ASST CIT 5(3)(2), MUMBAI V. SANGHAVI EXPORTS INTERNATIONAL P. LTD, MUMBAI

ITA 1090/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9941 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI RAJENDRA, HON'BLE ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO .1 089 /MUM/201 6 (A.Y: 2009 - 10) D.C.I.T 5(3)(1) ROOM NO . 573 , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V . M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD . CE 4011, 4012, 4013, DIAMOND BOURSE, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400051 PAN NO: AA KCS 7350 N (APPELLANT) (RESPONDENT) ITA NO . 1090 /MUM/2016 (A.Y : 2008 - 09 ) A .C.I.T 5( 3)(2 ) ROOM NO. 519 , AAYAKAR BHAVAN, 5 TH FLOOR M.K. ROAD, MUMBAI - 400 020 V. M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD . CE 4011, 4012, 4013, DIAMOND BOURSE, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400051 PAN NO: AA KCS 7350 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUCHEK ANCHALIYA DEPARTMENT BY : SHRI V. JUSTIN DATE OF HEARING : 15.03.2018 DATE OF PRONOUNCEMENT : 16 .03.2018 2 ITA NO.1089 & 1090/MUM/2016 (A.Y: 2009 - 10 & 2008 - 09) M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD O R D E R PER C.N. PRASAD (JM) 1. THESE TWO APPEA LS ARE FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2009 - 10 AND 2008 - 09 RESPECTIVELY. 2. IN SO FAR AS THE APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 IS CONCERNED , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT RECEIVE ANY EXEMPT INCOME AND THEREFORE NO DISALLOWANCE IS ATTRACTED U/S. 14A OF THE ACT. 3. LD.DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ASSESSMENT ORDER AND T HE APPELLATE ORDER , WE COULD NOT SEE ANY FINDING GIVEN BY THE AUTHORITIES THAT THE ASSESSEE HAS NOT EARNED THE EXEMPT INCOME DURING THIS ASSESSMENT YEAR. WE ALSO FIND THAT THE ASSESSEE NEITHER FILED AN APPEAL NOR CROSS OBJECTION BEFORE US CONTENDING TH AT THE ASSESSEE DID NOT RECEIVE ANY DIVIDEND INCOME AND THEREFORE THERE SHOULD NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT. IN THE ABSENCE OF APPEAL OR CROSS OBJECTION BY THE ASSESSEE THE CONTENTIONS OF THE ASSESSEE CANNOT BE ACCEPTED IN TH E APPEAL FILED BY THE REVENUE. 3 ITA NO.1089 & 1090/MUM/2016 (A.Y: 2009 - 10 & 2008 - 09) M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD 5. IN BOTH THESE APPEALS THE REVENUE AGITATED THE ORDERS OF THE LD.CIT(A) IN DELETING THE DI SALLOWANCE UNDER RULE 8D2(II) R.W.S. 14A OF THE ACT . 6. IN BOTH THESE YEARS THE ASSESSMENTS WERE COMPLETED U/S. 143(3) AND WHILE COMPLETING THE ASSESSMENTS THE ASSESSING OFFICER DISALLOWED EXPENSES ATTRIBUTABLE FOR EARNING THE DIVIDEND INCOME UNDER RULE 8D2(II) BEING INTEREST AND ALSO ADMINISTRATIVE EXPENSES UNDER RULE 8D2(III) . LD.CIT(A) AFTER EXAMINING THE ACCOUNTS OF THE ASSESSEE AND NOTICING THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS TO TAKE CARE OF THE INVESTMENTS, HE DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE UNDER R ULE 8D2(II) IN RESPECT OF INTEREST BUT SUSTAINED THE DISALLOWANCE MADE UNDER RULE 8D2(III) OF I.T. RULES . 7. LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND SUBMITTED THAT THERE IS NO JUSTIFICATION IN DELETING THE DISALLOWANCE MADE UNDER RULE 8D2(II) OF I.T. RULES. 8. LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE LD.CIT(A). 9. ON A PERUSAL OF THE ORDERS OF THE LD.CIT(A) , WE FIND THAT THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL, 4 ITA NO.1089 & 1090/MUM/2016 (A.Y: 2009 - 10 & 2008 - 09) M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD RESERVES AND SURPLUS AND THE INVESTMENTS MADE BY THE ASSESSEE ARE FAR BELOW THAN THE SURPLUS FUNDS. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE CIT V. HDFC BANK LTD [366 ITR 505] IF THE ASSESSEE HAD SUFFICIENT OWN FUNDS F OR M AKING INVESTMENTS A PRESUMPTION CAN BE DR AWN THAT THE INVESTMENTS IN TAX FREE SECURITIES MUST BE DEEME D TO HAVE COME OUT OF OWN FUNDS AND NOT FROM BORROWED FUNDS AND THEREFORE NO DISALLOWA NCE U/S. 14A IS REQUIRED TO BE MADE. IT IS THE FINDING OF THE LD.CIT(A) THAT ASSESSEE HAS SUFFICIENT OWN FUN DS FOR MAKING TAX FREE INVESTMENTS AND SINCE THIS FINDING IS NOT CONTROVERTED WITH EVIDENCES BY THE REVENUE , RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. HDFC BANK LTD [366 ITR 505], WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS OF REVENUE. 10. IN THE RESULT, REVENUE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 16 TH MARCH , 2018 . SD/ - SD/ - ( RAJENDRA ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED . 16 / 03 / 2018 GIRIDHAR , S R. PS 5 ITA NO.1089 & 1090/MUM/2016 (A.Y: 2009 - 10 & 2008 - 09) M/S. SANGHAVI EXPORTS INTERNATIONAL P. LTD COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM