ROBUST MARKETING SERVICES P.LTD, MUMBAI V. DCIT RG 7(2), MUMBAI

ITA 1238/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0357 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD DR
• Assessee Lawyers: SANJEEV JOSHI LD
• Section: 143(3); 14A

Judgement Text

ITA.NO.1238/MUM/2016 ROBUST MARKETING SERVICES PRIVATE LIMITED ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1238/MUM/2016 ( ASSESSMENT YEAR: 2011-12) ROBUST MARKETING SERVICES PRIVATE LIMITED FLAT NO.502, 5 TH FLOOR STERLING HERITAGE, PLOT NO.388 SANKARA MATTAM ROAD MATUNGA (CR)MUMBAI-400 019 VS. ASSISTANT COMMISSIONER OF INCOME TAX RANGE-7(2) ROOM NO. 624, 6 TH FLOOR AAYKAR BHAVAN M.K.ROAD,MUMBAI-400 020 ! ' PAN/GIR NO. AABCR-7635-J ( !# APPELLANT ) : ( $%!# RESPONDENT ) ASSESSEE BY : SANJEEV JOSHI, LD. AR REVENUE BY : RAM TIWARI, LD. DR & DATE OF HEARING : 25/07/2018 '() / DATE OF PRONOUNCEMENT : 12/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-14 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-14/IT-341/13-14 DATED 31/12/2015 QUA CONFIRMATION OF DISALLOWANCE U/S 14A. THE ASSESSMEN T FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-7(2), ITA.NO.1238/MUM/2016 ROBUST MARKETING SERVICES PRIVATE LIMITED ASSESSMENT YEAR-2011-12 2 MUMBAI [AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 24/01/2014 WHEREIN THE LOSS OF RS.281.91 LACS AS DECLARED BY T HE ASSESSEE IN RETURN OF INCOME E-FILED ON 30/09/2011 HAS BEEN ASSESSED AT RS.106.67 LACS. THE ASSESSEE HAS BEEN SADDLED WITH SOLE DISAL LOWANCE U/S 14A FOR RS.175.24 LACS WHICH IS THE SOLE SUBJECT MATTER OF THIS APPEAL. DURING IMPUGNED AY, THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE, WAS STATED TO BE ENGAGED IN THE BUSINESS OF MARKET DEVELOPMENT OF FERTILIZERS, AGRO PRODUCTS AND ADVISORY SERVICES IN INVESTMENT ACTIVITIES. 2. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.60.87 LACS, WHI CH CALLED FOR DISALLOWANCE U/S 14A. THE ASSESSEE HAD MADE SUO-MOTO DISALLOWANCE AGAINST THE SAME FOR RS.90,094/- IN THE RETURN OF I NCOME. THE ASSESSEE DEFENDED THE SAME VIDE SUBMISSIONS DATED 12/09/2013 BY SUBMITTING THAT THE SHARES WERE HELD AS STOCK-IN-TRADE AND THE REFORE, NO DISALLOWANCE U/S 14A COULD BE MADE IN SUCH A CASE. HOWEVER, NOT CONVINCED, LD. AO, APPLYING RULE 8D WORKED OUT AGGR EGATE IMPUGNED DISALLOWANCE OF RS.175.24 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.164.44 LACS AND E XPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.10.80 LACS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 31/12/2 015 WHEREIN THE ASSESSEE REITERATED THE CONTENTIONS. HOWEVER, LD. C IT(A), RELYING ON THE DECISION OF ITS PREDECESSOR IN ASSESSEES OWN CASE FOR AY 2009-10 CAME TO A CONCLUSION THAT THE ASSESSEE HAD MADE INV ESTMENTS ONLY AS INVESTOR AND NOT AS DEALER AND THEREFORE, THE DISAL LOWANCE WAS JUSTIFIED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA.NO.1238/MUM/2016 ROBUST MARKETING SERVICES PRIVATE LIMITED ASSESSMENT YEAR-2011-12 3 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI. SANJEEV JOSHI, SUBMITTED THAT THE SHARES WERE HELD AS STOCK-IN-TRA DE AND THEREFORE, THE DISALLOWANCE WAS NOT CALLED FOR. REL IANCE HAS BEEN PLACED ON CBDT CIRCULAR NO. 06/2016 DATED 29/02/2016. THE SAME HAS BEEN CONTROVERTED BY LD. DEPARTMENTAL REPRESENTATIVE [DR ], SHRI RAM TIWARI, WHO SUBMITTED THAT THE THERE WAS DIRECT NEXUS OF TH E EXPENDITURE VIS-- VIS INVESTMENTS MADE BY THE ASSESSEE AND MOREOVER I T WAS ACCEPTED POSITION THAT THE ASSESSEE WAS HOLDING THE INVESTME NTS AS INVESTOR ONLY. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND PERUSED RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE ARE OF THE CONSIDERED OPINION THAT FOR THE PURPOSE OF COMPUTING DISALLOWA NCE U/S 14A, NOW IT IS IMMATERIAL WHETHER THE INVESTMENTS WERE HELD AS INV ESTOR OR AS STOCK-IN- TRADE IN THE WAKE OF RECENT DECISION OF HONBLE APE X COURT RENDERED IN MAXOPP INVESTMENT LTD. VS. CIT [91 TAXMANN.COM 154] WHEREIN THE HONBLE COURT HAS UPHELD THE ABOVE PROPOSITION. THE REFORE, THE RELIANCE ON THE AFORESAID CBDT CIRCULAR, IN OUR OPINION, COULD NOT HELP THE ASSESSEE IN ANY MANNER. 6. PROCEEDING FURTHER, UPON PERUSAL OF FINANCIAL ST ATEMENTS AS PLACED BEFORE US, WE FIND THAT AT YEAR-END, THE ASSESSEES SHARE CAPITAL WAS MERE RS.1 LACS AS AGAINST AGGREGATE INVESTMENTS OF RS.34.76 CRORES MADE BY THE ASSESSEE IN SHARES & MUTUAL FUNDS. THE LOANS FUNDS STOOD AT RS.56.25 CRORES WHEREAS ACCUMULATED PROFIT & LOSS ACCOUNT WAS A NEGATIVE FIGURE OF RS.3.67 CRORES. THE ABOVE FACTS LEAD US TO CONCLUDE THAT ALL INVESTMENT WERE FUNDED OUT OF THE LOAN FUN DS AND THEREFORE, DISALLOWANCE U/S 14A WAS RIGHTLY APPLIED TO THE CAS E OF THE ASSESSEE. ITA.NO.1238/MUM/2016 ROBUST MARKETING SERVICES PRIVATE LIMITED ASSESSMENT YEAR-2011-12 4 WE HAVE NO HESITATION IN CONFIRMING THE STAND OF LO WER AUTHORITIES, IN THIS REGARD. 7. SO FAR AS THE ASSESSMENT FOR AY 2009-10, AS RELI ED UPON BY LD. CIT(A), IS CONCERNED, WE FIND THAT THE ASSESSEE CON TESTED THE SAME BEFORE THIS TRIBUNAL VIDE ITA NO.2641/MUM/2014 DATED 24/11/2015 WITHOUT ANY SUCCESS WHEREIN THE MATTER WAS CONCLUDE D AGAINST THE ASSESSEE BY THE TRIBUNAL IN THE FOLLOWING MANNER:- 10. THE NEXT ISSUE URGED BY THE ASSESSEE BEFORE US RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE ASSESSEE HAD EARNED DI VIDEND INCOME OF RS.1,33,720/-, WHICH WAS CLAIMED AS EXEMPT. THE ABO VE SAID DIVIDEND INCOME WAS EARNED OUT OF MUTUAL FUND INVESTMENTS. THE ASSESSEE MADE A DISALLOWANCE OF RS.86,915/- OUT OF INTEREST EXPENDITURE RELATING TO MUTUAL FUND INVESTMENTS AND RS.40,94,203/- AS THE INTEREST RELATING TO INVESTME NTS MADE IN PURCHASE OF SHARES OF M/S DEEPAK FERTILISERS AND CHEMICALS LTD. HOWEVER , DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REQUESTED THE AO TO ALLOW THE INTEREST EXPENDITURE OF RS.40,94,203/- REFERRED ABOVE ON THE GROUNDS THAT THE SHARES OF DEEPAK FERTILIZERS HAVE BEEN PURCHASED AS STOCK IN TRADE. SINCE THE ASSESSING OFFICER HAS HELD THAT THE SHARES OF DEEPAK FERTILIZE RS HAVE BEEN PURCHASED ONLY TO HOLD IT AS INVESTMENTS, THE AO REJECTED THE CLAIM O F THE ASSESSEE AND IT WAS ALSO CONFIRMED BY LD CIT(A). 11. SINCE WE HAVE UPHELD THE VIEW TAKEN BY THE TAX AUTHORITIES AND SINCE THE SHARES OF DEEPAK FERTILIZERS & PETROCHEMICALS LTD HAS BEEN PURCHASED TO HOLD THEM AS INVESTMENTS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SEC. 14A READ WITH RULE 8D SHALL APPL Y. BEFORE US, THE ASSESSEE PLACED RELIANCE ON CERTAIN CASE LAWS TO CONTEND THAT THE D ISALLOWANCE U/S 14A SHOULD NOT EXCEED THE DIVIDEND INCOME. THE LD A.R FURTHER SUBM ITTED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME ONLY FROM MUTUAL FUNDS AND IT DID NOT RECEIVE ANY DIVIDEND FROM DEEPAK FERTILIZERS AND PETROCHEMICALS LTD. ACC ORDINGLY, IT WAS CONTENDED THAT NO DISALLOWANCE IS CALLED FOR IN THE ABSENCE OF DIV IDEND INCOME. 12. HOWEVER, WE NOTICE THAT THE ASSESSEE ITSELF HAS ADMITTED THAT THE SHARES OF DEEPAK FERTILIZERS & PETROCHEMICALS LTD WERE PURCHA SED OUT OF LOAN OF RS.20.75 CRORES TAKEN FROM M/S NOVA SYNTHETICS LTD AND THE A SSESSEE ITSELF HAS COMPUTED THE INTEREST OF RS.40.94 LAKHS AS PERTAINING TO THE INV ESTMENT MADE IN THE SHARES OF DEEPAK FERTILIZERS. HENCE THE INTEREST EXPENDITURE OF RS.40.94 LAKHS CANNOT BE TAKEN AS EXPENDITURE RELATING TO THE BUSINESS CARRI ED ON BY THE ASSESSEE, BUT IT IS RELATED TO THE INVESTMENT MADE IN THE SHARES. HENCE , THE INTEREST EXPENDITURE IS OTHERWISE NOT ALLOWABLE UNDER THE NORMAL PROVISIONS OF THE ACT. ACCORDINGLY, WE CONFIRM THE DISALLOWANCE OF RS.40.94 LAKHS MADE BY THE AO. ITA.NO.1238/MUM/2016 ROBUST MARKETING SERVICES PRIVATE LIMITED ASSESSMENT YEAR-2011-12 5 VIEWED FROM ANY ANGLE, ALL THE GROUNDS URGED BEFORE IN THE APPEAL STAND DISMISSED. 8. RESULTANTLY, THE ASSESSEES APPEAL STAND DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2018. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 12.09.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI