MAZDA COLOURS LTD., MUMBAI V. THE ADDL.C.I.T., RANGE 1(2), MUMBAI

ITA 1127/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6227 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P N DEVADASAN
• Assessee Lawyers: FALE E H BILIMORIA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1127/MUM/2009 (ASSESSMENT YEAR 2005-06) MAZDA COLOURS LTD, N K MEHTA INTERNATIONAL HOUSE, BABUBHAI CHINAI MARG, 178 BACKBAY RECLAMATION, MUMBAI-400020 PAN: AAACM3864H . APPELLANT VS ADDL.CIT RANGE 1(2) AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 .. RESPONDENT APPELLANT BY : SHRI FALEE H BILIMORIA RESPONDENT BY : SHRI P.N DEVADASAN O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 6.11.2008 OF CIT(A)-I, MUMBAI, FOR THE ASSESSMENT YEAR 2005-06.. 2. THE ASSESSEE RAISED VARIOUS GROUNDS IN THIS APPE AL, HOWEVER, THE ONLY ISSUE ARISES FOR OUR CONSIDERATIO N AND ADJUDICATION IS WHETHER IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE CIT(A) IS JUSTIFIED IN DISALLOWING THE IN TEREST U/S 14A ITA NO. 1127/MUM/2009 (ASSESSMENT YEAR 2005-06) 2 AND APPLYING THE PROVISIONS OF RULE 8D OF THE INCO ME TAX RULES 1962. 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E RELEVANT RECORD. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT ONLY DISALLOWANCE MADE BY THE AO FO R THIS YEAR IS REGARDING INTEREST EXPENDITURE BY APPLYING THE P ROVISIONS OF SECTION 14A. SINCE THE ASSESSEE HAS NOT UTILIZED T HE BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT AND THERE IS NO NEW INVESTMENT DURING THE YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION, THEREFORE, NO DISALLOWANCE IS CALLED FOR. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT FOR T HE ASSESSMENT YEAR: 2004-05, THIS TRIBUNAL IN ASSESSE ES OWN CASE IN ITA NO.. 5135/MUM/2008 VIDE ORDER DATED 4.1 1.2010 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THIS TRIBUNAL HAS ALSO DECI DED SIMILAR ISSUE IN ASSESSEES CASES FOR THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04. THE COPIES OF THE ORDERS FO R ALL THESE ASSESSMENT YEARS ARE FILED IN THE PAPER BOOK AT PAG ES 1 TO 36. THUS, THE LEARNED AR HAS POINTED OUT THAT THE ASSES SEE HAS NOT UTILISED THE BORROWED FUNDS FOR THE PURPOSE OF INVESTMENTS, THEREFORE, NO DISALLOWANCE IS CALLED FOR. 4. THE LEARNED DR HAS SUBMITTED THAT THE ISSUE IS R EQUIRED TO SET ASIDE TO THE FILE OF THE AO FOR THE DECIDIN G THE ISSUE ITA NO. 1127/MUM/2009 (ASSESSMENT YEAR 2005-06) 3 AFRESH IN VIEW OF THE DECISION OF THE HON. JURISDI CTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE LTD REPORTED IN 328 ITR 81(BOM). HE HAS RELIED UPON THE ORDERS OF THE LOWE R AUTHORITIES. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND RELE VANT RECORD, WE NOTE THAT THIS TRIBUNAL IN THE ASSESSEE S APPEAL FOR THE ASSESSMENT YEAR 2004-05 HAS DECIDED THIS ISSUE IN PARAGRAPHS 6 AS UNDER : 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS OF THE CASE AS WELL AS THE ORDERS OF THE ITAT IN EARLIER YEARS IN ASSESSEES OWN CASE. IT IS AN ADMI TTED FACT THAT DURING THE YEAR THE ASSESSEE HAS NOT INVESTED ANY FRESH FUNDS AND EVEN THE A.O. GAVE A FINDING THAT THE INVESTMENT HAS COME DOWN FROM THE BEGINNING OF THE YEAR TO THE END OF THE YEAR AND HA S TAKEN THE AVERAGE INVESTMENT FOR CONSIDERATION IN T HE ASSESSMENT ORDER. WHEN THIS FACT IS VERY CLEAR IN T HE ORDER OF THE A.O. AS WELL IN THE BALANCE SHEET AND THE ENCLOSURES, WE ARE UNABLE TO UNDERSTAND FROM WHERE THE CIT(A) HAS COME TO THE CONCLUSION THAT ASSESSEE HAS INVESTED DURING THE YEAR MORE THAN `1 CRORE OUT OF THE BORROWED FUNDS. AS THE RECORD INDICATES THE ASSESSEE HAS INVESTED IN EARLIER YEARS IN VARIOUS CONCERNS AND PUBLIC LIMITED COMPANIES AND THERE IS A FINDING BY THE ITAT IN EARLIER YEARS, FOLLOWING THE FINDING OF THE CIT(A) IN THOSE YEARS, THAT THE ASSE SSEE HAS NOT INVESTED ANY BORROWED FUNDS IN SHARES AND ACCORDINGLY THE DISALLOWANCE OF INTEREST UNDER SECT ION 36(1)(III) /14A DOES NOT ARISE. IT IS ALSO A FACT T HAT THE CIT(A) IN A.Y. 2001-02 AND 2002-03 CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 10% OF THE DIVIDEND EARNED AND THE SAME WAS ALSO NOT UPHELD BY THE ITAT. DURING THE YEAR THE A.O. HAS NOT CONSIDERED ANY OTHER EXPENDITURE EXCEPT THE INTEREST FOR DISALLOWANCE UNDER SECTION 14A CONSEQUENT TO THE FINDING GIVING IN EARLIER YEARS AND ON THE FACT THA T NO FRESH INVESTMENT HAVE BEEN MADE DURING THE YEAR, TH E DISALLOWANCE CANNOT BE UPHELD. TO THAT EXTENT THE ITA NO. 1127/MUM/2009 (ASSESSMENT YEAR 2005-06) 4 ORDERS OF THE CIT(A) ARE TO BE REVERSED. THE A.O. I S DIRECTED TO ALLOW THE AMOUNTS. THE PLEA THAT THIS I SSUE IS TO BE RE-EXAMINED BY THE A.O. FOLLOWING THE HON' BLE HIGH COURT JUDGEMENT ALSO IS NOT CORRECT AS THE ASSESSEE HAS EARNED ONLY A SMALL AMOUNT OF `17,000/ - AS DIVIDEND INCOME AND AS RIGHTLY HELD BY THE ITAT IN EARLIER YEARS THERE CAN BE NO EXPENDITURE FOR EARNI NG SMALL DIVIDEND INCOME OUT OF THE TOTAL PROFIT OF `4 48.63 LAKHS EARNED BY THE ASSESSEE COMPANY. IN VIEW OF THIS ASSESSEES GROUNDS ARE ALLOWED, FOLLOWING THE PRINCIPLES ESTABLISHED BY THE ITAT ORDERS IN EARLIE R YEARS IN ASSESSEES OWN CASES. 6. SINCE THERE IS NO DISALLOWANCE BY THE AO ON ACC OUNT OF OTHER EXPENDITURES EXCEPT INTEREST, THEREFORE WHEN THIS TRIBUNAL HAS HELD IN THE ORDERS OF EARLIER YEARS T HAT THE ASSESSEE HAS NOT UTILIZED ANY BORROWED FUNDS FOR TH E PURPOSES OF INVESTMENT AND WHEN NO FRESH INVESTMENTS WAS MA DE DURING THE YEAR UNDER CONSIDERATION THEN CONSIDE RATION, IN VIEW OF THE ORDER OF THIS TRIBUNAL (SUPRA) NO DIS ALLOWANCE ON ACCOUNT OF THE INTEREST EXPENDITURE IS JUSTIFIED. ACCORDINGLY, FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE ASSESSE ES OWN CASE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE DISALLOWANCE MADE U/S 14A IS DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2010 SD SD (T.R.SOOD) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 30 TH NOV 2010 SRL:251110 ITA NO. 1127/MUM/2009 (ASSESSMENT YEAR 2005-06) 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI