RALLIS INDIA LTD, MUMBAI V. ADDL CIT 3(3), MUMBAI

ITA 1095/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1441 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2015
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 1095 / MUM/20 1 5 ( ASSESSMENT YEAR : 2011 - 12 ) RALLIS INDIA LTD., C/O. KALYANIWALLA & MISTRY ARMY & NAVY BUILDING, 3 RD FLOOR, 148, M.G.ROA D FORT, MUMBAI 400 001 VS. ACIT 3(3), MUMBAI 400 020 PAN/GIR NO. AABCR2657N APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI M.M.GOLVALA ALONGWITH SHRI HARMUZT TAMSHEDJI REVENUE BY MS. VINITA J MENON DATE OF HEARING 04 / 04 /201 7 DATE OF PRONOUNCEME NT 06 / 04 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 8, MUMBAI DATED 29/12/2014 FOR THE A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. ONLY GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE MADE U/S.14A R.W.R.8D (2)(III). AT THE OUTSET, LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, DISALLOWANCE MADE UNDER RULE 8D (2)(III) WAS RESTRICTED TO 2% OF THE EXEMPT INCOME IN THE A.Y.2007 - 08, 2008 - 09 AND 2009 - 10. THE PRECISE OBSERVATION OF TRIBUNAL IN ITS ORDER DATED 16/12/2016 IN A.Y. 2009 - 10 WAS AS UNDER: - ITA NO. 1095/MUM/2015 RALLIS INDIA LTD., 2 21. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD IN THE LIGHT OF THE DECISIONS RELIED UPON. IT IS EVIDENT, BEFORE THE FIRST APPELLATE AUTHORITY ASSESSEE HAD SPECIFICALLY TAKEN A PLEA THAT IT HAS OWN INTEREST FREE FUND OF ` 348.67 CRORE TO MAKE THE INVESTMENT OF ` 127 CRORE. HOWEVER , THE AFORESAID CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE LEARNED COMMISSIONER (APPEALS). THE FACT THAT ASSESSEE WAS HAVING SUBSTANTIAL INTEREST FREE FUNDS AVAILABLE WITH IT TO TAKE CARE OF THE EXEMPT INCOME YIELDING INVESTMENT HAS NOT BEEN D ISPUTED BY THE DEPARTMENTAL AUTHORITIES. THEREFORE, APPLYING RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN HDFC BANK LTD. V/S DCIT, [2016] 383 ITR 529 (BOM.) AND CIT V/S HDFC BANK LTD. V/S DCIT, [2014] 366 ITR 505 (BOM.), WE HOLD THAT NO DISA LLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) CAN BE MADE. AS FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) IS CONCERNED, IT IS THE CONTENTION OF THE ASSESSEE THAT ONE OF THE EMPLOYEE IS LOOKING AFTER THE INVESTMENT ACTIVI TY. THEREFORE, THE SALARY COST OF THE EMPLOYEE HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE. WE HAVE NOTED, IN ASSESSMENT YEAR 2007 - 08, THE TRIBUNAL IN ASSESSEE'S OWN CASE HAS M/S. RALLIS INDIA LTD. HELD 2% OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE TO B E A REASONABLE DISALLOWANCE UNDER SECTION 14A . APPLYING THE SAME PRINCIPLE, WE DIRECT THE ASSESSING OFFICER TO DISALLOW 2% OF THE DIVIDEND INCOME UNDER SECTION 14A . THESE GROUNDS ARE PARTLY ALLOWED. 3. WE HAD CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT ASSESSEE SUO - MOTO DISALLOWED THE SUM OF RS.19,905/ - UNDER RULE 8D (2)(III). HOWEVER, AO HAS COMPUTED DISALLOWANCE OF RS.68.40 LAKHS. TR IBUNAL IN ASSESSEE S OWN CASE CONSISTENTLY HAS RECORDED A FINDING TO THE EFFECT THAT ONE OF THE EMPLOYEES WAS LOOKING AFTER INVESTMENT ACTIVITY, S ALARY COST OF WHICH EMPLOYEE HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE. AFTER CONSIDERING THE ENTIRE FACTS A ND CIRCUMSTANCES, THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 2% OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE EXACTLY SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASS ESSEES OWN CASE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 2% OF THE EXEMPT INCOME. WE DIRECT ACCORDINGLY. ITA NO. 1095/MUM/2015 RALLIS INDIA LTD., 3 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 06 / 04 /2017 S D/ - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 06 / 04 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//