DCIT 1(2), MUMBAI V. JOHN FOWLER (INDIA ) P. LTD, MUMBAI

ITA 1197/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100859 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI KIRAN SR ARDR
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1197/MUM/2014 ASSESSMENT YEAR: 2009-10 D.C.I.T.1(2), R. NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S JOHN FOWLER (INDIA) PVT. LTD. 4 TH FLOOR, 84, RAJ MAHAL BUILDING, VEER NARIMAN ROAD, MUMBAI-400024 ( / REVENUE) ( !'# /ASSESSEE) P.A. NO. AABCJ4396C / REVENUE BY SHRI K. RAVI KIRAN SR. AR-DR !'# / ASSESSEE BY SHRI RAJIV THAKKAR $ % & ' / DATE OF HEARING : 11/08/2015 & ' / DATE OF ORDER: 26/08/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 28/10/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO D ELETING THE DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT , JOHN FOWLER (INDIA) PVT LTD. ITA NO.1197/MUM/2014 2 1961 READ WITH RULE 8D OF THE RULES BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 2. DURING HEARING OF THIS APPEAL, SHRI K. RAVI KIR AN, LD. DR, ADVANCED HIS ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED BY DEFENDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND, SHRI RAJIV T HAKKAR, LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE CONCLUSI ON ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF ENGINEERING WOODS, INVEST MENT OF SURPLUS FUNDS AND AGRICULTURAL ACTIVITIES. THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ASSESSI NG THE TAXABLE LOSS AT RS.81,11,390/-. THE ASSESSING OFFI CER MADE ADDITION OF RS.19,49,582/- U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, BY INCREASING THE DISALLOWANCE FROM RS.34,05,559/-, AS COMPUTED BY TH E ASSESSEE, TO RS.53,55,141/-. THE ASSESSEE FELT AGG RIEVED AND PREFERRED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. 2.2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE FACTS, MATERIAL AVAILABLE ON RECORD AND THE ARGUMENT OF THE ASSESSEE AND BY FOLLOWING THE VARIO US DECISIONS DELETE THE DISALLOWANCE AMOUNTING TO JOHN FOWLER (INDIA) PVT LTD. ITA NO.1197/MUM/2014 3 RS.19,49,582/-. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT WHILE MAKI NG THE DISALLOWANCE U/S 14A R.W.R.8D OF THE RULES, SINCE T HE ASSESSMENT YEAR INVOLVED IS 2009-10, BROADLY, WE AR E IN AGREEMENT WITH THE CONTENTION OF THE LD. DR THAT RU LE 8D WILL BE APPLICABLE. BUT FACT REMAINS THAT THE ASSES SING OFFICER DISALLOWED THE ENTIRE AMOUNT OF FEES PAID T O HDFC. RULE 8D (III) PROVIDES THAT DISALLOWANCE TO BE MADE ON 0.5% OF THE AVERAGE VALUE OF THOSE INVESTMENTS, WHICH YI ELDS EXEMPT INCOME, THEREFORE, DISALLOWANCE CANNOT BE MA DE ON THE TOTAL VALUE OF INVESTMENT. IT IS ALSO NOTED TH AT VIDE LETTER DATED 28/10/2013, THE ASSESSEE FURNISHED THE DETAIL WORKING OF COMPUTATION OF DISALLOWANCE U/S 14A R.W. R 8D OF THE RULES, WHICH HAS BEEN REPRODUCED AT PAGE 6 O NWARDS OF THE IMPUGNED ORDER. WE FIND THAT THE ASSESSING OFFICER TOOK THE WHOLE INVESTMENT INCLUDING THE INVESTMENT FROM WHICH INCOME IS NOT EXEMPT FOR MAKING THE DISALLOWA NCE AND IGNORED THE ALLOCATION OF DIRECT EXPENDITURE WH ICH IS IN THE NATURE OF FEE PAID TO HDFC ASSET MANAGEMENT COM PANY LTD. THE ASSESSEE DULY EXPLAINED WITH FACTS AND FIG URES THAT ENTIRE DIRECT EXPENDITURE IS NOT ATTRIBUTABLE TO TH E EARNING OF EXEMPT INCOME ALONE. THE ASSESSEE ALSO MADE SUO-MOTO JOHN FOWLER (INDIA) PVT LTD. ITA NO.1197/MUM/2014 4 DISALLOWANCE, THUS, WE FIND NO INFIRMITY IN THE CON CLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL S). HIS STAND IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 11/08/2015. SD/ - (ASHWANI TANEJA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 26/08/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1 ( + ) / THE CIT, MUMBAI. 4. 0 0 $ 1 / CIT(A)- , MUMBAI 5. 34 .! , 0 +' ! 5 , $ % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. / BY ORDER, /3+ . //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI