WESTERN INDIA STEEL CO. P.LTD, MUMBAI V. DCIT CIR 3(3), MUMBAI

CO 118/MUM/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8762 (ITAT-MUMBAI)
• Duration Of Justice: 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Assessee Lawyers: C A GULANIKAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI H L KARWA, PRESIDENT & SHRI N K BILLAIYA, ACCOUNTANT MEMBER ITA NO.3728/MUM/2012: ASST. YEAR 2009-10 THE DY. CIT CIR. 3(3), MUMBAI. VS. WESTERN INDIA STEEL CO. P. LTD., MITTAL TOWER, A WING, 16 TH FLOOR, RANJI PATEL ROAD, NARIMAN POINT, MUMBAI- 400 021 PAN: AACCP0558K (APPELLANT) (RESPONDENT) AND CO. NO. 118/MUM/2013 (ARISING OUT OF ITA NO.3728/MUM/2012: ASST. YEAR 20 09-10) WESTERN INDIA STEEL CO. P. LTD., MUMBAI VS. THE DY. CIT CIR. 3(3), MUMBAI. (CROSS-OBJECTOR) (RESPONDENT) FOR THE REVENUE : SHRI D.K.SINHA FOR THE ASSESSEE : SHRI C. A GULANIKAR DATE OF HEARING : 19.06.2013 DATE OF PRONOUNCE MENT :26.06.2013 O R D E R PER N.K.BILLAIYA (AM) : THIS APPEAL BY THE REVENUE AND CROSS-OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE CIT(A) -7, MUMBA I DATED 23.01.2012 PERTAINING TO A.Y. 2009-10. 2 ITA NO.3728/MUM/2012 & CO 118/M/13 AY: 2009-2010 2. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN FOLLOWING INCOM E WHICH IT HAD CLAIMED AS EXEMPT FROM INCOME-TAX A) SHARE OF PROFIT FROM BUILDARCH WESTERN (AOP) RS .13,24,594 B) INTEREST RECEIVED (AOP) RS.16,21,387 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME AND ALSO REQUESTED TO SHOW CA USE AS TO WHY THE EXPENSES INCURRED AND CLAIMED IN RESPECT OF EXEMPT INCOME SH OULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE IT RULES. THE ASSESSEE FILED A REPLY DATED 09.11.2011 STATING THAT NO EXPENDITURE IS DIRECTLY INCURRED FOR THE PURPOSES OF EARNING THE EXEMPT INCOME THEREFORE, TH E PROVISIONS OF SECTION 14A DOES NOT APPLY. THE ASSESSING OFFICER DID NOT ACCEPT TH E SUBMISSIONS MADE BY THE ASSESSEE AND CONCLUDED THAT THE ASSESSEE HAS FAILED TO COMPUTE THE ATTRIBUTABLE EXPENSES AS PER RULE 8D. APPLYING RULE 8D, THE ASS ESSING OFFICER COMPUTED THE DISALLOWANCE U/S. 14A AT RS.24,49,972/-. THE ASSES SEE CARRIED THE MATTER BEFORE THE CIT(A) AND EXPLAINED THAT THE ASSESSEE HAS EARNED D IVIDEND OF RS.2,014 ONLY AND SHARE INCOME FROM AOP. THE ASSESSEE FURTHER EXPLAI NED THAT IT HAS SUFFICIENT OWN CAPITAL RESERVES AND SURPLUS TO THE TUNE OF RS.2,27 ,32,842/- WHEREAS THE INVESTMENT MADE BY THE ASSESSEE GENERATING INCOME IS RS.2,24,0 8,172/- ONLY. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESSEE THE CIT(A ) WAS CONVINCED THAT THE ASSESSEE HAD SURPLUS FUNDS FOR MAKING INVESTMENT. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER COULD NOT ESTABLISH THE NEXUS BETWEEN INTEREST EXPENDITURE AND THE INVESTMENT MADE. THE CIT(A) COULD NOT FIND ANY JUSTIFICATION IN MAKING THE DISALLOWANCE OF THE INTEREST EXPENDITURE BY THE ASS ESSING OFFICER. HOWEVER, AT THE SAME TIME, THE CIT(A) WAS OF THE VIEW THAT IT CANNO T BE STATED THAT THE ASSESSEE DID NOT INCUR ADMINISTRATIVE AND OTHER EXPENSES IN EARN ING THE EXEMPT INCOME AND CONFIRMED 0.5% OF THE ADDITIONS MADE BY THE ASSESSI NG OFFICER IN RESPECT OF AVERAGE 3 ITA NO.3728/MUM/2012 & CO 118/M/13 AY: 2009-2010 INVESTMENT. THE REVENUE IS AGGRIEVED BY THIS FINDI NG OF THE CIT(A) AND THE ASSESSEE IS IN CROSS-OBJECTION. 3. BEFORE US THE LEARNED DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. THE COUNSEL FOR THE ASSESSEE REITERATED THAT THE ASSESS EE HAS NOT INCURRED ANY EXPENDITURE WHETHER DIRECTLY OR INDIRECTLY FOR EARN ING EXEMPT INCOME. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD SURPLU S OWN FUNDS AS HAS ALSO BEEN ACCEPTED BY THE CIT(A), OUT OF WHICH IT HAS MADE IN VESTMENT FOR EARNING EXEMPT INCOME. THUS, THERE IS NO QUESTION OF DISALLOWANCE OF ANY DIRECT EXPENDITURE. HOWEVER, AT THE SAME TIME, WE DO NOT FIND ANY REASO N FOR DISALLOWING 0.5% OF AVERAGE INVESTMENT AS MADE BY THE CIT(A). TO THIS EXTENT THE FINDINGS OF THE CIT(A) ARE MODIFIED. THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE CROSS-OBJECTION OF THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, NO DISALLOWANCE IS TO BE MADE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JUNE 2013. SD/- SD/- (H L KARWA) (N.K.BILLAIYA) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT : 26 TH JUNE, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, MUMBAI 4. THE CIT (A)- MUMBAI 5. THE DR, G- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI