PET FIBRES LTD, MUMBAI V. DCIT CIR 3(2), MUMBAI

ITA 1212/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2989 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANESH BAREDR
• Assessee Lawyers: ANUJ KISHNADWALAARS
• Keywords: Earning of tax free income; Additional evidence
• Section: 14A; 115JB

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL C BENC H MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./1212/MUM/2014 , /ASSESSMENT YEAR: 2010-11 PET FIBRES LIMITED 11-B, MITTAL TOWER NARIMAN POINT,MUMBAI-400 021. PAN:AAACP 2521 L VS. THE DCIT, CIRCLE-3(2) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI GANESH BARE-DR ASSESSEE BY: SHRI ANUJ KISHNADWALA-ARS / DATE OF HEARING: 23.05.2016 / DATE OF PRONOUNCEMENT: 29.0 6 .2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.18.12.2013 OF CIT(A)-4,MUM BAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES, FILED ITS RETURN OF INCOME 01.10.2010, DECLARING TOTAL IN COME AT RS.NIL AND BOOK PROFIT U/S. 115JB OF THE ACT AT RS.11,29,65,950/-.THE ASSESSMENT OR DER U/S.143(3) OF THE ACT, WAS PASSED ON 04.12.2012, DETERMINING THE TOTAL INCOME OF THE ASS ESSEE AT RS.NIL, THE AO CALCULATED THE BOOK PROFIT U/S. 115JB OF THE ACT RS.11,47,62,323/- . AS THE BOOK PROFIT WAS MORE THAT THE INCOME COMPUTED AS PER THE NORMAL PROVISIONS OF TH E ACT,SO THE AO TOOK THE BOOK PROFIT FOR TAXATION PURPOSES. 2. DURING THE COURSE OF HEARING BEFORE US, THE ASSESSE E FILED AN APPLICATION FOR ADMITTING ADDITIONAL GROUND OF APPEAL.IT WAS STATED THAT THE ONLY GROUND CHALLENGING THE DISALLOWANCE MADE BY THE AO U/S. 14A R.W. RULE 8D HAD BEEN RAISE D, THAT IT HAD BEEN TAXED AS PER MAT PROVISIONS FOR THE YEAR UNDER CONSIDERATION, THAT T HE GROUND CHALLENGING THE DISALLOWANCE U/S. 14A AS PER MAT PROVISIONS U/S. 115JB WAS INADVERTEN TLY NOT AGITATED. THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE STATED THAT ADD ITIONAL GROUND RAISED BY THE ASSESSEE WAS LEGAL IN NATURE AND DID NOT REQUIRE ENQUIRY ABOUT T HE FACTS. DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE OF ADMITTING OF ADDITIONAL EVIDENCE TO THE DISCRETION OF THE BENCH. WE ARE OF THE OPINION THAT THE ISSUE RAISED BY THE ASSESSEE IS PU RE LEGAL ISSUE, THEREFORE, ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED. 1212/M/14-PET FIBRES LTD. 2 3. THE FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT CONFI RMATION OF DISALLOWANCE OF RS.18.21 LAKHS MADE BY AO R.W. RULE 8D.DURING THE ASSESSMENT PROCEEDINGS,THE AO FUND THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.35.93 CRORES, I T HAD RECEIVED EXEMPT INCOME U/S.10 OF THE ACT OF RS.48/-, THAT THE ASSESSEE HAD DISALLOWE D SUM OF RS.25,000/- AS PER PROVISIONS OF SECTION 14A OF THE ACT. VIDE ORDER SHEET ENTRY,DATE D 9.11.2012,THE ASSESSEE WAS ASKED AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U/S. 14A OF THE ACT IN ACCORDANCE TO RULE 8D(2) OF THE ACT. AFTER CONSIDERING THE REPLY OF THE ASSESSEE,DA TED 19.12.12,THE AO HELD THAT THE TERM EXPENDITURE OCCURRING IN SEC.14A WOULD TAKE IN ITS SWEEP NOT ONLY DIRECT EXPENSES BUT ALSO ALL FORMS OF EXPENDITURE REGARDLESS OF WHETHER THEY WERE FIXED , VARIABLE, DIRECT, INDIRECT, ADMINISTRATIVE, MANAGERIAL OR FINANCIAL.APPLYING TH E PROVISIONS OF RULE 8D, THE AO MADE A DISALLOWANCE OF RS.17.96 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED T HAT ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.48/-,THAT IT HAD INCURRED VARIOUS EXPE NSES FOR ITS BUSINESS TO MAINTAIN ITS CORPORATE STATUS AND HAD DISALLOWED RS. 25,000/- AS DISALLOWABLE U/S.14A OF THE ACT, THAT THE AO HAD ATTRIBUTED RS.18.21 LAKHS AS EXPENDITURE IN RELATION TO EARNING OF EXEMPT INCOME, THAT HE HAD REDUCED EXEMPTION AVAILABLE TO THE ASSESSEE U/S.10(34)/115JB OF THE ACT, THAT THE EXPENSES INCURRED WERE ADMINISTRATIVE AND STATUTORY IN NATURE, THAT SAME WERE NOT INCURRED FOR EARNING DIVIDEND INCOME, THAT NO EXPENDITURE COULD BE ALLOCATED TOWARDS EXEMPT INCOME IN THE TERMS OF SECTION 14A OF THE ACT R.W. RULE 8D. A FTER CONSIDERING SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA REFERRED TO THE ORDER OF HIS PREDECESSOR FOR THE AY.2007-08 AND UPHELD THE DISALLOWANCE MADE U/S. 14 A OF THE ACT. HE FURTHER HELD THAT THE ASSESSEE HAD INVESTED RS.36.92 CRORES AND RS.35.93 CRORES ON 31.3.2009 AND 31.3.2010 RESPECTIVELY, THAT THE INCOME FROM THOSE INVESTMENT S WERE NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE, THAT EXPENDITURE CLAIMED BY IT COU LD BE CONSIDERED TO HAVE BEEN INCURRED FOR INCOME NOT INCLUDIBLE IN THE TOTAL INCOME,THAT THE ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE ENTIRE CAPITAL BEING INVESTED IN THE SE CURITIES, THAT THE ASSESSEE HAD NOT GIVEN ANY DETAILS TO WORK THE DIRECT NEXUS OF INTEREST EXPEND ITURE TO THE EXEMPT INCOME .FINALLY, HE UPHELD THE DISALLOWANCE OF RS.17.96 LAKHS . 5. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) CONTEN DED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.48/- ONLY, THAT ON ITS OWN IT HAD DISALLOWED RS.25,000/-, THAT IT HAD PAID SECURITY TRANSACTION TAX OF RS.6.19 LAKHS,THAT AO HAD DISALLOWED RS.18.21 AS EXPENDITURE 1212/M/14-PET FIBRES LTD. 3 IN RELATION TO THE EARNING OF EXEMPT INCOME, THAT H E HAD GIVEN A DISCOUNT OF RS.25,000/-TO THE ASSESSEE OUT OF TOTAL EXPENDITURE, THAT HE HAD REDU CED THE EXEMPTION AVAILABLE TO THE ASSESSEE U/S.10(34)/115JB OF THE ACT,THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE WERE ADMINISTRATIVE AND STATUTORY IN NATURE, THAT SAME WERE NOT INCURRE D FOR EARNING OF DIVIDEND INCOME. DEPARTMENTAL REPRESENTATIVE(DR) RELIED ON THE ORDER OF THE FAA . IN THE CASE UNDER CONSIDERATION, THE ASSESSEE WAS D IRECTED TO FILE A CALCULATION OF DISALLOWANCE UNDER NORMAL PROVISIONS.WE HAVE CONSIDERED THE CALC ULATION FILED BY THE ASSESSEE.WE FIND THAT THE ASSESSEE HAD ITSELF DISALLOWED RS.25,000/ -IN OUR OPINION,TO MEET THE ENDS OF JUSTICE, DISALLOWANCE SHOULD BE RESTRICTED TO RS.50,000/- ON LY.FIRST EFFECTIVE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. 6. THE AO IS DIRECTED TO RECALCULATE THE INCOME AS PER THE MAT PROVISIONS,AS PER THE DECISION TAKEN IN THE EARLIER PARAGRAPH.ADDITIONAL GROUND RA ISED BY THE ASSESSEE STANDS PARTLY ALLOWED. AS A RESULT, APPEAL FILE D BY THE ASSESSEE IS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE,2016. SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29.06.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.