Mustang Trading & Investments P Ltd., CHENNAI V. ACIT, CHENNAI

ITA 114/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3947 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R VIJAY RAGHAVAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , . . ' # $ , % &' ( [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T.A.NO.114/MDS/2016 / ASSESSMENT YEAR: 2010-11 M/S . MUSTANG TRADING & INVESTMENTS (P) LTD., ELDORADO 5 TH FLOOR, 112,NUNGAMBAKKAM HIGH ROAD CHENNAI 600 034 [PAN: AAACM4620P] VS. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(1), CHENNAI 600 031 ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI R . VIJAYRAGHAVAN , ADVOCATE /RESPONDENT BY : SHRI A . V . SREEKANTH, JCIT / DATE OF HEARING : 01 .1 1 .2016 ! / DATE OF PRONOUNCEMENT : 23 . 11.2016 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-8, CHENNAI DATED 26.10.2015 AN D PERTAINS TO ASSESSMENT YEAR 2010-11. 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE DISALL OWANCE MADE BY THE ASSESSEE UNDER SECTION 14A R.W. RULE 8D OF INCOME T AX RULES. FOR THE ASSESSMENT ORDER 2010-11, THE ASSESSING OFFICER REC EIVED A SUM OF RS.67,51,987/- AS DIVIDEND BUT NOT MADE ANY DISALL OWANCE OF EXPENDITURE :: 2 :: ITA NO.114/MDS/2016 INCURRED IN RELATION TO THE EARNING OF DIVIDEND INC OME. THEREFORE, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A R.W. RULE 8D AND DISALLOWED THE AMOUNT OF RS.1,29,29,556/-. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE WENT ON BE FORE THE COMMISSIONER OF INCOME TAX(APPEALS) AND ARGUED THAT THE ASSESSEE MADE INVESTMENTS FROM ITS OWN FUNDS AND ALSO DEALING IN SHARE TRADING AND HENCE THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE IN THE ASSESSEES CA SE. THE LD. CIT(APPEALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND DIS MISSED THE ASSESSEES APPEAL, PLACING RELIANCE ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD., (328 ITR 81) (BOM), CIT V. RELIANCE UTILITIES & POSER LTD. [2009] 313 ITR 340 / 178 TAXMAN 135 (B OM.) AND THIRD MEMBER DECISION OF THE HONBLE ITAT, MUMBAI D BENCH IN THE CASE OF D.H. SECURITIES (P) LTD. VS. DCIT [146 ITD 1]. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE FILED APPEAL BEFORE THIS TRIBUNAL AND ARGUED THAT THE ASEESEE HA S OWN FUNDS FROM WHICH IT HAS MADE THE INVESTMENTS AND THE ASSESSEE IS ALSO D EALING IN SHARES AND SECURITIES AND HENCE, THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE IN THIS CASE. FURTHER, THE LD.AR SUBMITTED THAT ON IDENTIC AL FACTS IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-1 0 IN ITA NO.1455 & 1456/MDS/2013, HONBLE ITAT, CHENNAI REMITTED THE I SSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH. ON THE OTHER HAND, LD.DR RELIED ON ORDERS OF THE L OWER AUTHORITIES. :: 3 :: ITA NO.114/MDS/2016 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. ON IDENTICAL FACTS IN A SSESSES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 IN ITA NO.1455 & 1456/MDS/2013, HONBLE ITAT, CHENNAI REMITTED THE ISSUE BACK TO THE FILE O F THE ASSESSING OFFICER WITH THE FOLLOWING DIRECTIONS. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. IMPUGNED ASSESSMENT YEAR BEING 2009-10, ASSESSING OFFICER WA S ENTITLED TO INVOKE SECTION 14A READ ALONG WITH RULE 8D. NEVERTHELESS, ARGUMENT OF THE ASSESSEE BEFORE THE A.O. WAS THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATIO N TO THE INVESTMENTS WHICH HAD RESULTED IN TAX-FREE INCOME. ASSESSEE HAD SPECIFICA LLY MENTIONED THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME OF RS.1,08,367/-. ASSESSEE ALSO MENTIONED THAT INVESTMENTS MADE IN THE EARLIER YEAR S WERE FROM SURPLUS FUNDS WITH IT. ASSESSING OFFICER THOUGH HE MENTIONED THAT THE CLAI M OF THE ASSESSEE WAS NOT ACCEPTABLE, HAD NOT MADE A VERIFICATION AS TO WHETH ER INTEREST EXPENDITURE INCURRED WAS IN RELATION TO TERM LOANS RAISED FROM M/S IL&FS , WHICH WERE USED FOR PURPOSES OTHER THAN INVESTMENTS WHICH EARNED TAX-FREE INCOME . RULE 8D CAN BE INVOKED ONLY IF ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORREC TNESS OF THE CLAIM OF THE ASSESSEE REGARDING THE EXPENDITURE INCURRED FOR EARNING 8 I. T.A. NOS. 1455 & 1456/MDS/13 THE TAX-FREE INCOME. CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. BEST AND CROMPTON ENGINEERING (I.T.A. NO. 1603/MDS/2012 DATE D 16.7.2013), AS WELL AS CALCUTTA BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. CHAMP ION COMMERCIAL COMPANY LTD. (I.T.A. NO. 644/KOL/2012) HAVE HELD THAT UNLESS AND UNTIL I NTEREST EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR MAKING INVESTMENTS RESULTING IN TA XFREE INCOME, A DISALLOWANCE UNDER SUB-CLAUSE (II) TO RULE 8D(2) COULD NOT BE DONE. SI NCE AN ANALYSIS OF THE CLAIM OF ASSESSEE THAT IT HAD INCURRED NO EXPENDITURE FOR EA RNING TAX-FREE INCOME WAS NOT DONE BY THE LOWER AUTHORITIES, WE ARE OF THE OPINION THA T THE MATTER REQUIRES A FRESH LOOK BY THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE REGARDING DISALLOWANCE UNDER SECTION 14A BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 6. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWI NG THE DECISION OF COORDINATE BENCH, WE SET ASIDE THE ORDERS OF THE LO WER AUTHORITIES AND REMIT THE :: 4 :: ITA NO.114/MDS/2016 ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ANA LYZE THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED AND DECIDE THE MATTER A FRESH IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . . ' # $ ) (D.S. SUNDER SINGH) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23 RD NOVEMBER, 2016. EDN &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF