1 M.A No. 637/Del/2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `FRIDAY ' NEW DELHI
BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
M.A NO. 637/Del/2019
In
( I.T.A. No. 2368/DEL/2016 A.Y 2011-12)
Mahanagar Telephone Nigam Vs DCIT,
Ltd., Large Taxpayer Unit,
5th Floor, 9, CGO Complex, Circle 1, NBCC Plaza,
Lodhi Road, Pushp Vihar
New Delhi New Delhi.
AAACM 0828 R
(APPLICANT) (RESPONDENT)
Applicant by Shri Ved Jain, Adv.
Ms. Umang Luthra, Adv.
Respondent by Ms. Ashima Neb, Sr. D.R
Date of Hearing 18.10.2019
Date of Pronouncement 13.11.2019
ORDER
PER SUCHITRA KAMBLE, JM
This Miscellaneous Application is filed by the assessee in respect of order
dated 12.06.2019 under section 254(2) of the Income Tax Act, 1961.
2. The Ld. AR submitted that in appeal filed by the Revenue ground no.1
was regarding deletion of addition of Rs.7,18,53,000/- out of total addition of
Rs.9,69,57,875/- made by the Assessing Officer u/s 14A and in assessee's
2 M.A No. 637/Del/2019
appeal ground no.2 was regarding disallowance of Rs.2,51,04,875/- sustained
by the CIT(A) under section 14A of the Act. The Ld. AR further submitted that
the Revenue's ground no.1 has been discussed in para 5 to para 7. This ground
was dismissed in view of the findings recorded that assessee's own funds were
more than the funds invested from where exempt income has been received.
The Ld. AR submitted that ground no. 2 of assessee's appeal was discussed in
para 8 to para 10 of the order thereby stating that disallowance in respect of
the expenses @0.5% to be applied only to those investments which actually
have resulted in exempt dividend income rather than 0.5% of the average of
total investment. Thereafter, on the next page of the order even the
computation of disallowance @0.5% on Rs.17,48,00,000/- i.e. Rs.8,74,000/-
was worked out on the basis of judgment of the Jurisdictional High Court in
case of ACB India Ltd. Vs. ACIT (ITA No.615/2014 dated 24.03.2015). However,
para no.10 of the order ground no.1 of the assessee's appeal was dismissed
despite the fact that the disallowance is restricted to 0.5% of the investment
which actually resulted in exempt dividend income and accordingly, this
ground of the assessee has to be partly allowed. The Ld. AR relied upon the
decision of the Hon'ble Supreme Court in case of CIT vs. Saurashtra Kutch
Exchange Ltd. (2008) 305 ITR 227 (SC) dated 15.09.2008.
3. The Ld. DR vehemently opposed this Misc. Application by stating that
this amounts to review of the order.
4. We have heard both the parties and perused all the relevant material
available on record. From the perusal of Para 7 of the order dated 12.06.2019,
the assessee's submissions appears to be proper as the CIT(A) has restricted
the disallowance to 0.5% of average investment but in Para 7 on page 6
inadvertently it has been mentioned as 5%. Therefore, we are modifying Para 7
as under:
3 M.A No. 637/Del/2019
"7. We have heard both the parties and perused all the relevant material
available on record. The CIT(A) held as under:
"6.1. From the schedule of investments, it is noticed that the total
investments of Rs. 4946.58 million INR include an investment of Rs.
2500/- million INR in bonds besides an investment of Rs.1446.58
million INR in subsidiaries and an investment of Rs. 1000/- million INR
in the preference shares of ITI limited. The above figures are the figures
of closing balance of the investments. The opening balances of these
investments are same except the investments in subsidiary companies
which were Rs. 1245.77 million INR. As regards LIC Mutual fund, the
opening investment was Rs. 349.6 million INR which reduced to nil at
the end of the year. The Total investments (closing balance) of Rs.
4946.58 million INR constitute 3.5% of the closing balance of share
capital, reserves & surplus and loans totaling Rs. 1,41,021.56 million
INR. In view of this factual position and also considering the fact that
the assessee has interest free funds in the form of share capital and
reserves & surplus of Rs. 66,464.81 million INR (being the closing
balance), there is no reason why the appellant's claim that the interest
bearing funds have not been used for making investment should not be
accepted. Therefore, the disallowance of interest under rule 14 A r.w.
rule 8D (2)(ii) of Rs. 71.853 million INR is deleted. However, as regards
the disallowance under rule 8D(2)(iii), being 0.5% of the average
investments (income from which is exempt), the undersigned does not
agree with the order of my predecessor that no administrative expenses
were incurred in connection with such investments. In a large
organisation like appellant, the investments needs to be regularly
monitored and man hours of staff are used apart from other
administrative expenses. Therefore, the appellant's claim that no such
expenditure was incurred is not correct. Once it is held that the claim of
4 M.A No. 637/Del/2019
the appellant is not correct, the only way to estimate the same, is under
rule 8D (2)(iii) being 0.5% of the average investments income from
which, is exempt. The AO has worked out, this disallowance at Rs.
2,51,04,875/-. The value of average investments has been taken as the
average of total investments mentioned in schedule F of the balance
sheet. However, as discussed all the investments made, mentioned in
schedule F do not yield exempt income. Therefore, the disallowance u/s
14A r.w. rule 8D(2)(iii) is restricted to only 0.5% of average investment
income from which, is exempt irrespective of where the said exempt
income has been received during the A.Y. 11-12 or not. Consequently,
ground no. 2 of the appeal is partly allowed."
Thus, the CIT(A) properly held that disallowance u/s 14A r.w.r. 8D(2)(iii) is
restricted to only 0.5% of average investment income from which is exempt
irrespective of the same exempt income was received during the Assessment
Year 2011-12, there is no need to interfere with the finding of the CIT(A).
Ground No.1 of the Revenue's appeal is dismissed."
As relates to Para 10 of the order dated 12.06.2019, the same is modified as
under:
"10. We have heard both the parties and perused all the materials
available on record. As we have decided this issue in the earlier Para while
deciding Revenue's appeal. Ground No.1 of assessee's appeal is partly
allowed."
Thus, the Misc. Application filed by the assessee is allowed.
5 M.A No. 637/Del/2019
6. In result, Misc. Application is allowed.
Order pronounced in the Open Court on This 13th Day of November, 2019.
Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 13/11/2019
Priti Yadav, Sr. PS *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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