JAMES MACKINTOSH & CO. P.LTD, MUMBAI V. JT CIT RG 2(2), MUMBAI

ITA 1174/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88273 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 16-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Business income
• Section: 14A; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , . , BEFORE SHRI VIJAY PAL RAO , JM AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO.1174/MUM/2013 ( / ASSESSMENT YEAR : 2009-10 ) M/S. JAMES MACKINTOSH & CO.PVT. LTD. DARABSHAW HOUSE BALLARD ESTATE MUMBAI-400 001. / VS. JT. CIT(OSD) RANGE-2(2) MUMBAI. ./ ./PAN/GIR NO. : AAACJ 0988 P ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI NARESH KUMAR ! / RESPONDENT BY : SHRI PREMANAND J. '#$ ! % / DATE OF HEARING : 04/02/2015 &'( ! % / DATE OF PRONOUNCEMENT : 13/02/2015 ) / O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23/11/2012 FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS IN THIS APPEAL. 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED CONFIRMING ORDER OF THE LEARNED ASSESSING OFFICER O F TAXING INTEREST INCOME TO THE EXTENT OF RS.34,87,215/- AS INCOME FROM OTHER SOURC ES INSTEAD OF BUSINESS INCOME. IT IS SUBMITTED THAT SUCH INTEREST INCOME A RE ARISING FROM THE BUSINESS OPERATIONS AND ACCORDINGLY, THE SAME SHOUL D BE TAXED AS BUSINESS INCOME. ACCORDINGLY, THE NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 2. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING ORDER OF THE LEARNED ASSESSING OFFICER MAKING THE D ISALLOWANCE OF RS.25,53,915/- AS AGAINST RS.20,47,676/- MADE BY AP PELLANT UNDER SECTION 2 ITA NO.1174/M/13 14A OF INCOME TAX ACT, 1961 BASED ON ERRONEOUS FIGU RES TAKEN IN RESPECT OF TOTAL ASSETS FOR THE PURPOSE OF CALCULATION OF D ISALLOWANCE U/S 14A R.W. RULE 8D OF INCOME TAX ACT, 1961. IT IS SUBMITTED TH AT SUCH ADDITIONAL DISALLOWED OF RS.5,06,239/- IS UNJUSTIFIED. HENCE, WE PRAY YOUR HONOUR TO DELETE THE SAID ADDITION MADE BY THE LEARNED ASSESSING OFF ICER. 2. GROUND NO.1 REGARDING INTEREST INCOME ASSESSED A S INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. AT THE TIME OF HEARIN G THE LD. AR HAS SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO.1 AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS RAISED NO OBJECTION IF THE G ROUND NO.1 OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ACCORDINGLY GROUND NO.1 O F THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. 3. GROUND NO.2 REGARDING DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. 3.1 WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AS FAR AS APPLICABILITY OF RULE 8D FOR T HE YEAR UNDER CONSIDERATION THE LD. AR HAS NOT RAISED ANY OBJECTION IN VIEW OF JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF GODREJ & BOYCE 328 ITR 81 (BOM.). THE ONLY GRIEVANCE OF THE ASSESSEE IN RESPECT OF DISALLOWANCE UNDER SECTION 14A IS WOR KING OF AVERAGE VALUE OF TOTAL ASSET. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS WORK ED OUT AVERAGE VALUE OF TOTAL ASSET AT RS.55,14,33,421/-. WHEREAS THE AO HAS WORKED OUT THE AVERAGE VALUE OF TOTAL ASSET AT RS.37,33,24,923/- AND THEREBY INCREASE THE DISAL LOWANCE ON ACCOUNT OF INTEREST EXPENDITURE FROM RS.10,61,105 TO RS.15,67,344/-. HE HAS CONTENDED THAT THE AO HAS RECOMPUTED THE AVERAGE VALUE OF THE ASSET WITHOUT G IVING OPPORTUNITY TO THE ASSESSEE AND IT IS NOT CLEAR FROM THE ASSESSMENT ORDER AS TO HOW THE AO HAS ARRIVED TO THE SAID FIGURE OF AVERAGE VALUE OF THE TOTAL ASSET. 3.2 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD WE NOTE THAT THE ASSESSEE HAS WORKED OUT THE DISALLOWANCE UNDER SECTION 14A BY TAKING THE AVERAGE VALUE OF TOTAL ASSET AT RS.55 ,14,33,421/- WHICH WAS FOUND BY THE AO AS NOT CORRECT AND ACCORDINGLY THE AO HAS COMPUT ED THE AVERAGE VALUE OF TOTAL ASSET AT RS.37,33,24,923/- RESULTING IN ENHANCEMENT OF DISALLOWANCE UNDER SECTION 14A 3 ITA NO.1174/M/13 TO THE TUNE OF RS.5,06,239/-. THE ASSESSEE RAISED T HE GROUND OF DISALLOWANCE UNDER SECTION 14A BEFORE CIT(A) ALONGWITH DISALLOWANCE UN DER SECTION 36(1)(III) BEING A DOUBLE DISALLOWANCE ON ACCOUNT OF INTEREST REGARDIN G INTEREST FREE ADVANCE GIVEN TO SISTER CONCERN. CIT(A) HAS DELETED THE DISALLOWANCE MADE UNDER SECTION 36(1)(III) BY HOLDING THAT NO SEPARATE FURTHER DISALLOWANCE UNDER SECTION 36(1)(III) IS CALLED FOR AND ACCORDINGLY CONFIRMED THE DISALLOWANCE MADE UNDER S ECTION 14A. THUS, IT IS CLEAR THAT NEITHER THE AO HAS DISCUSSED IN THE ASSESSMENT ORDE R AS TO HOW THE AVERAGE VALUE OF TOTAL ASSET WAS WORKED OUT NOR CIT(A) HAS GONE INTO THIS ISSUE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS IS SUE TO THE RECORD OF THE AO, FOR A LIMITED PURPOSE, TO GIVE THE ASSESSEE AN OPPORTUNIT Y OF HEARING AS HOW THE AVERAGE VALUE OF ASSET WORKED OUT BY THE AO. HENCE, THE AO HAS TO REDO THE WORKING OF DISALLOWANCE UNDER SECTION 14A AFTER GIVING OPPORTU NITY TO THE ASSESSEE. 4. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/201 5. *) ! &'( ' + ,# - 13/02/2015 ' ! .$ SD/- SD/- (D. KARUNAKARA RAO) (VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER '/$ MUMBAI; ,# DATED 13/02/2015 . # . ./ JV, SR. PS 4 ITA NO.1174/M/13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. '0 ( ) / THE CIT(A)- 4. '0 / CIT 5. 1. %#2 , 2 , '/$ / DR, ITAT, MUMBAI 6. .3 4$ / GUARD FILE. ! ! ! ! / BY ORDER, % % //TRUE COPY// ' '' ' / !# !# !# !# $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.