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Income-Tax Officer 2 (2) Versus M/s Kalimati Investment Co. Ltd., DCIT – 2 (3) (1) , Mumbai Versus M/s Kalimati Investment Co. Ltd. And Tata Steel Ltd., (Successor in interest to the erstwhile :Kalimati Investment Company Limited) Versus Income-Tax Officer

2017 (10) TMI 593 - ITAT MUMBAI

Compute the income from House Property on the basis of municipal value - Held that:- We find that the CIT(A) following the orders of the Tribunal in the assesses own case for A.Ys 2006-07 and A.Y. 2007-08 (which as on date had been upheld by the Hon’ble High Court), had directed the A.O to ascertain the municipal rateable vale of the property for the year under consideration and compute the income from house property by taking the ‘annual value’ of the property at such municipal rateable value. .....

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en affirmed by the Hon’ble High Court, therefore, no infirmity arises from his order in respect of the issue under consideration. We thus, in light of the aforesaid facts uphold the order of the CIT(A) in respect of the issue under consideration. The Ground of appeal No. 1 raised by the revenue before us is dismissed. - Disallowance u/s 14A r.w Rule 8D - Held that:- The scope of disallowance of expenses incurred for earning of exempt incomes was required to be read and applied in context of .....

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the assessee. We find ourselves to be in agreement with the aforesaid view taken by the Tribunal in the assesses own case, as well as the other cases on which reliance had been placed by the ld. A.R. We have given a thoughtful consideration to the order of the CIT(A) and do not find any infirmity in his order, to the extent the latter had reduced the further disallowance of ₹ 1,38,37,713/- made by the A.O u/s 14A to an amount of ₹ 15,41,788/-, with a consequential relief of ₹ 1 .....

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under Sec. 14A. - I.T.A. No.4015/Mum/2014, I.T.A. No.4982/Mum/2015, I.T.A. No.4361/Mum/2014 - Dated:- 11-10-2017 - Shri G.S. Pannu, AM And Shri Ravish Sood, JM Assessee by : Shri. Raj A. Kapadia Revenue by : Shri. V. Jenardhanan, D.R. ORDER Per Ravish Sood, Judicial Member The present appeals filed in the case of the abovementioned assesses are directed against the respective orders passed by the Commissioner of Income-tax (Appeals)-5, Mumbai [for short CIT(A)] for A.Y 2010-11 & 2011-12, dat .....

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014, which in itself arises from the assessment order passed by the Assessing Officer under Sec. 143(3) of the Income-tax Act, 1961 (for short Act ), dated 10.12.2012 in the case of Tata Steel Limited (successor in interest to the erstwhile Kalimati Investment Company Limited) which had been assailed before us as I. T. A. No. 4361/Mum/2014. That as certain common issues are involved in the aforesaid appeals, therefore, they are taken up and being disposed of by way of a consolidate order. We fir .....

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g the earlier years order directed the AO to compute the income from House Property on the basis of municipal value without appreciating that the department has not accepted the decision in the AY 2009-10 and an appeal to the Hon‟ble ITAT has been filed. ii). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O to compute the Income from House Property on the basis of municipal value even though the prevailing market value in that area was .....

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the statute and held as a reasonable method by the Hon‟ble Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. iii). On the facts and in the circumstances of the case and in law, the Ld. CIT(a) erred in directing the AO to restrict the disallowance u/s 14A to the extent of ₹ 37,11,208/- for the purpose of computation u/s 155JB of the IT Act without appreciating that as the Explanation 1 to Section 115JB of the IT Act an amount disallowed u/s 14A is to be considered as expenditure i .....

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filed by the assessee was processed as such under Sec. 143(1) of the Act . The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2). The A.O vide his order passed under Sec. 143(3), dated. 10.12.2012, had inter alia made the following disallowances/additions in the hands of the assessee: S. No. Particulars Amount 1. Disallowance under Sec. 14A ₹ 1,38,37,713/- 2. Addition on account of suppression of income under the head Income from house property . ₹ .....

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tions of the assessee in the backdrop of the facts of the case, therein partly allowed the appeal. 4. The revenue being aggrieved with the order of the CIT(A), to the extent the latter had set aside the disallowances and allowed relief to the assessee, had therein carried the matter in appeal before us. 5. The ld. Departmental representative (for short D.R ) at the very outset submitted that the CIT(A) had erred in following the earlier years orders and directing the A.O to compute the income fr .....

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Authorised representative (for short A.R ) for the assessee submitted that the issue involved in the present appeal was squarely covered by the judgment of the Hon ble High Court of Bombay in the assesses own case for A.Y. 2004-05, viz. Commissioner of Income- tax-2 Vs. M/s Kalimati Investment Co. Ltd. in ITA No. 1308 of 2012; dated. 09.10.2014 and in A.Ys 2006-07 to 2007-08, viz. Commissioner of Income-tax-2 Vs. M/s Kalimati Investment Co. Ltd. in ITA No. 1238 of 2012 and ITA No. 1239 of 2012; .....

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ackdrop of the aforesaid facts it was submitted by the ld. A.R that as the issue involved in the present appeal was squarely covered by the order of the Hon ble High Court and the earlier orders of this Tribunal, therefore, no infirmity did emerge from the order of the CIT(A) who had adjudicated the issue following the aforesaid orders. 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find t .....

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ord which would enable the Assessing Officer to determine the Annual Letting Value by disregarding the municipal valuation. He could not have assumed any other value at which property would be let from year to year. In such circumstances and his assumption being contrary to law, the Tribunal was justified in allowing the assesses appeal. The aforesaid view was thereafter again followed by the Hon ble High Court while disposing of the appeal of the revenue for A.Y. 2006-07 & A.Y. 2007-08, viz .....

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s of rent received and notional interest on the interest free security received from the tenant. The ld. A.O determined the ALV of the said property at ₹ 1,50,000/- per month. The municipal rateable value of the said flat was ₹ 12,26,300/-. The CIT(A) while relying upon the decision of the Tribunal in the own case of the assessee for earlier assessment year deleted the addition by observing as under:- I have considered the facts of the case. The assesses owns property being flat no. .....

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2553/Mum/2011- AY. 2006-07 combined order dated 09/05/201 has held that the municipal value should b taken as ALV with out deduction of any municipal taxes which were borne by the tenant. During the year, municipal value of the property is ₹ 12,26,300/-. Respectfully following the above order of the ITAT, the A.O is directed to take ₹ 12,26,300/- as ALV subject to standard statutory deduction but not allowing any further deduction towards Municipal Taxes which were paid by the tenant .....

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lved in the present case is squarely covered by the aforesaid orders of the Hon ble High Court and the coordinate benches of the Tribunal, in the assesses own case for the preceding years. We find that the CIT(A) following the orders of the Tribunal in the assesses own case for A.Ys 2006-07 and A.Y. 2007-08 (which as on date had been upheld by the Hon ble High Court), had directed the A.O to ascertain the municipal rateable vale of the property for the year under consideration and compute the in .....

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he Tribunal passed in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, which as on date had been affirmed by the Hon ble High Court, therefore, no infirmity arises from his order in respect of the issue under consideration. We thus, in light of the aforesaid facts uphold the order of the CIT(A) in respect of the issue under consideration. The Ground of appeal No. 1 raised by the revenue before us is dismissed. 8. The ld. D.R adverted to the disallowance made by the A.O under Sec. 14A r.w .....

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(i); and (ii). ₹ 1,44,65,346/- i.e 0.5% of the average investment as per clause 8D(2)(iii) ]. Thus, the A.O after reducing the suo motto disallowance of ₹ 21,69,240/-, added back the balance disallowance of ₹ 1,38,37,713/- [i.e ₹ 1,60,07,133/- (-) ₹ 21,69,240/-] to the total income of the assessee. The assessee assailed the disallowance made by the A.O before the CIT(A). We find that the CIT(A) observed that the plea of the assessee before him was that the disallowa .....

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ade ₹ 1,62,95,071 2. Diminution in value of investment ₹ 999 3. General Office Expenses ₹ 15,93,333 4. Auditors remuneration ₹ 2,60,811 5. Director s fees ₹ 48,000 6. Depreciation ₹ 81,497 7. Professional fees ₹ 2,76,276 Total ₹ 1,85,46,987 We find, that the CIT(A) while deliberating on the disallowance under Sec. 14A r.w Rule 8D, accepted the contention of the assessee that while working out the amounts debited in the Profit & loss account [re .....

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expenses (Rs. 15,93,333/-); (ii). Auditors remuneration (Rs. 2,60,811/-); (iii). Directors fees (Rs. 48,000/-; and (iv). Professional fees (Rs. 2,67,276/-), in its return of income, therefore, concluded that the administrative expenses computed at 0.5% of the average investment was liable to be limited to ₹ 21,69,420/-, as against the amount of ₹ 1,44,65,347/- computed by the A.O as per Rule 8D(2)(iii). However, the CIT(A) being of the view that the assessee had failed to substantiat .....

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60,07,133/- made by the A.O. The revenue being aggrieved with the reducing of the further disallowance of ₹ 1,38,37,713/- made by the A.O u/s 14A to an amount of ₹ 15,41,788/- by the CIT(A), with a consequential relief of ₹ 1,22,95,925/- [i.e ₹ 1,38,37,713 (-) ₹ 15,41,788/-] to the assessee, had thus carried the matter in appeal before us. 9. The ld. D.R submitted that the CIT(A) had erred in restricting the disallowance made by the A.O on the basis of Rule 8D, over .....

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A, which requires that the expenditure actually incurred in earning of such exempt income, and nothing more than such expenditure could be disallowed. The ld. A.R submitted that the issue was squarely covered by the order of the Tribunal passed in the assesses own case for A.Y. 2009-10, viz. DCIT Vs. M/s Tata Steel Ltd. (Successor to M/s Kalimati Investment Co. Ltd.); dated. 31.07.2015, in ITA No. 6854/Mum/2012. The ld. A.R further placed reliance on the following orders of the coordinate benche .....

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find that the present issue before us had earlier too came up before the Tribunal in the appeal of the revenue, in the assesses own case for A.Y. 2009-10, viz. DCIT Vs. M/s Tata Steel Ltd. (Successor to M/s Kalimati Investment Co. Ltd.), dated. 31.07.2015, in ITA No. 6854/Mum/2012, wherein it was observed by us as under: 5. The ground no. 2 is against the disallowance of ₹ 1,33,57,138/- under section 14A r.w rule 8D by the AO. The CIT(A) restricted the disallowance to ₹ 4,77,399/- b .....

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012) 22 Taxmann.co.61 (Delhi-Trib) that disallowance u/s 14A cannot exceed the expenditure actually claimed by the assessee.‟ 6. The revenue relied upon the order of the A.O whereas the assessee vehemently argued that the case is covered by the decision of the Delhi bench of the Tribunal in the case of Gillette Group India (P) Ltd. Vs. ACIT (2012) 22 Taxmann.co.61 (Del- Trib). We have considered the rival arguments and found that the CIT(A) has rightly restricted the disallowance to ₹ .....

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ires that the expenditure actually incurred in earning of such exempt income, and nothing more than such expenditure could be disallowed. We find ourselves to be in agreement with the contention of the ld. A.R that the very purpose sought to be achieved by the legislature by making available the machinery proviso, i.e Rule 8D, cannot be lost sight of while computing the disallowance under Sec. 14A. We find that the Tribunal while disposing of the appeal of the revenue in the assesses own case fo .....

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by the Tribunal in the assesses own case, as well as the other cases on which reliance had been placed by the ld. A.R. We have given a thoughtful consideration to the order of the CIT(A) and do not find any infirmity in his order, to the extent the latter had reduced the further disallowance of ₹ 1,38,37,713/- made by the A.O u/s 14A to an amount of ₹ 15,41,788/-, with a consequential relief of ₹ 1,22,95,925/- [i.e ₹ 1,38,37,713 (-) ₹ 15,41,788/-] to the assessee. .....

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as averred before the CIT(A) that the book profit for computing the tax liability of the assessee as per the MAT provisions contemplated under Sec. 115JB, was not liable to be raised by the notional component of such disallowance. The CIT(A) observed that as the disallowance under Sec. 14A was already restricted by him to the extent of the actual expenses debited in the Profit & loss account, he therefore directed the A.O to increase the book profit only to the extent of disallowance of S .....

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. 13. The appeal of the revenue is dismissed in terms of our aforesaid observations. ITA No. 4361/Mum/2014 A.Y. 2010-11 14. We shall now take up the appeal of the assessee for A.Y. 2010-11. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal : The Learned Commissioner of Income-tax (Appeals) [ Ld. CIT(A) ] erred in adopting the Municipal Rateable Value of ₹ 12,26,300 as the Annual Value of the Appellants property at New Delhi and thereby , in .....

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nity of showing cause against such enhancement, in gross and flagrant violation of the express mandate of sub-section (2) of section 251 and (ii). disallowing under Section 14A, the said Demat Charges. 3. The Ld. CIT(A) erred in directing that the Assessing Officer‟s enhancement of the Book Profit under Section 115JB be limited to the actual expenses debited to the P & L A/C. The Appellant submits that the Ld. CIT(A) ought to have held that no part of the amount disallowed under Sectio .....

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ed against the assessee by the judgment of the Hon ble High Court of Bombay in the assesses own case for A.Y. 2004-05, viz. Commissioner of Income-tax-2 Vs. M/s Kalimati Investment Co. Ltd. in ITA No. 1308 of 2012; dated. 09.10.2014 and in A.Ys 2006- 07 to 2007-08, viz. Commissioner of Income-tax-2 Vs. M/s Kalimati Investment Co. Ltd. in ITA No. 1238 of 2012 with ITA No. 1239 of 2012; dated. 09.10.2014. It was further submitted by the ld. A.R that the said issue was also covered against the asse .....

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eding year, viz. A.Y. 2009-10, in ITA No. 6854/Mum/2012, dated. 31.07.2015, had held that the annual value of a property was to be ascertained on the basis of the municipal rateable vale of the property for the year under consideration. We have given a thoughtful consideration to the issue before us, and in the backdrop of the aforesaid concession of the ld. A.R and after perusing the aforesaid orders of the Hon ble High Court and the Tribunal in the assesses own case, are of the considered view .....

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of ₹ 15,93,333/- (which had already been offered by the assessee for disallowance under Sec. 14A in its return of income), therefore, no separate addition of the same was called for while computing of the disallowance under Sec. 14A by the CIT(A). The ld. A.R submitted that the CIT(A) while recasting the amount liable for disallowance under Sec.14A, thus, wrongly made a separate addition of the demat charges of ₹ 15,41,788/- in the hands of the assessee. It was averred by the ld. A. .....

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of income of the assessee, without putting him to notice and affording any reasonable opportunity of being heard to him, which thus on the said count too could not be sustained. 17. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. The ld. A.R in order to fortify his contention that the amount of the demat charges of ₹ 15,41,788/- were included in the General office expenses of ₹ 15,93 .....

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included the demat charges of ₹ 15,41,788/- . We further find that the assessee had during the course of the assessment proceedings furnished with the A.O the bifurcated details of the General expenses (comprising of demat charges of ₹ 15,41,788/-) (Page 37 of APB ) alongwith the further details of the demat charges (Page 38 of APB ). We have perused the material to which our attention was drawn by the ld. A.R and are of the considered view that the amount of demat charges of ₹ .....

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erefore, the CIT(A) had erred in making a separate disallowance of the demat charges of ₹ 15,41,788/- in the hands of the assessee while computing the disallowance under Sec. 14A. We thus, are of the considered view that the separate disallowance of ₹ 15,41,788/- made by the CIT(A) while computing the disallowance under Sec. 14A cannot be sustained and is liable to be deleted. We thus direct the A.O to delete the disallowance of ₹ 15,41,788/-. The Ground of appeal No. 2 raised .....

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ad enhanced the book profit for computing the tax liability under Sec. 115JB by the aforesaid amount of disallowance of ₹ 1,38,37,713/- and had worked out the Adjusted book profit at an amount of ₹ 2,68,14,28,982/-. The assessee assailed the enhancing of the book profit by the amount of disallowance under Sec. 14A by the A.O. The CIT(A) while disposing of the appeal of the assessee had restricted the disallowance under Sec. 14A to an amount of ₹ 37,11,208/-. The CIT(A) while ad .....

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for the assessee submitted that the issue that the book profit for computing the tax liability under Sec. 115JB was not to be increased by the amount of disallowance made under Sec. 14A, stands settled as on date by the order of the Special bench of the Tribunal in the case of ACIT Vs. Vireet Investment Pvt. Ltd. (ITA No. 502/Del/2012 & CO No. 68/Del/2012; dated. 16.06.2017(SB). We have perused the order of the Special bench of the Tribunal passed in the case of Vireet Investment Pvt. Ltd. .....

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dered view, that as held therein, the A.O while computing the book profit under Sec. 115JB cannot make any adjustment in respect of the disallowance made under Sec. 14A in the hands of the assessee. We thus, are of the considered view that the A.O while computing the book profit under Sec. 115JB cannot make any adjustment as regards the disallowance made in the hands of the assessee under Sec. 14A. We thus, in the backdrop of the aforesaid order of the Special bench of the tribunal, direct the A .....

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peal of the assessee is partly allowed in terms of our aforesaid observations. ITA NO. 4982/Mum/2015 A.Y. 2011-12 21. We shall now take up the appeal of the revenue for A.Y. 2011-12. The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal: On the facts and in circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. The order of the CIT(A) is opposed t .....

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his method of calculation has been prescribed by the statute and held as reasonable method by the Hon‟ble Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. 328 ITR 81 (Bom). 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to restrict the disallowance u/s 14A to the extent of ₹ 4,59,196/- for the purpose of computation u/s 115JB of the I.T Act without appreciating that as per Explanation 1 to Section 115JB of the I.T Act, a .....

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3), dated. 05.03.2014, had inter alia made a disallowance of ₹ 1,56,91,134/- under Sec. 14A r.w Rule 8D, as against the disallowance of ₹ 4,59,196/- that was suo motto offered by the assessee in its return of income. The A.O thereafter proceeded with and assessed the income of the assessee at ₹ 1,98,49,470/- under the normal provisions. Still further, the A.O while framing the assessment also enhanced the book profit under Sec. 115JB by the amount of further disallowance of  .....

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of ₹ 4,59,196/- that was suo motto offered by the assessee in its return of income, to an amount of ₹ 1,56,91,134/-, leading to a consequential adding up of the disallowance by an amount of ₹ 1,52,31,938/-. The assessee assailed the raising of the disallowance under Sec. 14A by the A.O before the CIT(A). It was submitted by the assessee that the disallowance under Sec. 14A was liable to be restricted to the amount of actual expenditure of ₹ 4,59,196/- as was debited in th .....

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. 1 to 3 raised by the assessee in the present appeal, viz. ITA No. 4982/Mum/2015 were identical to those as were there before the Tribunal in the Grounds of appeal No. 2(i) & 2(ii) in the appeal of the revenue for the immediate preceding year, viz. ITA No. 4015/Mum/2014 for A.Y. 2010-11. The said factual position was not controverted by the ld. D.R. Thus, as the Grounds of appeal No. 1 to 3 involved in the present appeal are identical to those raised before us by the revenue vide its Ground .....

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