JAYCEE HOMES LTD, MUMBAI V. ITO 8(2)(1), MUMBAI

ITA 1067/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3283 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2014
• Court: TRIBUNAL
• Section: 143(3); 14A

Judgement Text

, , J, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4299/MUM/2014 ASSESSMENT YEAR: 2010-11 JIGAR COMMODITIES & DERIVATIVES P. LTD., 301-308 BHAGWATI HOUSE, P.LOT A/19 VEERA DESAI RD. ANDHERI (E) MUMBAI- 400058 / VS. ITO - 8(2)(1) , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACJ1728P / ASSESSEE BY SHRI RAJIV KHANDELWAL (AR) / REVENUE BY SHRI ASHISH HELIWAL , (DR) / DATE OF HEARING : 07/03/2016 / DATE OF ORDER: 16/03/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 17 {(IN SHORT CIT(A)}, ORDER DATED 09.04.2014 PAS SED AGAINST ASSESSMENT ORDER U/S. 143(3) OF THE ACT, DATED 20.0 3.2013 FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUND S: JIGAR COMMODITIES & DERIVATIVES P. L. 2 THE FOLLOWING GROUND OF APPEAL IS INDEPENDENT OF, AND WITHOUT PREJUDICE TO, THE OTHER GROUNDS OF APPEAL F OR THE YEAR UNDER REFERENCE: 1. THE COMMISSIONER OF INCOME-TAX APPEALS - 17, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRE D IN UPHOLDING THE ACTION OF THE INCOME-TAX OFFICER 8(2) (1), MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN DISALLOWING A SUM OF RS 22,69,624, ON ACCOUNT OF EXPENSES INCURRED FOR EARNING DIVIDEND INCOME BY INVOKING THE PROVISIONS OF SECTION 14A RE AD WITH RULE 8D. 2. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OU GHT NOT TO HAVE CONFIRMED THE ACTION OF THE ASSESSING O FFICER IN MAKING THE IMPUGNED DISALLOWANCE OF RS 2 2,69,624 INASMUCH AS THE SAME IS NOT IN ACCORDANCE WITH THE PRESCRIPTION OF SECTION 14A READ WITH RULE 8D. 3. THE APPELLANTS FURTHER CONTEND THAT THE ASSESSIN G OFFICER OUGHT TO HAVE INFORMED THE APPELLANTS OF TH E CORRECT CALCULATION OF DISALLOWANCE PER THE PROVISI ONS OF SECTION 14A R.W. RULE 8D (REFE R CIRCULAR NO. 14 (XL-35) OF 1955). 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI RAJIV KHANDELWAL, AUTHORISED REPRESENTATIVE (A R) ON BEHALF OF THE ASSESSEE AND BY SHRI ASHISH HELIWAL, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE R EVENUE. 3. IT IS NOTED THAT THE ONLY EFFECTIVE ISSUE RAISED I N THIS APPEAL IS WITH REGARD TO DISALLOWANCE MADE BY THE LOWER AU THORITIES U/S 14A. IT WAS SUBMITTED BY THE LD. COUNSEL THAT I N THIS CASE OWN FUNDS OF THE ASSESSE COMBINED WITH INTEREST FRE E FUNDS ARE MORE THAN THE AMOUNT OF INVESTMENT MADE IN THE SHAR ES, AND THEREFORE INTEREST CANNOT BE DISALLOWED IN VIEW OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC 365 I TR 505. IN ADDITION TO THE ABOVE, IT WAS FURTHER SUBMITTED THAT THE JIGAR COMMODITIES & DERIVATIVES P. L. 3 INVESTMENT MADE IN THE SHARES WERE SUBSTANTIALLY IN THE CASE OF GROUP COMPANIES FOR STRATEGIC REASONS. ON THE BA SIS OF BALANCE SHEET AND OTHER PAPERS ENCLOSED ON THE PAPE R BOOK IT WAS SUBMITTED THAT INVESTMENT IN THE GROUP COMPANIE S WAS TO THE TUNE OF 99.93 % AND THUS INVESTMENT IN OTHER SH ARES WAS MERELY 0.07% OF THE TOTAL INVESTMENT. HE, THEREFORE , ARGUED THAT SINCE THE INVESTMENT WAS NOT FOR THE PURPOSE O F EARNING TAX FREE INCOME, THEREFORE, THE EXPENSES COULD NOT HAVE BEEN DISALLOWED. IN SUPPORT OF HIS ARGUMENTS, HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT DATED 02.09.2015 AS WELL AS CIT VS. ORIENTAL STRUCTURAL ENGINEERS (P.) LTD. 216 TAXMANN 92 AND GARWARE WALL ROPERS LTD. 46 TAXMANN.COM 18 (ITAT MU MBA). 3.1. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE ASSES SEE HAS HIMSELF MADE SUO MOTO DISALLOWANCE, AND THEREFORE DISALLOWANCE TO THAT EXTENT CANNOT BE DELETED AT TH IS STAGE. SINCE THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSE E, ADMITTING OF THE FACTUAL POSITION THAT CERTAIN EXPE NSES WERE INCURRED FOR EARNING TAX FREE INCOME, AND THEREFORE , ASSESSEE CANNOT TAKE A U- TURN AND CHANGE THIS FACTUAL POSIT ION. 3.2. WE HAVE GONE THROUGH ORDER OF LOWER AUTHORITIES AN D COPIES OF JUDGMENT PLACED BEFORE US AS WELL AS BALA NCE SHEET AND OTHER DOCUMENTS SHOWN TO US. FROM THE PERUSAL OF THE BALANCE SHEET IT IS NOTED THAT OWN F UNDS OF THE ASSESSEE AND INTEREST FREE FUNDS COMBINED TOGET HER AGGREGATED TO RS. 48.37 CRORES WHEREAS, THE TOTAL JIGAR COMMODITIES & DERIVATIVES P. L. 4 INVESTMENT MADE IN THE SHARES IS AROUND RS.45.33 CRORES. THUS, APPARENTLY, INTEREST FREE FUNDS ARE M ORE THAN THE AMOUNT OF INVESTMENT. THUS, IN VIEW OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F HDFC, (SUPRA), WE FIND THAT DISALLOWANCE OF INTERES T U/S 14A WAS UNCALLED FOR. FURTHER IT IS NOTED BY US THA T SUBSTANTIAL INVESTMENT MADE BY THE ASSESSEE IS IN T HE GROUP COMPANIES ONLY, CLAIMED TO BE FOR THE STRATEG IC REASONS, APPARENTLY. THE POSITION OF LAW WHICH HAS BEEN EMERGED AS ON DATE IS THAT INVESTMENT MADE FOR STRA TEGIC REASONS AND NOT FOR EARNING TAX-FREE INCOME, SHOULD NOT BE CONSIDERED FOR MAKING DISALLOWANCE UNDER RULE 8D . THEREFORE, UNDER THESE CIRCUMSTANCES, TAKING IN THE ACCOUNTS ALL THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE FIND THAT DISALLOWANCE MADE BY THE ASSESSEE SUO MOTO COULD ONLY BE SUSTAINED, AND REST OF THE DISALLOWAN CE MADE BY THE AO IS DIRECTED TO BE DELETED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. SD/- (C.N. PRASAD) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 16/ 03 /2016 CTX? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : JIGAR COMMODITIES & DERIVATIVES P. L. 5 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI