Sahara Investments P.Ltd, Mumbai vs Department Of Income Tax

ACIT(OSD)-2(3), M/s. Sahara Investments Pvt. R.No.556, 5th Floor, Ltd., Aayakar Bhavan, Nevile House, Vs. M.K. Road, J.N. Heredia Marg, Mumbai - 400020 Ballard Estate, Fort, Mumbai - 400 001 PAN: AAECS 6355B (Appellant) (Respondent)

ITA No.93/M/2013 Assessment Year: 2007-08

M/s. Sahara Investments Pvt. ACIT(OSD)-2(3), Ltd., R.No.556, 5th Floor, Nevile House, Aayakar Bhavan, Vs. J.N. Heredia Marg, M.K. Road, Ballard Estate, Mumbai - 400020 Mumbai - 400 001 PAN: AAECS 6355B (Appellant) (Respondent)

Present for: Assessee by : Shri Ashok Unadkat, A.R. Revenue by : Shri Neil Philip, D.R.

Date of Hearing : 16.06.2015 Date of Pronouncement : 30.06.2015

ORDER

Per Sanjay Garg, Judicial Member:

The above tilted two appeals one by the Revenue and the other by the assessee have been directed against the order dated 17.12.2012 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2007-08. First we take up the appeal of the Revenue.

2 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

ITA No.1785/M/2013 2. The Revenue has taken the following grounds of appeal:

"i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the sum of Rs. 85 lakhs received as sale proceeds by the assessee company as result of indenture dated 26.09.2001 signed by late Smt. Bachoobai Waronzow, transferring her rights arising out of agreement of 02.0 1 .1995 with developers, neither result in capital gain nor is in the form of adventure in the nature of trade.

ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in concluding that the sum of Rs. 85 lakhs received by the assessee is a capital receipt overlooking the crucial fact that the amount was received as a result of an agreement the assessee had entered into with Mrs. Bachoobai Waranzow creating an interest in the estate and therefore taxable as business income.

iii)On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in concluding that the sum of Rs. 85 lakhs received by the assessee represents the sale proceeds of the properties in para 1.2 of the order and at the same time, holding that the amounts received are capital receipts in para 1.3 of the order thereby contradicting himself.

iv) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying on the decision of ITAT in the assessee's case for A.Y. 2004-05 and 2005-06 ignoring the fact that the decision of ITAT has not been accepted by the Department and appeal u/s.260A has been filed.

2. i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance u/s.14A by relying on the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Ltd. Vs. DCIT 328 ITR 81 (Born), ignoring that the Department has not accepted the said decision and SLP No. 12872 of 2011 has been filed against that decision.

ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance u/s.l4A read with Rule 8D when this method of working of disallowance is held as reasonable method by jurisdictional High Court in the case of Godrej & Boyce Mfg. Ltd. Vs. DCIT 328 ITR 81 (Bom).

3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored."

Ground No.1

3. At the outset, the Ld. A.R. of the assessee has submitted that in relation to the issue involved/raised through ground No.1, the Department has already 3 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

filed appeals for A.Y. 2004-05 and 2005-06 before the Hon'ble Bombay High Court and the Hon'ble High Court has admitted the following question of law.

"Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in coining to the conclusion that the amount received by the Assessee, as a result of Indenture dated 26 11 September, 2001 signed by Late Sint. Bachoobai Woronzow, transferring her rights arising out of an agreement of 2" January, 1995 with developers, does not result in Capital Gain in the hands of the Assessee ?"

4. The Ld. A.R. has further stated that the said question of law arising from the aforesaid receipts is identical with the question of law arising out in the present appeal before this Tribunal for A.Y. 2007-08. The Ld. A.R. has further brought our attention to the declaration of the assessee under section 158A submitted vide letter dated 26.11.2014 to the effect that assessee would abide by the order of the Hon'ble High Court delivered in the appeal as referred to above and that it shall not raise the said questions of law in the present case before any appellate authority or for reference before the Hon'ble High Court under section 256. It has therefore been requested to keep the present appeal by the Department for A.Y. 2007-08 in abeyance till the decision of the question of law framed by the Hon'ble High Court. The Ld. A.R. has further brought our attention to the order of the Tribunal passed in the own case of the assessee for A.Y. 2006-07 wherein also the assessee has filed a declaration under section 158A of the Act. The Tribunal in pursuance of the provisions of section 158A of the Act had invited the comments of the Assessing Officer (hereinafter referred to as the AO). After considering the comments of the AO, the Tribunal held that the proposal made by the assessee was justified and no harm would be caused to the AO if the issue is kept in abeyance till the final decision of the Hon'ble Bombay High Court is delivered. The Tribunal admitting the declaration made by the assessee has directed that the issue of nature of advance received by the assessee is to be kept in abeyance and has to be decided after receiving the orders of the Hon'ble Bombay High Court for 4 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

earlier two assessment years. The relevant part of the order of the Tribunal for the sake of convenience is reproduced as under:

"4.Before us, Authorised Representative(AR) stated that the assessee had filed declaration u/s.158 of the Act, that it would abide by the order of the Hon'ble Court delivered in the appeal for the AY.s filed by the AO, that the issue was identical to the issue raised in the appeal for the year under appeal. In pursuance of the provisions of section 158A of the Act comments of the AO were invited about the declaration made by the assessee. The AO after narrating the facts stated that the FAA had held that the disputed amounts were sale proceeds of properties owned by the Trust, that same had to treated as capital receipt, that he was not in agreement with the assessee that revenue's appeal for the year under appeal should be kept in abeyance on the above said substantial question of law, that the Tribunal could decide the case on merit. Departmental Representative (DR),after handing over the report of the AO, left the issue to the discretion of the Bench.

5.We have heard the rival submissions and perused the material before us.We find that the Hon'ble jurisdictional High Court has admitted following question of law:

Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in coining to the conclusion that the amount received by the Assessee, as a result of Indenture dated 26 11 September, 2001 signed by Late Sint. Bachoobai Woronzow, transferring her rights arising out of an agreement of 2" January, 1995 with developers, does not result in Capital Gain in the hands of the Assessee ?

We find that the issue involved in the year under consideration are identical to the issue of earlier two AY.s., that the AO has not given any reason for not agreeing with the proposal of the assessee to keep the issue in abeyance till the appeal filed by the department is not adjudicated by the Hon'ble Bombay Hig h Court. In our opinion, the provisions of section 158A of the Act cast a duty upon the AO and the Appellate Authorities pass a reasoned order. A reasoned order presupposes application of mind by the authority concerned i.e.A0/Appellate Authority. They are required to elaborate the reasons as to why they oppose or accept the proposal submitted by the assessee.A one liner submission-" I agree/I do not agree" is a bald statement and is of no judicial value. As stated earlier such an order is not subject to appeal or revision. Therefore, it becomes more important that the authority handling such application devote some time and pass an order that could show as to how and why it arrived at a particular conclusion. In other words in absence of such an order, containing discussion of thoug ht process of that authority, is no order in the eyes of law. In our opinion the comment of the AO opposing the proposal of the assessee falls under that category. It is to 5 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

remembered that the Central Board of Direct Taxes have advised the officers of the department to avoid unnecessary litigation. In our opinion, the proposal made by the assessee is justified and no harm would be caused to the AO if the issue is kept in abeyance till the final decision of the Hon'ble Court is delivered. As a result, we admit the declaration made by the assessee. Issue of nature of advance received by the assessee is to be kept in abeyance and has to be decided after receivin g the order of the Hon'ble Bombay Hi g h Court for the earlier two AY.s. Grounds no. 1-4 of the appeal filed by the AO are kept in abeyance, as per the provisions of section 158 A of the Act."

5. Since the identical issue is involved in the present appeal and the assessee has filed a similar declaration under section 158A of the Act, hence in view of the findings of the Tribunal given on the comments of the AO on the declaration of the assessee, in our view, no useful purpose will be served in calling the comments of the AO on identical declaration filed by the assessee u/s 158A for the assessment year under consideration. Hence we dispense with the formality of seeking again the comment of the AO in view of the observations made by the Tribunal on similar declaration filed under section 158A in relation to A.Y. 2006-07. We admit the declaration filed by the assessee and dispose off this ground of appeal with the direction the AO will decide/ apply the findings/directions as will be given in the order of the Hon'ble Bombay High Court on the question of law framed by the Hon'ble Bombay High Court vide order dated 10.10.2014 in Revenue's appeal bearing ITA No.1261/M/2013 for A.Y. 2004-05 and further vide order dated 09.10.2014 in ITA No.1260/M/2013 for A.Y. 2005-06.

Ground No.2

6. The ground No.2 raised by the Revenue is relating to the disallowance under section 14A of the Act. The Ld. A.R. of the assessee has stated that the Ld. CIT(A) restricted the disallowance to the extent of expenditure claimed by the assessee in the P & L account. The Ld. CIT(A) has observed that the total expenses debited in the P & L account is at Rs.57,492/-. The AO himself has 6 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

restricted the amount of disallowance to that extent. As per law, the disallowance of expenditure cannot go beyond the total expenditure claimed by the assessee in the P & L account. Under such circumstances, there is no infirmity in the order of the Ld. CIT(A) in restricting the total disallowance under section 14A to the extent of total expenditure debited in the P & L account. This ground of the appeal of the Revenue is therefore dismissed.

7. Now we take up the assessee's Cross objections C.O. No.93/M/2013

8. The assessee has raised the following cross objections:

"1. The learned Commissioner (Appeals) erred in holding that the amounts received by the Company from the Estate of EFD were not advances but sale proceeds of the properties of the EFD Trust, without prejudice to his decision for not taxing the same, as the nature of the amounts received was covered in the favour of the appellant by the orders of the CIT (A) and ITAT, where it was held that the amounts received are capital receipts and is therefore not taxable.

2. The learned Commissioner (Appeals) erred in disposing off the appellants appeal against the penalty proceedings u/s.271 (1) (c) on the grounds that it was not appealable u/s.246A of the Income-tax Act, 1961.

3. Each of the above grounds of appeal is without prejudice to the other.

4. The appellant reserves the right to amend, alter or add to any of the above Grounds of Appeal."

9. In view of the declaration made by the assessee under section 158A of the Act, the grounds raised by the assessee vide cross objection have become infructuous and the same are accordingly dismissed.

10. In the result, as per observations made above, the appeal of the Revenue in relation to Ground No.1 is disposed off as per directions given above 7 ITA No.1785/M/2013 & ITA No.93/M/2013 M/s. Sahara Investments Pvt. Ltd.

whereas ground No. 2 of Revenue's appeal is dismissed. The cross objection of the assessee are hereby dismissed.

Order pronounced in the open court on 30.06.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 30.06.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.