BALAJI INFRA PROJECTS LTD, MUMBAI V. ACIT 2(1), MUMBAI

ITA 1127/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0122 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Unexplained investment; Earning of tax free income
• Section: 143(3); 142(1); 14A; 69

Judgement Text

1 ITAS 1127 & 1560/MUM/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO.1127 /MUM /2013 - AY 2009-10 M/S BALAJI INFRA PROJECTS LTD 6 TH FLOOR, NEW EXCELSIOR BLDG A.K. NAYAK MARG, FORT MUMBAI-1 PAN : AAACB2055M VS ACIT 2(1), MUMBAI APPELLANT RESPONDENT ITA NO.1560/MUM /2013 - AY 2009-10 DY.CIT 2(1), MUMBAI VS M/S BALAJI INFRA PROJECTS L TD MUMBAI APPELLANT RESPONDENT ASSESSEE BY NONE REVENUE BY SHRI SUMAN KUMAR DATE OF HEARING 20-06-2017 DATE OF PRONOUNCEMENT 23- 06-2017 O R D E R PER G MANJUNATHA, AM : THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-4, MUMBAI DATED 24- 12-2012 AND THEY PERTAIN TO AY 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIE S, FILED ITS RETURN OF INCOME FOR THE 2 ITAS 1127 & 1560/MUM/2013 AY 2009-10 ON 01-10-2009 DECLARING LOSS OF RS.9,34, 607. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF T HE ACT WERE ISSUED. IN RESPONSE TO THE NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASSES SEE ATTENDED FROM TIME TO TIME AND FILED THE DETAILS, AS CALLED FOR. THE ASSESSME NT WAS COMPLETED U/S 143(3) ON 30- 12-2011 DETERMINING TOTAL INCOME OF RS.7,39,16,530 INTERALIA BY MAKING DISALLOWANCES TOWARDS SHARE APPLICATION MONEY, DISA LLOWANCE OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME U/S 14A R.W.R. 8 D AND UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORD ER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) IN THE DETAILED DISC USSION IN HIS ORDER DATED 24-12- 2012 PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, W HEREIN HE DELETED ADDITIONS MADE BY THE AO TOWARDS SHARE APPLICATION MONEY AND UNEXP LAINED INVESTMENT U/S 69 OF THE ACT; HOWEVER, SET ASIDE THE ISSUE OF DISALLOWAN CE OF EXPENDITURE U/S 14A R.W.R. 8D TO THE FILE OF THE AO. AGGRIEVED BY THE ORDER O F CIT(A), THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. 3. THE ONLY ISSUE CAME UP FOR OUR CONSIDERATION FROM B OTH THE APPEALS IS DISALLOWANCE OF EXPENDITURE U/S 14A R.W.R. 8D OF TH E INCOME-TAX RULES, 1962. THE FACTS WHICH LEAD TO THE IMPUGNED ADDITION ARE THAT DURING THE FINANCIAL YEAR RELEVANT TO AY 2009-10, THE ASSESSEE HAS EARNED EXEMPT INCOM E BEING DIVIDEND OF RS.2,09,249; HOWEVER, DID NOT DISALLOW ANY EXPENDIT URE INCURRED TO EARN EXEMPT INCOME. THE AO DISALLOWED EXPENDITURE INCURRED TO EARN EXEMPT INCOME BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R. 8D. THE AO HA S CALCULATED THE DISALLOWANCE @0.5% OF AVERAGE VALUE OF INVESTMENT WHICH WORKED O UT TO RS.69,87,634. THE ASSESSEE CLAIMS THAT ITS TOTAL OPERATIVE AND ADMINI STRATIVE EXPENSES ARE AT RS.3,36,38,515 AS PER SCHEDULE 14 TO THE P&L ACCOUN T OUT OF WHICH IT HAD DISALLOWED ON ITS OWN THE ENTIRE ADMINISTRATIVE EXP ENSES EXCLUDING AN AMOUNT OF RS.22,09,380 THEREFORE, THE AO WAS ERRED IN DISALLO WING EXPENDITURE U/S 14A R.W.R. 8D OVER AND ABOVE THE EXPENDITURE DEBITED IN THE P& L ACCOUNT. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E AND ALSO THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS CIT 378 ITR 81(BOM) HELD THAT RULE 8D IS APPLICABLE FROM AY 200 8-09 ONWARDS AND, THEREFORE, THE AO HAS RIGHTLY APPLIED RULE 8D. THE CIT(A) FUR THER OBSERVED THAT DISALLOWANCE OF EXPENDITURE U/S 14A R.W.R.8D CANNOT BE MORE THAN THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. THE ASSESSEE CLAIMS TO HAVE CLAIM ED EXPENDITURE OF RS. 3 ITAS 1127 & 1560/MUM/2013 22,09,380, WHEREAS THE AO HAS DISALLOWED RS.69,87,6 34. SINCE THE EXPENDITURE DISALLOWED U/S 14A CANNOT BE MORE THAN THE EXPENDIT URE CLAIMED, THE CIT(A) SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECTED THE AO TO VERIFY THE TOTAL EXPENSES AND ALSO TO RESTRICT THE DISALLOWANCE U/S 14A TO TH E EXTENT OF EXPENSES CLAIMED. 4. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DIS PUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME. IT IS ALSO AN U NDISPUTED FACT THAT THE ASSESSEE HAS CLAIMED CERTAIN ADMINISTRATIVE EXPENDI TURE, HOWEVER, FAILED TO DISALLOW ANY EXPENDITURE TO EARN EXEMPT INCOME. THE AO HAS INVOKED THE PROVISIONS OF RULE 8D TO DISALLOW EXPENSES @0.5% OF AVERAGE VALUE OF I NVESTMENTS. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE HAS DI RECTED THE AO TO RESTRICT THE DISALLOWANCE OF EXPENSES TO THE EXTENT OF EXPENSES ACTUALLY CLAIMED BY THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXT RACTED BELOW:- 7. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS IONS OF THE ASSESSEE. HON'BLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. CIT 328 ITR 81 THA T RULE 8D IS APPLICABLE FROM A.Y. 08-09 AND, THEREFORE, A.O. HAS RIGHTLY APPLIED RULE 8D. THERE IS NO DISALLOWANCE ON ACCOUNT OF INT EREST AND THE ENTIRE DISALLOWANCE MADE BY THE A.O. AS PER RULE 8D RS.69, 87,634/- IS ON ACCOUNT OF EXPENSES ONLY, WHEREAS, ASSESSEE HAS CLA IMED THAT ITS TOTAL OPERATIVE AND ADMINISTRATIVE EXPENSES ARE RS. 3,36,38,515/- AS CHARGED TO PROFIT AND LOSS A/C. AS PER SCHEDULE 14 TO THE FINAL ACCOUNTS. ASSESSEE HAS FURTHER CLAIMED THAT OUT OF THE TOTAL EXPENSES CHARGED TO PROFIT AND LOSS A/C., ASSESSEE HAS ALREADY OFFERED ALL OTHER EXPENSES FOR DISALLOWANCE EXCEPT RS.22,09,380/-, DETAIL OF WHICH HAS BEEN FILED BY THE ASSESSEE DURI NG APPELLATE PROCEEDINGS. THEREFORE, IN EFFECT THE ASSESSEE HAS CLAIMED ADMINISTRATIVE AND OPERATIVE EXPENSES TO THE EXTENT OF RS.22,09,380/- ONLY AND, THEREFORE, IT IS CLAIMED THAT RULE 8D CANNOT B E APPLIED. WHEREAS, THERE IS NO RESTRICTION IN APPLICATION OF RULE 8D I N SUCH A SITUATION HUT, OF COURSE, THE DISALLOWANCE AS PER RULE 8D U/S. 14A CANNOT BE MORE THAN THE TOTAL EXPENSES CLAIMED. HENCE, THE A.O. IS DIRE CTED TO VERIFY THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE AFTER EX CLUDING WHAT HAS BEEN OFFERED FOR DISALLOWANCE AND THEN RESTRICT THE DISALLOWANCE U/S. 14A TO THE EXTENT OF EXPENSES CLAIMED. THE SAM E IS THE DECISION OF HON'BLE ITAT IN THE CASE OF GILLETTE GROUP INDIA PVT. LTD. 51 SOT 221 (DEL) (URO). IN RESULT, THE GROUND OF APPEAL IS PAR TLY ALLOWED. THE FACTS REMAIN UNCHANGED. THE REVENUE AS WELL AS ASSESSEE FAILED TO BRING ON RECORD ANY EVIDENCES TO PROVE THAT THE FINDINGS OF FACTS RECORDED BY THE CIT(A) IS INCORRECT. THEREFORE, WE UPHOLD THE ORDER OF CIT(A ) AND DISMISS THE APPEALS FILED BY 4 ITAS 1127 & 1560/MUM/2013 THE ASSESSEE AS WELL AS THE REVENUE. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO.1127/MUM/2013 AND APPEAL FILED BY THE REVENUE IN ITA NO.1560/MUM/2013 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUN, 2017. SD/- SD/- (D.T. GARASIA) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 23 RD JUNE, 2017 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI