ACIT CEN CIR 30, MUMBAI V. ORICON ENTERPRISES LTD, MUMBAI

ITA 1145/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83788 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: ANCY KISNADWALA
• Keywords: Earning of tax free income; Condonation of delay
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI , , ! '#$ , % & BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 1145/MUM/2013 ( ' ' ' ' / ASSESSMENT YEAR : 2009-10 THE DCIT, CENT CIR-30, MUMBAI / VS. M/S. ORICON ENTERPRISES LTD., 1076, DR. E. MOSES ROAD, WORLI, MUMBAI-400 066 C.O. NO. 92/MUM/2014 ( ARISING OUT OF I .T.A. NO. 1145/MUM/2013) ( ' ' ' ' / ASSESSMENT YEAR : 2009-10 M/S. ORICON ENTERPRISES LTD., 1076, DR. E. MOSES ROAD, WORLI, MUMBAI-400 066 / VS. THE DCIT, CENT CIR-30, MUMBAI ) % ./ * ./ PAN/GIR NO. : AAACO 0480F ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . / APPELLANT BY: SHRI O.P. MEENA ,-)+ / . / RESPONDENT BY: SHRI ANCY KISNADWALA / 01% / DATE OF HEARING : 09.09.2014 23' / 01% / DATE OF PRONOUNCEMENT :12.09.2014 4 / O R D E R PER N.K. BILLAIYA, AM: ITA NO. 1145/M/13 C.O. NO. 92/M/14 2 THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-39 , MUMBAI DT.6.11.2012 PERTAINING TO A.Y.2009-10. 2. THE SOLE GRIEVANCE OF THE REVENUE READS AS UNDER : THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,52,97,867/- WHICH WA S MADE U/S. 14A OF THE I.T. ACT, 1961, BY APPLYING RULE 8D OF THE I.T. RULES, WITHOUT APPRECIATING FACTS OF THE CASE.: 3. THE GRIEVANCE CONNECTED WITH THE CROSS OBJECTION S OF THE ASSESSEE READ AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS. 9,52,147/- U/S. 14A OF THE ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DELETING THE ENTIRE DISALLOWANCE OF RS. 1,53,19,575 /- COMPUTED BY THE AO U/S. 14A OF THE ACT R.W. RULE 8D OF I.T. RULES, 1962. THE LD. CIT(A) OUGHT TO HAVE HELD THA T NO DISALLOWANCE IS CALLED FOR U/S. 14A OF THE ACT. 3. THE CROSS OBJECTIONS BY THE ASSESSEE ARE LATE BY 26 DAYS. THE ASSESSEE HAS FILED APPLICATION FOR CONDONATION OF D ELAY SUPPORTED BY AN AFFIDAVIT. WE HAVE CAREFULLY PERUSED THE CONTENTS OF THE APPLICATION FOR THE CONDONATION OF DELAY ALONGWITH THE AFFIDAVIT. WE FIND THAT THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUSE THEREFORE THE DELAY OF 26 DAYS IN FILING THE CROSS OBJECTION IS C ONDONED. ITA NO. 1145/M/2013- REVENUES APPEAL 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS BOTH EXEMPT I NCOME YIELDING ITA NO. 1145/M/13 C.O. NO. 92/M/14 3 INVESTMENT AS WELL AS BUSINESS ASSETS IN THE BALANC E SHEET. THE AO FOUND THAT THE ASSESSEE HAS OFFERED AN AMOUNT OF RS. 21,7 08/- U/S. 14A OF THE ACT R.W. RULE 8D. THE AO DID NOT ACCEPT THIS ALLOC ATION OF EXPENDITURE BY THE ASSESSEE AND PROCEEDED TO COMPUTE THE DISALL OWANCE AS PER RULE 8D OF THE ACT. THE DISALLOWANCE WAS COMPUTED AT RS . 1,53,19,575/-. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS STRONGLY CONTENDED THAT OUT OF THE TOTAL INVESTMEN TS, MAJOR AMOUNT OF INVESTMENTS IS IN SHARES OF SUBSIDIARIES/ASSOCIATE COMPANIES WHICH WERE ACQUIRED/ALLOTTED FOR CONSIDERATION OTHER THAN CASH . IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT SINCE THE SHARES WERE A LLOTTED IN CONSIDERATION OF AMALGAMATION/TRANSFER OF BUSINESS FOR WHICH NEIT HER LOAN WAS TAKEN NOR ANY CASH PAYMENT WAS MADE. THEREFORE, THERE IS NO QUESTION OF ALLOCATING INTEREST EXPENDITURE. 5.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD. CIT(A) EXCLUDED THE INVESTMENTS MADE IN THE SUBSIDIARY/ASS OCIATE COMPANIES AND RECOMPUTED THE DISALLOWANCE AS PER RULE 8D AND CONF IRMED THE DISALLOWANCE OF RS. 9,52,147/-. 6. THE REVENUE AND THE ASSESSEE BOTH ARE IN APPEAL AND CROSS OBJECTION AGAINST THIS FINDING OF THE LD. CIT(A). 7. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE S TRONGLY SUPPORTED THE FINDINGS OF THE AO. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED THE BALANCE SHEET OF TH E ASSESSEE. THE ITA NO. 1145/M/13 C.O. NO. 92/M/14 4 UNDISPUTED FACT IS THAT THE ASSESSEE IS HAVING OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND RESERVES AND SURPLUS AMOUNTING TO RS. 101.31 CRORES AS AGAINST THE INVESTMENTS OF RS. 69. 08 CRORES. THIS CLEARLY SHOWS THAT THE ASSESSEE IS HAVING SUFFICIENT OWN FU NDS TO MAKE THE INVESTMENT. FURTHER, WE FIND THAT OUT OF THE TOTAL INVESTMENTS OF RS. 69.08 CRORES, RS. 66.68 CRORES ARE INVESTED IN SUBSIDIARY /ASSOCIATE COMPANIES. FURTHER, WE FIND THAT THE LOAN LIABILITY OF RS. 25. 25 CRORES AS ON 31.3.2008 HAS COME DOWN TO RS. 15.61 CRORES AS ON 31.3.2009 I .E. YEAR UNDER CONSIDERATION. THIS ALSO PROVES THAT THERE ARE NO FRESH BORROWINGS DURING THE YEAR UNDER CONSIDERATION. 9.1. CONSIDERING THE ABOVE STATED FACTS IN TOTALITY , WE DO NOT FIND ANY REASON FOR THE ALLOCATION OF INTEREST EXPENDITURE T OWARDS EARNING OF EXEMPT INCOME. HOWEVER, ALLOCATION OF ADMINISTRATI VE AND OTHER EXPENSES CANNOT BE RULED OUT. THE DISALLOWANCE AS PER RULE 8D (2)(III) AS COMPUTED BY THE LD. CIT(A) COMES TO RS. 2,10,756/-. IN OUR CONSIDERED OPINION, THIS DISALLOWANCE WOULD MEET THE ENDS OF J USTICE. THE TOTAL DISALLOWANCE SUSTAINED IS RS. 2,10.756/-. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 5 DATED : 12 TH SEPTEMBER, 2014 . . ./ RJ , SR. PS ITA NO. 1145/M/13 C.O. NO. 92/M/14 5 4 4 4 4 / // / ,0 ,0 ,0 ,0 6 '0 6 '0 6 '0 6 '0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 89 ,0 , , / DR, ITAT, MUMBAI 6. 9: ; / GUARD FILE. 4 4 4 4 / BY ORDER, -0 ,0 //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI