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TMI Blog2018 (12) TMI 1870X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/- under the head income from house property. 2(b) On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) erred in not following jurisdictional Hon'ble ITAT judgment in the case of M/s. CR Development P. Ltd. v JCIT-8(1)(OSD), Mumbai (ITA. No. 4277/M/2012) which was relied on Hon'ble Spring Court decision in the case of Chennai Properties & Investment Ltd. v CIT(A) (2015) 373 ITR 673 (SC) on the pretext that Hon'ble ITAT has not discussed the issue raised in Delhi High Court judgment in the case of Ansal Housing Finance & Leasing Co. Ltd. (2013) 354 ITR 180. 3. The brief facts of the case are that the assessee filed its return of income on 30.09.2012 for the A.Y.2012-13 declaring total income to the tune of Rs. Nil. The case was selected for scrutiny and notices u/s 143(2)& 142(1) of the Act were issued and served upon the assessee. The assessee is a private limited company, deriving income from Hotel Business and Construction. The company is running a five star hotel in the name and style of The Carlton at Kodaikannal, Tamil Nadu, having rooms and other facilities. The assessee also derived income from dividend, share of profit from partnership fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.81 crores which yielded tax free income. When a person who was having its own fund more than the investment then it would be presumed that the investment was made out of his own fund. In the case of HDFC Bank Ltd Vs. DCIT & Ors 2016 383 ITR 529 (Bom). It is specifically held that the no disallowance is permissible u/s 14A of the I.T. Act, 1961 if, the investment in tax free securities has been made from interest free funds. In the group concern case titled as CIT Vs. Palm Grove Beach Hotels Pvt. Ltd. (ITA. No. 27 of 2014) dated 11.07.2016. The Hon'ble Bombay High Court has held that the no disallowance u/s 14A r.w. Rule 8D of the Act is required if, the assessee uses it is own fund for the investment to earn the exempt income. The Hon'ble ITAT Mumbai Bench in the case of in ITA. No.5157/M/2013 titled as Ferani Hotels Pvt. Ltd. Vs. ACIT dated 04.02.2016 has held in para no. 8 as under: - "8. We have considered the submissions of the parties and perused the material available on record. Undisputedly, the issue relating to disallowance of expenditure u/s 14A r/w Rule 8D, was subject matter of dispute in assessment year 2009-10. The co-ordinate bench of the Tribunal while consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in income which does not form part of the total income under the Act, the expenditure which is incurred in the earning of that income would have to be disallowed. That is exactly a matter which the Assessing Officer has to determine. Whether or not any expenditure was incurred by the assessee in relation to the earning of non-taxable income falls within the domain of the Assessing Officer. The basis on which the Tribunal had come to its decision for the assessment years 1998-99, 1999-2000 and 2001-02 would not conclude that question.' Where therefore the assessee is able to show, with reference to its accounts, of the borrowed capital having financed a particular asset (or asset class), the interest cost http://www.itatonline.org 4 ITA No. 857/Mum/2013 (A.Y. 2009-10) Ferani Hotels Pvt. Ltd. vs. Asst. CIT relatable thereto would necessarily have to be consider as expended toward the same. Upon this being conveyed by the Bench during hearing, the ld. Authorized Representative (AR), the assessee's counsel, would submit that the borrowed capital in the instant case is in fact wholly for business purposes, being toward the assessee's hotel project at Kodaikanal and the real estate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirm the disallowance of the indirect administrative expenditure, which is the subject matter of disallowance under r.8D(2)(iii), i.e., in principle. We may though further clarify that the disallowance qua investment in partnership firm, i.e., to the extent it survives our directions afore-said, shall be computed in terms of the decision by the larger bench of the tribunal in Vishnu Anand Mahajan (supra). We decide accordingly. There being no material difference in facts, respectfully following the aforesaid order of the Tribunal, we restore the matter back to the file of the AO for denovo adjudication in terms with the direction contained therein. Ground no.1 is allowed for statistical purposes." 5. Taking into account all the facts and circumstances and by relying upon the law settled in above mentioned cases. No disallowance u/s 14A r.w. Rule 8D of the Act is required in the present case, therefore, we are of the view that the finding of the CIT(A) is wrong against law and facts, therefore, we set aside the finding of the CIT(A) on this issue and delete the addition raised on account of u/s 14A r.w. Rule 8D of the Act. Accordingly, this issue is decided in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon. It is an undisputed fact that the assessees are in the business of builders, developers and construction. Both the assessees have constructed various projects and the projects were treated as stock in trade in the books of account. Flats sold by the assessees were assessed under the head 'income from business'. There were certain unsold flats in stock in trade which the AO treated as property assessable under the head 'income from house property' and computed notional annual letting value on such unsold flats placing reliance on the decision in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that if the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business and the business stocks, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es & Investments Ltd. vs. CIT reported in 373 ITR 673, held that unsold flats which are in stock in trade should be assessed under the head 'business income' and there is no justification in estimating rental income from those flats and notionally computing annual letting value under Section 23 of the Act. While holding so the Coordinate Bench observed as under: - "3. The ld. AR placed the order of Bombay Tribunal in the case of M/s Perfect Scale Company Pvt. Ltd., ITA Nos.3228 to 3234/Mum/2013, order dated 6-9-2013, wherein it was held that in respect of assets held as business, income from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant para in 5 is hereby reproduced as under.: - "5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. The Hon'ble Supreme Court held that since the assessee company's main object, is to acquire and held properties and to let out these properties, the income earned by letting out these properties is main objective of the company, therefore, rent received from the letting out of the properties is assessable as income from business. On the very same analogy in the instant case, assessee is engaged in business of construction and development, which is main object of the assessee company. The three flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under.: - "5.4 Ground Numbers 4 to 6 are related with disallowance u/s 14A. Ground No. 6 contests adjustment of 14A disallowance against Book Profits for the purpose of computation of Minimum Alternative Tax [MAT] u/s 115JB. So far as the adjustment of disallowance u/s 14A in computation of book profit u/s 115JB is concerned, we find that the matter stood squarely in assessee's favour by the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415]. ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 Upon perusal of the same, we find that Special Bench, after considering two contrary decision of Hon'ble Delhi High Court titled as CIT Vs. Goetze (India) Ltd. [2014 361 ITR 505] & PCIT Vs. Bhushan Steel Ltd. [ITA 593/2015 dated 29/09/2015], took the view favorable to the assessee in terms of ratio of decision of Hon'ble Supreme Court rendered in CIT Vs. Vegetable Products Limited [1973 88 ITR 192]. The decision in PCIT Vs. Bhushan Steel Ltd., in turn, placed reliance on the decision of Hon'ble Supreme Court rendered in Apollo Tyres Ltd. Vs. CIT [255 ITR 273] which held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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