Computer Sciences Corporation Business Process Services India Ltd. (Formerly known as Fortune Infotech Ltd.), Vadodara V. The ACIT, Circle-1(1)(2), Vadodara

ITA 119/AHD/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6983 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 119/AHD/2016 ( ASSESSMENT YEAR : 2012-13) COMPUTER SCIENCES CORPORATION BUSINESS PROCESS SERVICES INDIA PVT. LTD. (FORMERLY FORTUNE INFOTECH LTD.) PLOT NO. 160/4, OLD CHHANI ROAD, VADODARA-390024 / VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(2), VADODARA ./ ./ PAN/GIR NO. : AAACC7460R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : ARTI N. SHAH, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR. DR DATE OF HEARING 29/01/2019 !'# / DATE OF PRONOUNCEMENT 26/04/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-1, VADODARA (CIT(A) IN SHORT), DATED 09 .10.2015 ARISING IN THE ASSESSMENT ORDER DATED 19.02.2015 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2012-13. ITA NO. 119/AHD/16 [COMPUTER SCIENCES CORPORATION BUSINESS PROCESS SERVICES INDIA PVT. LTD. VS. ACIT] A.Y. 2012-13 - 2 - 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE BY WAY OF ITS GROUNDS OF APPEAL IS TOWARDS DISALLOWANCE OF RS.22,36,435/- OUT OF EXPENDITURE INCURRED IN TERMS OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE I.T. RULES. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN BUSIN ESS OF IT ENABLES SERVICES IN THE FIELD OF HEALTH CARE & FINA NCIAL SERVICES. IN THE COURSE OF SCRUTINY ASSESSMENT, THE AO OBSERV ED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.3,28,67,9 68/- DURING THE YEAR WHICH WAS CLAIMED AS EXEMPT FROM TAXATION. IT WAS FURTHER NOTICED THAT ASSESSEE HAS SUO MOTU DISALLOWED RS.1,06,654/- UNDER S.14A OF THE ACT AS EXPENSES ON ACCOUNT OF EXEMPTED INCOME. THE AO OBSERVED THAT THERE WAS NO PROPER JUSTIFICATION FOR MAKING SUO MOTU DISALLOWANCE OF RS.1,06,654/- AS AGAINST THE DISALLOWANCE OF RS.23,43,089/- WORKED O UT AS PER RULE 8D(2)(III) FOR DISALLOWANCE OF GENERAL AND ADMINIST RATIVE EXPENDITURE BEING 0.5% OF THE AVERAGE VALUE OF INVE STMENT. THE ESTIMATION OF EXPENSES PER TRANSACTION BY THE ASSES SEE AT RS.1,06,654/- WAS NOT FOUND TO BE ON SOUND BASIS. THE AO ACCORDINGLY DISALLOWED THE REMAINING AMOUNT OF RS.2 2,36,435/- UNDER S.14A R.W. RULE 8D OF THE RULES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN THE FIRST APPEAL ALSO THE ASSESSEE COULD NOT GET ANY RELIEF FROM THE CIT(A). THE CIT(A) EXAMINED ALL FACTUAL A SPECTS IN GREAT LENGTH AND COULD NOT GATHER ANY MERIT IN THE PLEA OF THE ASSESSEE FOR LESSER QUANTIFICATION OF DISALLOWANCE VIS--VIS THE STATUTORY FORMULA PROVIDED FOR IN THIS REGARD. THE CIT(A) ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO. 119/AHD/16 [COMPUTER SCIENCES CORPORATION BUSINESS PROCESS SERVICES INDIA PVT. LTD. VS. ACIT] A.Y. 2012-13 - 3 - 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS ON THE ISSUE AND PERUSED THE MATERIAL REFERRED TO AND RELIED UPON IN THE COU RSE OF HEARING. THE CASE WAS MADE OUT BEFORE US ON BEHALF OF THE AS SESSEE THAT THE COMPUTATION OF DISALLOWANCE OF RS.1,06,654/- WAS MA DE ON THE BASIS OF TIME SPENT BY VARIOUS EMPLOYEES AS DETAILE D IN PAGE 32 OF THE PAPER BOOK. WE DO NOT FIND ANY SUBSTANCE IN TH E WORKING SHOWN BY THE ASSESSEE. THE ASSESSEE HAS NAMED SOME PERSONNEL IN THE LOWER HIERARCHY AND SHOWN HARDLY ANY TIME SP ENT ON MAINTENANCE OF INVESTMENTS. THE CIT(A) HAS EXAMINE D THE ISSUE IN PERSPECTIVE AND FOUND THAT THE DIVIDEND INCOME C ONSTITUTES MORE THAN 20% OF THE TOTAL REVENUE OF THE ASSESSEE COMPANY AND MORE THAN 65% OF THE PROFIT EARNED BY THE ASSESSEE. CONSEQUENTLY, THE REVENUE IN FORM OF DIVIDEND INCOM E IS ONE OF THE MOST IMPORTANT SOURCE OF EARNING OF THE ASSESSE E. THE CIT(A) RIGHTLY OBSERVED THAT CLAIM OF THE ASSESSEE THAT ON LY A SMALL PART OF THE SALARIES PAID TO JUNIOR LEVEL STAFF IS ATTRI BUTABLE TO SUCH LARGE INVESTMENT IS CLEARLY WITHOUT ANY RATIONAL. ON PERUSAL OF THE FINANCIAL STATEMENT FILED BY THE ASSESSEE ALSO, WE OBSERVE THAT THE INVESTMENT IN SHARES AND MUTUAL FUNDS STANDS AT RS. 51.01 CRORES AS AGAINST THE TOTAL OWN FUNDS OF RS.56 CRORE OR SO. APPARENTLY, ALMOST ENTIRE FUND HAS FOUND ITS WAY IN THE INVESTM ENT ACTIVITY. IT IS DIFFICULT TO APPRECIATE THE ARGUMENT CANVASSED O N BEHALF OF THE ASSESSEE THAT THE SENIOR MANAGEMENT/DIRECTORS ETC. HAVE NOT PLAYED ANY ROLE IN SUCH CRUCIAL VENTURE. THE STATU TORY FORMULA FOR ESTIMATION OF EXPENDITURE SQUARELY APPLIED TO THE F ACTS OF THE CASE. WE FIND THAT CIT(A) HAS SEEN THE ISSUE IN THE CONTE XT. THERE IS NO ITA NO. 119/AHD/16 [COMPUTER SCIENCES CORPORATION BUSINESS PROCESS SERVICES INDIA PVT. LTD. VS. ACIT] A.Y. 2012-13 - 4 - APPARENT REASON TO GRANT EXCEPTION TO THE ASSESSEE FROM APPLICATION OF STATUTORY FORMULA. WE THUS DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 26/04/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 26/04/201 9