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Dish TV India Ltd. Versus ACIT Range 16 (1) , Mumbai

2017 (11) TMI 799 - ITAT MUMBAI

Disallowance u/s. 14A - Held that:- We have observed that the assessee is engaged in business of direct to home (DTH) satellite television services and teleport services. We further observed that assessee has not received any dividend income or other exempt income during the impugned assessment year. The assessee has conceded and accepted to have incurred ₹ 5 lacs towards an expenditure u/s. 14A towards earning of an exempt income which is claimed to be reasonable expenditure to be disallo .....

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lack - We hereby order deletion of the addition u/s 14A as confirmed by the CIT-A by restricting/upholding the disallowance of expenditure u/s 14A to the tune of admitted expenditure of ₹ 5 lacs claimed to have been incurred by the assessee for earning exempt income as conceded by the assessee. - Decided partly in favour of assessee. - I.T.A. No. 6971/Mum/2016 - Dated:- 13-11-2017 - SHRI D.T GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri. Ja .....

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Officer (hereinafter called the AO ) u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by the Assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- 1. (i) The Ld. CIT(A) erred in law and facts in confirming disallowance of ₹ 48,80,605/- out of expenses u/s 14A of the Act @ 1% of personnel cost and other expenses on assumption basis. The reasons giv .....

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home(DTH) satellite television services and teleport services including placement and active service . In the first round of litigation while passing the order u/s. 143(3) of the Act, the A.O made an inter-alia additions to the tune of ₹ 1,97,58,364/- u/s. 14A. The learned CIT-A in the first round of litigation confirmed the disallowance to the tune of ₹ 5 lacs and deleted the balance additions to the tune of ₹ 1.92 crores . The department came in appeal in first round of litig .....

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loans with investments and it was submitted that no expenses were incurred for buying or maintaining investments and hence section 14A cannot be applied. The A.O after considering the reply of the assessee observed that there are expenditure incurred in relation to the earning of the exempt income and hence disallowance of expenditure 14A is required to be made. The AO observed from the financial statements of the assessee that the assessee has incurred following expenditure: i) Personal Cost R .....

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CIT-A in second round of litigation who restricted the addition/disallowance of expenditure to 1% of the said expenses by holding as under: 3.3. I have circumspected the facts & circumstances of the case and have carefully considered the findings of the Assessing Officer as well as rival submission of the Appellant . I find that in order dated 25.01.2010, my Ld. predecessor, CIT(A) has restricted the disallowance of expenditure to the extent of ₹ 5 lacs. However, department has filed .....

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alance Sheet that total investment as on 31.03.2007 is of ₹ 94,45,10,450/ whereas on 31.03.2006 total investment of ₹ 1,06,,87,15,480/- whereas the total interest-free fund of the Appellant as on 31.03.2006 was of ₹ 4,44,39,32,900/-, Similarly, as on 31.03.2007 owned fund was of ₹ 21,2,40,79,601/-. Thus, investment of ₹ 94,45,10,040/- as appearing in Schedule-7 cannot be presumed to be from unsecured loan of ₹ 30,63,14,726/-. Therefore, there is Financial Cost .....

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nvincing one because most of the investment are internal transfer of fund which requires less managerial involvement. Further, the business of the Assessee is altogether different than simple investment hence, considering the facts & circumstances of the case, disallowance from Personnel Cost & Other Expenses @1% will be the most reasonable. Accordingly disallowance is restricted to ₹ 48,80,605/-. The Assessing Officer is therefore, directed to delete the balance amount of ₹ .....

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of litigation, learned CIT-A restricted disallowance u/s 14A to ₹ 5 lacs while in second round the CIT-A has upheld the disallowance to the tune of 1% of the total expenditure and disallowance u/s 14A as confirmed by learned CIT(A) comes to ₹ 48.8 lakh, while A.O upheld the disallowance u/s 14A in the second round of litigation to 3% of the expense which come to 1.82 crore. At the outset Ld. Counsel for the assessee submitted that there is no exempt income earned by the assessee and .....

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16 (10) TMI 1039 Bombay High Court]. Thus, it was submitted that no disallowance u/s 14A can be made . It was submitted that assessee has voluntarily disallowed ₹ 5 Lacs u/s 14A which is reasonable disallowance in the first round of litigation which is acceptable to assessee. it is also submitted that no satisfaction has been recorded by the A.O while making disallowance u/s. 14A . The learned CIT-A has made disallowance u/s. 14A in mechanical manner by adopting disallowance at the rate of .....

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on ble Delhi High Court to hold that since the assessee has not earned any dividend income and the investments were made only as a strategic investment in wholly owned subsidiary companies, no disallowance u/s 14A is attracted. The Ld. DR on the other hand relied upon the order of the learned CIT-A 5. We have considered rival contentions and perused the material on record including case laws cited before us. We have observed that the assessee is engaged in business of direct to home (DTH) satell .....

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e Delhi High Court in the case of Cheminvest Limited v. CIT (supra) and decision of the Hon ble Bombay High Court in the case of Ballarpur Industries Limited (supra) is applicable, the disallowance of expenditure u/s 14A in the instant case be restricted to an admitted expenses to have been incurred for earning of the exempt income to the tune of ₹ 5 lack . We have also observed that the tribunal in assessee own case for AY 2008-09 and 2009-10 has deleted the disallowance u/s. 14A by holdi .....

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e heard the rival contentions of both the parties and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance on in support of propositions put forth by the assessee for deletion of the disallowance of ₹ 74,31,010/- under section 14A r.w. Rule 8D. Admittedly, the assessee has not earned any exempt income in the year under consideration and this fact has not been controverted by the learned CIT(A). The applicability of the pro .....

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e Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (2015) 278 ITR 33 (Del) vide order dated 02.09.2015 wherein at para 23 thereof their Lordships have held as under: - 23. In the context of the facts enumerated hereinbefore the court answers the question framed by holding that the expression does not form part of the total income in section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevan .....

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heminvest Ltd. (supra) would squarely apply. The Hon'ble High Court in the aforesaid judgement held that no disallowance under section 14A of the Act can be made in the year in which no exempt income is earned. It was held that the expression does not form part of the total income in section 14A of the Act envisages that there should be an actual earning of income which is not includible in the total income during the relevant year for the purpose of disallowing any expenditure incurred in r .....

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efore set aside the decision of the authorities below and direct the AO to delete the disallowance of expenditure amounting to ₹ 74,31,010/- under section 14A of the Act. 9. The co-ordinate bench further held that if the investment was made as a strategic investment in group companies for controlling interest no disallowance is attracted under section 14A of the Act observing as under: 3.5.1 Further the learned A.R. for the assessee has submitted that, even otherwise, the said disallowance .....

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y the assessee are in respect of its strategic investments in subsidiary/group concerns is factually correct. We find that a Coordinate Bench of this Tribunal in the case of Fiduciary Euromax Global Markets Ltd. in ITA No. 1349/Mum/2012 and others dated 29.06.2016, relied on by the assessee, at para 14 thereof on similar factual circumstances has held that: - 14. ...................... .......... strategic investment in group companies therefore cannot be held to be for investment purposes or wi .....

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