Assessing Officer made a disallowance under Section 14A, and the Commissioner (Appeals) provided some relief by excluding strategic investments from the calculation.

What were the issues?

Whether expenses disallowed under Section 14A should be added to book profit for MAT computation. Whether strategic investments should be excluded when calculating disallowance under Section 14A.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

Before: SHRI B.R. BASKARAN & SHRI PAWAN SINGH

For Appellant: Shri Rakesh Mohan (AR)
For Respondent: Shri Pooja Swaroop (DR)
Hearing: 04.06.2018Pronounced: 04.06.2018

IN THE INCOME-TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER & 3157/Mum/2016 (AYs 2011-12 & 2012-13) M/s Crest Ventures Ltd. DCIT-OSD-2(3) (Formerly known as Sharyans Room No. 552, Resources Ltd.), 4th Floor, Aayakar Bhavan, Kalpataru Heritage, 127, Vs. M.K. Marg, M.G. Road, Fort, Mumbai-400020 Mumbai-400001 PAN: AABCS8634C Appellant Respondent Appellant by : Shri Rakesh Mohan (AR) Respondent by : Shri Pooja Swaroop (DR) Date of Hearing : 04.06.2018 Date of Pronouncement : 04.06.2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER;

1.

This group of two appeals by the assessee under section 253 of Income- tax Act are directed against the separate orders of Commissioner (Appeals)-6, Mumbai dated 16.02.2016 for assessment year 2011-12 and 2012-13. The assessee has raised identical grounds of appeal for both the assessment years; therefore both the appeals were hard together and are decided by common order for the sake of brevity. For appreciation of fact we are referring the fact for assessment year 2011-12. The assessee has raised following grounds of appeals.

(i) On the facts and in the circumstances of the case and in law, honourable Commissioner (Appeals) erred in sustaining the partial disallowance under section 14A read with rule 8D(iii) made by assessing officer, on account of expenses attributable to earning the exempt income, under Crest Ventures Ltd. normal provision of the act, to the extent of considering investment with holding less than 26%. The appellant prays that the same may kindly be deleted. (ii) On the facts and in the circumstances of the case and in law, honourable Commissioner (Appeals) erred in sustaining the addition under section 14A read with Rule8(iii) made by assessing officer, on account of expenses attributable to earning the exempt income while computing book profit under MAT provisions of the Act. The appellant prays that the same may kindly be deleted.

2.

Brief facts of the case are that assessee is a company engaged in business of Project Management, Leasing finance and in Real Estate filed its return of income for assessment year 2011-12 on 26 September 2011 declaring total income of Rs. 80,80,141/-. The assessment was completed under section 143(3) on 26th of March 2014. The assessing officer while passing assessment order made disallowance under section 14A for Rs.29,01,196/- in addition to suo moto disallowance of Rs. 3,83,535/-, .

The assessing officer further added the amount of disallowance under section 14A under the MAT provisions. On appeal before Commissioner (Appeals), the assessing officer was directed to exclude the strategic investment while calculating the average value of investment from the average investment for the purpose of disallowance @.5% of the average investment and allowed the relief to the assessee. The assessing officer was further directed to restrict either suo-moto disallowance made by assessee or the disallowance which may arrive after excluding the strategic investment for the purpose of calculating the average value of investment, whichever is higher. The ld. Commissioner (Appeals) further Crest Ventures Ltd. directed the assessing officer for adding to the book profit under clause (f) of Explanation 1 to section 115JB, the only disallowance which may arrive while giving effect to the order of Commissioner (Appeals).

Therefore, further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.

3.

We have heard learned Authorised Representative (AR) of the assessee and learned Departmental Representative (DR) for the revenue and perused the material available on record. At the outset of hearing the learned AR of the assessee submits that he is not pressing ground No.1 of the appeal in both assessment years. Therefore, considering the submission of learned AR of the assessee ground No.1 of the appeal is dismissed as not pressed. Ground No.2 relates to addition of disallowance under section 14A to the Book Profit under MAT provision. The learned AR of the assessee submits that this ground of appeal

is covered in favour of assessee by the decision of Special Bench of the Delhi Tribunal in ACIT Versus Vireet Investments (P) Ltd reported in [2017] 82 taxmann.com 41(Delhi-tri) (SB). On the other hand the learned DR for the revenue submits that this ground may be restored to the file of assessing officer to make the computation under clause (f) of Explanation 1 to section 115JB in accordance with the direction of Special Bench in Vireet investment (P) Ltd (supra). -57/M/2016 Crest Ventures Ltd.

4. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the learned Commissioner (Appeals) restricted the disallowance under section 14A to suo moto disallowance of Rs. 3,83,535/- or .5% of average investment by excluding the strategic investment for the purpose of calculating the average value of investment for the purpose of disallowance under section 14A read with Rule 8D(2)(iii), whichever is higher. The Special Bench of Delhi Tribunal in ACIT versus Vireet Investment (P) Ltd(supra) held that computation under clause (f) of Explanation 1 to section 115 JB(2) is to be made without resorting to computation as contemplated under section 14A read with Rule 8D. Therefore, respectfully following the decision of Special Bench this ground of appeal is restored to the file of assessing officer to work out the computation under section 115 JB by following the direction of Special Bench in Vireet Investment (P) Ltd (supra). Needless to say that the assessing officer shall grant opportunity of hearing to the assessee before passing the order in accordance with law. In the result ground of appeal raised by assessee is allowed for statistical purpose.

5. In the result appeal of the assessee is partly allowed.

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