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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
सुनवाई क� तार�ख / : 08.11.2017 Date of Hearing घोषणा क� तार�ख / : 08.01.2018 Date of Pronouncement आदेश / O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals)-52, Mumbai dated 13.07.2016 and pertains to assessment year 2012-13.
The grounds of appeal read as under:
(A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd. 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of Rs.39,81,500/- u/s 14A r.w.r.8D(iii) even when the assessee has had no other business activity than making investments in shares during the year under consideration and the assessee could not submit its justification regarding the basis of such disallowance made by the assessee itself at Rs.26,469/-". 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the decision of Hon'ble Jurisdictional High Court of Bombay in the case of M/s.Daga Capital Management (P) Ltd. 117 ITD 169 and M/s.Godrej & Boyce Mfg. Co. Ltd. 328 ITR 81 wherein a disallowance u/s 14A of the IT Act as per Rule 8D of the IT Rule has been categoricallly upheld."
In this case the Assessing Officer noticed that the assessee had made considerable investments in shares etc., dividend income from which was exempted from tax. He, therefore, required the assessee to explain as to why disallowance u/s. 14A of the I. T. Act read with Rule 8D of the I. T. Rules should not be made. In reply, the assessee company submitted before the Assessing Officer that it has already disallowed Rs.26,469/- on account of administrative expenses etc., which was sufficient. However, such a claim was rejected by the Assessing Officer and he worked out the disallowance u/s. 14A read with rule 8D at Rs.39,81,500/- and made addition in the hands of the assessee accordingly.
Upon the assessee's appeal, the ld. Commissioner of Income Tax (Appeals) noted that the issue was covered in favour of the assessee by the tribunal's decision in assessee's own case earlier. The ld. Commissioner of Income Tax (Appeals) observed as under:
(A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd.
7. I have considered the facts of the case, submissions and contentions of the appellant and order of the AO. As far as the applicability of provisions of section 14A is concerned the assessee has itself accepted the same and disallowed a sum of Rs.26,469/- in this regard. Therefore, the applicability of such provisions is upheld in principle . However the Hon'ble ITAT, Mumbai, in the case of the assessee alongwith two group companies namely Capstan Trading Pvt. Ltd. A.Y. 2010-11,and Palm Shelter Estate Development Pvt. Ltd. A.Y. 10-11 vide order dated 11/12/2015 has directed to delete such addition made u/s 14A . The relevant portion of the composite order is reproduced as under: "Before us, id Counsel for the assessee informed that identical issue was decided by the tribunal in a related concern namely Capstan trading Private Limited (vide for the Assessment Years 10-11 dated 11.03.2015). In this regard he brought our attention to the ground which found similarly worded and informed that the facts are also identical with mutatis mutandis. Tracing the facts of the said case, the counsel demonstrated that the AO made disallowance u/s.14A of the Act read with rule 8D(2)(iii) on account of administrative expenses and applied the rate of 0.5% of the average value of investment. However, he ignored the fact that the expenses actually incurred for earning the dividend income is less than what is disallowed by the AO. The CIT (A) confirmed the order of AO, ignoring the facts of the case.
5. Under these circumstances, the matter was decided by the tribunal in the said case on 11.02.2013, vide the discussion given in para 7 of the said order (supra) the appeal of the assessee was allowed. The Tribunal held that the disallowance made by the assessee is just and proper. He also brought our attention to para 6, where schedule 'k" containing the details of the administrative and the other expenses were extracted and made part of the order of the tribunal, and drew parallel to the similar expenses claimed are more identical, in such circumstances, the ration laid down by the tribunal in the case of Cape Trading Private Ltd. (supra) is applicable to the facts of these three appeals.
6. Ld DR for the Revenue relied heavily on the order of the CIT(A)/Assessing Officer. We perused them and explained closely the said decision of the Tribunal in the case of Cape Trading Private Ltd. and find the expenses mentioned in para 6 of the said order are more or same. We compared the heads of accounts of the expenses of the administrative and other expenses and in comparison we find majority of expenses claimed by the assessee are more or less on same accounts, i.e.,
(A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd. auditors remuneration, depreciation, legal and professional fees, business support fees etc. For example, on perusing the schedule "L" related to administrative expenses of M/s Casa Maria Properties Private Limited, pg no. 20 of the relevant, we find none of the accounts are primer facie directly identifiable as one meant for earning the exempt of income. Some of the expenses so claimed in the schedule related to other business expenses. Similar is the case with the other appeals under consideration as well. In such circumstances, we are of the view that the AO mechanically applied the provisions of Rule 8D(2)(iii) without examining the books of accounts of assessee and therefore, the . addition is unsustainable in law. Thus, we are of the opinion that the discussion given by /TAT vide paragraph 9 of the order of the Tribunal in /Mum/ I3(supra) are considered relevant and significant. Accordingly the said paragraph 7 is extracted as below:
"From the details of the expenses, we find that the printing and stationery expenses and bank charges and commission are only two items which could have direct or proximate nexus with the investment and exempt income. Therefore, the disallowance u/s 144 r.w. Rule 8D(2)(iii) cannot exceed to allocable expenses Incurred by the Assessing Officer clearly shows that it exceeds not only the expenses debited and claimed by the assessee which could have a proximate nexus with the earning of exempt income but also to the total 'expenditure debited by the assessee in the P&L account under the head 'administrative and other expenses' . Therefore, it turns out to be contradictory to the actual facts and gives absurd results in complete disregard to the scheme of disallowance u/s MA. Therefore, the provisions of Rule 8D(2)(iii) cannot be applied in the case of the assessee as it becomes unworkable and unrealistic. In the facts and circumstances of the case, we find that . when the provisions of Rule 8D(2)(iii) becomes unworkable, then in the absence of any finding as well as any specie expenses debited to the P&L account which could have a direct or proximate nexus for earning the dividend income the disallowance made by the assessee suo moto is just and proper. Accordingly we delete the disallowance made by the Assessing Officer."
Considering the above findings of the tribunal, the decision of the tribunal is applicable to the facts of the three appeals under consideration. Therefore, we are of the opinion, that the decisions of the CIT(A) in all these three cases are required to be reversed. Accordingly, the grounds raised by the assessee in all the appeals are allowed.
(A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd.
In the result, all the three appeals by the three different assessee's are allowed. 8. The facts of the present case are identical. Therefore respectfully following the decision of Hon'ble ITAT Mumbai dated 11/12/2015 [supra], in assessee's own case for A.Y. 2010-11, the disallowance made u/s 14A is directed to be deleted and this ground is allowed in favour of the assessee.
Against the above order, the Revenue is in appeal before us.
We have heard both the counsel and perused the records. The ld. Departmental Representative relied upon the order of the Assessing Officer. Per contra, the learned counsel of the assessee reiterated the finding of ld. Commissioner of Income Tax (Appeals) by submitting that the issue was covered in favour of the assessee by several decisions of the tribunal in assessee's own case earlier. Furthermore, he said that the disallowance is more than the expenditure incurred by the assessee. Hence, he submitted that the order of learned CIT-A should be upheld.
7. We have carefully considered the submission and perused the records. We find that in this case the assessee has himself made certain disallowances but the assessing officer has not been convinced by the same. Assessing officer has noted that assessee has not made any submission as to why the disallowance should not be made as per section 14 a read with rule 8D. Hence, the assessing officer has made the impugned disallowance by holding as under:
During the year under consideration, the assessee has shown investment as on 31.03.2012 at Rs.89,22,46,136/- as compared to Rs.89,73,59,019/- for the year ended 31st March, 2011. The assessee was asked to furnish its explanation with regard to disallowance as per section 14A read with Rule 8D(iii) on (A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd. account of expenditure attributable to these investments. In response to query raised on this issue, the assessee has not given any reply to substantiate the same. Even though the assessee has made an effort to identify the direct expenses relatable to the earning of exempt income, the fact remains undisputed that the disallowance is to be worked out mandatorily as per Rule 8D(iii). The case of the assessee is covered by sub-section (iii) of Rule 8D whereby the working of disallowance of expenditure u/s. 14A is provided in respect of cases where the assessee has incurred any expenditure but which is not directly attributable to any income or receipt. Therefore, investments made by the assessee, income from which is not forming part of the total income of the assessee as per section 14A r.w.r. 8D, is made hereunder: Average value of Investment: On the first day of previous year Rs. 89,22,46,136 On the last day of previous year Rs. 89,73,59,019
Average value of Investment Rs. 89,48,02,577 ½ % of average value of investment i.e. Rs.89,48,02,577/- = Rs. 44,74,013/- Disallowance u/s. 14A Rs.44,74,013/-
8. Before the ld. Commissioner of Income Tax (Appeals), the assessee submitted that the issue is covered in favour of the assessee by the tribunal's decision in assessee's own case. The ld. Commissioner of Income Tax (Appeals) has accepted the same.
Upon careful consideration, we find that the Revenue before us has not made out any case that there is any difference in the facts of the present case against the facts of the case of the earlier year considered by the tribunal which has been followed by the ld. Commissioner of Income Tax (Appeals). Accordingly, we uphold the order of the ld. Commissioner of Income Tax (Appeals).
(A.Y.2012-13) Dy. CIT vs. M/s. Casa Maria Properties Pvt. Ltd. 10. In the result, this appeal by the Revenue stands dismissed
Order pronounced in the open court on 08.01.2018 Sd/- Sd/- (Amarjit Singh) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated :08.01.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,