DDB MUDRA MAX P. LTD,MUMBAI vs. DCIT CIR 6(1), MUMBAI

The effective grounds raised by the assessee are as under:–

As far as ground no.1 is concerned, brief facts are, for the assessment year under consideration, the assessee filed its return of income on 23rd November 2011, declaring total income of ` 1,20,38,150. During the assessment proceedings, the Assessing Officer noticing that in the relevant previous year, assessee has received exempt income amounting to ` 1,25,441 called upon the assessee to explain why proportionate expenditure attributable to earning of exempt income should not be disallowed under section 14A r/w rule 8D. Though, the assessee objected to the proposed disallowance but the Assessing Officer rejecting the claim of the assessee worked out the disallowance under section 14A r/w rule 8D at ` 3,89,932. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals).

In the course of hearing of appeal, it was submitted by the assessee that while working out the disallowance in terms of rule 8D, the Assessing Officer has included certain investments which do not yield exempt income. The learned Commissioner (Appeals) after considering the submissions of the assessee and verifying the facts and material on record, found that some of the investments made

The learned Authorised Representative submitted before us that the learned Commissioner (Appeals) was convinced with the claim of the assessee that investments yielding taxable income should be excluded from the average investment for making disallowance under section 8D(2)(iii) but he directed the Assessing Officer to exclude the taxable income yielding investment made during the previous year relevant to the assessment year under dispute and did not exclude taxable income yielding investment which forms part of the above balance of investment. In this context, the learned Authorised Representative drew our attention to the schedule forming part of balance sheet to demonstrate that investments in growth plan are taxable income yielding investments. He, therefore, submitted these investments also have to be excluded while computing disallowance under rule 8D(2)(iii).

Learned Department Representative relied upon the order of the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. The grievance of the 4 DDB Mudra Max Pvt. Ltd. assessee is limited to the fact that taxable income yielding investment should not form part of the average investment for computing disallowance under rule 8D(2)(iii). As could be seen, the learned Commissioner (Appeals) in principle has accepted the aforesaid plea of the assessee by directing the Assessing Officer to exclude some of the taxable income yielding investments. However, it is the contention of the assessee that while doing so, the learned Commissioner (Appeals) has failed to consider taxable income yielding investment carried over from the previous assessment year and forming part of the opening balance of investment. Considering these submissions of the learned Authorised Representative, we direct the Assessing Officer to verify whether the opening balance of investment shown by the assessee includes investment yielding taxable income and if it is found to be so then such investment should be excluded for computing disallowance under section 14A r/w rule 8D. The Assessing Officer must allow reasonable opportunity to the assessee for explaining its case. Ground no.1 is allowed for statistical purposes.

In ground no.2, the assessee has challenged the disallowance of an amount of ` 3,33,755 on the basis of AIR information.

Brief facts are, in the course of assessment proceedings, the Assessing Officer on the basis of AIR information found that the 5 DDB Mudra Max Pvt. Ltd. assessee had received certain income which have not been offered to tax in the impugned assessment year. He, therefore, called upon the assessee to reconcile the difference. As alleged by the Assessing Officer, since the assessee could not satisfactorily explain the difference, he treated the sum of ` 3,33,755 as income of the assessee. Though, the assessee challenged the addition before the first appellate authority, he also confirmed the addition.

Learned Authorised Representative referring to the reconciliation of AIR details furnished before the Assessing Officer submitted that the amount shown to have been received from Nilgiri Dairy Farm Pvt. Ltd., was actually billed by assessee in financial year 2008–09 relevant to assessment year 2009–10 and the assessee in fact has offered it as income in assessment year 2009–10. He submitted, the payer company since credited the amount to the assessee and deducted tax in the subsequent financial year the difference arose. He, therefore, submitted the assessee having already offered the amount as income, no further addition can be made of the said amount. As far as the amount shown to have been received from Dish TV India Ltd. amounting to ` 2,740 and Maruti Suzuki India Ltd. of ` 22,37,934, as per AIR information, learned Authorised Representative submitted, the assessee neither has raised any invoice on these two parties nor has received any amount

Learned Departmental Representative relied upon the order of the Assessing Officer and the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. As far as the difference in receipt relating to Nilgiri Dairy Farm Pvt. Ltd. is concerned, it is claim of the assessee that it has raised the bills in financial year 2008–09 and has also shown the income in assessment year 2009– 10. Considering the aforesaid submissions of the assessee we direct the Assessing Officer to verify whether the assessee has offered the amount received from Nilgiri Dairy Farm Pvt. Ltd. as income in the assessment year 2009–10. If on verification assessee’s claim is found to be correct, no addition can be made in the impugned assessment year on the principle that the same income cannot be assessed twice. As far as the alleged receipts from Maruti Suzuki India Ltd., and Dish TV India Ltd. are concerned, the assessee has consistently claimed that neither it has any business connection with these two entities nor had received any amount from them. As it appears from the assessment order and the order of the learned Commissioner (Appeals), assessee’s claim has not been considered in proper perspective. When the assessee has claimed that it has not 7 DDB Mudra Max Pvt. Ltd. received any amount from the concerned parties, it is for the Department to make necessary enquiry and bring material on record to show that assessee in fact has received some income from the concerned parties. Without conducting any enquiry or investigation, the Assessing Officer cannot make addition simply on the basis of AIR information. That being the case, we direct the Assessing Officer to make enquiry with the concerned parties and thereafter on the basis of the result of enquiry / investigation the Assessing Officer can proceed to make addition only in the event evidence brought on record proves that assessee in fact has received the amount in question from the concerned parties. However, the Assessing Officer before making any addition has to extend full opportunity to the assessee to explain its case. This ground is allowed for statistical purposes.

In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 15.06.2016