MITSUTOR SHIPPING AGENCY P. LTD, MUMBAI V. JT CIT (OSD) 2(2), MUMBAI

ITA 1164/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3574 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Depreciation; Earning of tax free income; Source of fund
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1164/MUM/2013 ( %' ( / ASSESSMENT YEAR: 2009-10) MITSUTOR SHIPPING AGENCY PRIVATE LIMITED 205/206, VARNA CHAMBERS, 2 ND FLOOR, 11, HOMJI STREET, FORT, MUMBAI - 400001 ' / VS. JT. C.I.T. (OSD) 2(2) MAHARSHI KARVE ROAD, MUMBAI ./ ./ PAN/GIR NO. : AAACM3570E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 01.04.2016 !' /DATE OF PRONOUNCEMENT: 08.07.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED PRESENT APPEAL AGAINST THE O RDER DATED 14.12.2012 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 5, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2009-10. ASSESSEE BY: SHRI PANKAJ TOPRANI DEPARTMENT BY: SHRI SUMIT KUMAR ITA NO.1164/M/2013 A.Y. 2009-10 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.5,56,135/- MADE BY THE A.O., U/S.14A. B) THE LEARNED C.I.T.(A) FAILED TO APPRECIATE THAT DISALLOWANCE U/S.14A REQUIRES A FINDING OF INCURRIN G OF EXPENDITURE. IF IT IS FOUND THAT FOR EARNING EXEMP TED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWAN CE U/S. 14A CANNOT STAND. THE COMPANY HAS NOT INCURR ED ANY EXPENDITURE TO EARN TAX FREE INCOME. THE LEARNED J T. CIT HAS MECHANICALLY APPLIED THE PROVISIONS OF SECTION 14A AND RULE 8D. FURTHER THE DIVIDEND INCOME EARNED BY THE COMPANY IS ONLY RS.4,54,057/- WHEREAS THE AMOUNT DISALLOWED IS RS.5,56,135/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED THE RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.4,35,67,765/- ON 24.09.2009. THE RETURN WAS PRO CESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 21.02.2011. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTIC E U/S.143(2) OF THE ACT ON 24.08.2010 WHICH WAS DULY SERVED UPON THE AS SESSEE ON 08.09.2010. THEREAFTER, NOTICE U/S. 142(1) DATED 1 4.02.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS IN THE BUSINESS OF AGENCY OF SHIPPING LINES AND IT ALSO DERIVES INC OME BY WAY OF PROVIDING SERVICES LIKE TRANSPORTATION, CLEARING AN D FORWARDING ETC. DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE DECLA RED DIVIDEND INCOME OF RS.4,54,057/- U/S.10(34) OF THE ACT. THE ASSESSING OFFICER ITA NO.1164/M/2013 A.Y. 2009-10 3 APPLIED THE PROVISION U/S.14A R.W.R.8D OF THE ACT A ND ASSESSED THE EXPENDITURE TO THE TUNE OF RS.5,56,135/-. FEELING AGGRIEVED THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) BUT THE CIT(A) HAS ALSO CONFIRMED THE SAID EXPENSES, THEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D CAREFULLY. AT THE VERY OUTSET THE LEARNED REPRESENTATIVE OF THE ASSES SEE HAS ARGUED THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE D ID ONLY EIGHT TRANSACTIONS AND EARNED THE DIVIDEND (INCOME) TO TH E TUNE OF RS.4,54,057/- BUT THE ASSESSING OFFICER ASSESSED T HE EXPENDITURE MORE THAN THE DIVIDEND INCOME WHICH IS WRONG AGAINS T LAW AND FACTS. IT IS ALSO ARGUED THAT THE ASSESSEE WAS HAVING RESE RVE AND SURPLUS FUNDS MORE THAN THE INVESTMENT, THEREFORE, NO EXPEN SES OF ANY KIND IS REQUIRED TO BE DISALLOWED IN VIEW OF THE LAW SETTLE D IN CIT VS. HERO CYCLES, DECIDED BY P&H HIGH COURT, ON NOVEMBER 4, 2 009. IT IS ALSO ARGUED THAT THE ASSESSEE DID NOT CLAIM ANY EXPENDIT URE TOWARDS EARNING EXEMPT INCOME, THEREFORE, IN THE SAID CIRCU MSTANCES NO DISALLOWANCE OF ANY EXPENDITURE IS REQUIRED, HENCE THE ORDER IN QUESTION IS LIABLE TO BE SET ASIDE IN THE INTEREST OF JUSTICE. 5. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE LE ARNED CIT(A) IN ITA NO.1164/M/2013 A.Y. 2009-10 4 QUESTION. BEFORE DISCUSSING THE MATTER FURTHER IT IS NECESSARY TO ADVERT THE BALANCE SHEET ON RECORD MITSUTOR SHIPPING AGENCY PRIVATE LIMITED BALANCE SHEET AS AT 31 ST MARCH, 2009 SOURCE OF FUNDS SCH MARCH 31, 2009 (RUPEES) MARCH 31, 2008 (RUPEES) 1. SHARE HOLDERS FUND A. SHARE CAPITAL B. RESERVE & SURPLUS A B 1,30,000.00 90.524,518.67 1,30,000.00 70,345,810.72 TOTAL FUNDS EMPLOYED (RS.) 90,654,518.67 70,475,810.72 APPLICATION OF FUNDS 1. FIXED ASSETS GROSS BLOCK LESS: DEPRECIATION NET BLOCK 2. INVESTMENTS 3. CURRENT ASSETS, LOANS & ADVANCES LESS: CURRENT LIABILITIES & PROVISIONS NET CURRENT ASSETS (RS.) 4.PRELIMINARY EXPENSES (TO THE EXTENT NOT WRITTEN OFF) C D E F 72,062,363.81 43,786,071.12 28,276,292.69 103,379,670.01 107,088,133.28 148,089,577.31 (41,001,444.03) 68,730.433.80 42,598,581.11 26,131,852.69 119,074,395.75 68,740,425.91 143,470,863.63 (74,730,437.72) TOTAL APPLICATIONS (RS.) 90,654,518.67 70,475,840.72 NOTES TO THE ACCOUNTS L AS PER OUR REPORTS OF EVEN DATE 5.1 ON APPRAISAL OF THE BALANCE SHEET MENTIONED ABO VE IT IS APPARENT ON RECORD THAT THE ASSESSEE WAS HAVING SUF FICIENT RESERVE AND ITA NO.1164/M/2013 A.Y. 2009-10 5 SURPLUS FUNDS I.E. RS.90,524,518.67 AND THE SHARE CAPITAL OF THE ASSESSEE IS TO THE TUNE OF RS.1,30,000.00. NO DOUB T IN VIEW OF THE SAID CIRCUMSTANCES IT IS ASSUMED THAT THE ASSESSEE INVES TED IN THE SHARE CAPITAL FROM HIS OWN FUNDS. NO DISALLOWANCE OF ANY EXPENDITURE IS REQUIRED TO BE DONE. IN THIS REGARD WE ALSO FOUND SUPPORT OF LAW SETTLED IN CIT VS. HERO CYCLES (SUPRA). FURTHER TH E ASSESSEE EARNED THE DIVIDEND INCOME TO THE TUNE OF RS.4,54,057/- AN D DISALLOWED THE EXPENDITURE TO THE TUNE OF RS.5,56,135/- WHICH IS M ORE THAN THE EARNING. IT IS ALSO NOT PROPER AND JUSTIFIABLE. N OTHING CAME INTO NOTICE THAT THE ASSESSEE HAS CLAIMED THE EXPENDITUR E FOR THE INVESTMENT IN THE SHARES TO EARN THE DIVIDEND INCOME. IN VIEW OF THE SAID CIRCUMSTANCES, IT IS QUITE CLEAR THAT THE ORDER PAS SED BY THE LEARNED CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE BEING IT IS NOT A CASE WHICH FALLS WITHIN THE PURVI EW OF SECTION 14A R.W. RULE 8D OF THE ACT. ACCORDINGLY, WE DELETE TH E SAID EXPENDITURE TO THE TUNE OF RS.5,56,135/- U/S.14A R.W.RULE 8D OF THE ACT. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 8 TH JULY, 2016 MP MP MP MP ITA NO.1164/M/2013 A.Y. 2009-10 6 * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI