BINAYAK TEX PROCESSORS LTD, MUMBAI V. DCIT CEN CIR 6(3), MUMBAI

ITA 1184/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6966 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: SHANKARLAL JAIN LD
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA NO.1184/MUM/2017 BINAYAK TEX PROCESSORS LTD. ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO 1184/MUM/2017 ( / ASSESSMENT YEAR : 2012-13 ) BINAYAK TEX PROCESSORS LTD. C/O SHANKARLAL JAIN & ASSOCIATES LLP 12, ENGINEER BUILDING, 265 PRINCESS STREET, MUMBAI 400 002 / VS. DCIT CENTRAL CIRCL E 6(3 ) AIR BLDG, 19 TH FLOOR NARIMAN POINT MUMBAI 400021. %& ./ ./PAN/GIR NO. AAACB-1554-D ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : MR. SHANKARLAL JAIN- LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD.DR / DATE OF HEARING : 30/01/2020 / DATE OF PRONOUNCEMENT : 05/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-54, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-54/DCCC-6(3)/IT-03/15-16 DATED 19 /12/2016 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO.1184/MUM/2017 BINAYAK TEX PROCESSORS LTD. ASSESSMENT YEAR :2012-13 2 1. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF R S. 3,68,550/- MADE U/S 14A R.W.R. 8D(2)(III) OF THE INCOME TAX ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. THE LD. CIT(A) SHOULD HAVE APPRECIATED THAT APPE LLANT RECEIVED DIVIDEND OF RS.2,000/- ON INVESTMENT OF RS.10,000/- MADE IN SHA RES IN SARASWAT CO-OP. BANK LTD. SUCH DIVIDEND RECEIVED NOT BEING EXEMPT U /S 10(34) OF THE INCOME TAX ACT, THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME , HENCE PROVISION OF SECTION 14A ARE INAPPLICABLE. 3. LD. CIT(A) ERRED IN NOT CONSIDERING THE FACTS TH AT OUT OF THE TOTAL INVESTMENT OF RS.7,37,10,000/- INVESTMENT OF RS. 7,37,00,000/- AR E STRATEGIC INVESTMENTS MADE IN EARLIER ASSESSMENT YEARS, WITHOUT ANY VARIANCE A ND NO DIVIDEND BEING RECEIVED ON THE SAME AND BEING MADE FOR BUSINESS PU RPOSES, NO DISALLOWANCE UNDER RULE 8D(2)(III) IS APPLICABLE ON THE SAME. AS EVIDENT, THE SOLE SUBJECT MATTER OF APPEAL BEFOR E US IS DISALLOWANCE U/S 14A. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN TEXTILE MANUFACTURING WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3) ON 18/03/2015 WHEREIN IT WAS SADDLED WITH DISALLOWANCE U/S 14A FOR RS.28. 07 LACS. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE HAD MADE SHARE INVESTMENTS IN GROUP ENTITIES BUT DI D NOT OFFER ANY SUO- MOTO DISALLOWANCE U/S 14A WHILE COMPUTING THE TOTAL INCOME. THE ASSESSEE SUBMITTED THAT IT RECEIVED MEAGRE DIVIDEND OF RS.2,000/- FROM A CO-OPERATIVE BANK WHICH WAS ALREADY OFFERED TO TA X AND SINCE NO EXPENDITURE WAS INCURRED TO EARN THE DIVIDEND INCOM E, THE PROVISIONS OF SEC.14A WERE NOT APPLICABLE. HOWEVER, REJECTING THE SAME, LD. AO COMPUTED AGGREGATE DISALLOWANCE OF RS.28.07 LACS WH ICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.24.38 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.3.68 LACS. 3. BEFORE LD. CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS THAT SINCE NO EXEMPT INCOME WAS EARNED DURING THE YEAR, NO DISALLOWANCE ITA NO.1184/MUM/2017 BINAYAK TEX PROCESSORS LTD. ASSESSMENT YEAR :2012-13 3 U/S 14A WOULD BE WARRANTED. THE LD. CIT(A) RELYING UPON ITS PREDECESSORS ORDER FOR AY 2011-12 DELETED INTEREST DISALLOWANCE BUT CONFIRMED THE EXPENSES DISALLOWANCE OF RS.3.68 LACS . AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 4. UPON DUE CONSIDERATION OF FACTUAL MATRIX AS ENUM ERATED HEREINABOVE, THE UNDISPUTED POSITION THAT EMERGES I S THE FACT THAT THE ASSESSEE HAS EARNED MEAGRE DIVIDEND INCOME OF RS.2, 000/- ONLY AND THAT TOO HAS BEEN OFFERED TO TAX SINCE THE SAME WAS RECEIVED FROM A CO- OPERATIVE BANK AND THEREFORE, NOT AN EXEMPT INCOME. IN OTHER WORDS, THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME DURING THE YEAR. THIS BEING THE CASE, NO DISALLOWANCE U/R 8D(2)(III) WOULD BE J USTIFIED. THEREFORE, BY DELETING THE EXPENSE DISALLOWANCE OF RS.3.68 LACS A S CONFIRMED BY LD. CIT(A), WE ALLOW THE APPEAL. 5. THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2020. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 05/02/2020 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT ITA NO.1184/MUM/2017 BINAYAK TEX PROCESSORS LTD. ASSESSMENT YEAR :2012-13 4 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 356 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.