ASC ENTERPRISES LTD ( NOW DISH TV INDIA LTD), MUMBAI V. ACIT CIR 6(1), MUMBAI

ITA 1428/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8683 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: K SHIVARAM
• Keywords: Rule 8D; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGHA VAN (JM) I.T.A.NO.1428/MUM/2009 (A.Y. 2005-06) M/S. ASC ENTERPRISES LTD. (NOW DISH INDIA LTD.), MADHU INDL. ESTATE, 4 TH FLOOR, PANDURANG BUDHKAR MARG, WORLI, MUMBAI-400 018. PAN: AAACA5478M VS. ASST.COMMR. OF INCOME-TAX, CIR. 6(1), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI K. SHIVARAM RESPONDENT BY SHRI SHR AVAN KUMAR. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT (A) ON 05-12-2008 IN RELATION TO THE ASSTT. YEA R 2005-06. 2. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.61,11,115/- (STATED TO BE WRONGLY MENTIONED AS R S.6,11,115/-) TOWARDS INTEREST. BRIEFLY STATED FACTS OF THIS GROUND ARE T HAT THE ASSESSEE CLAIMED DEDUCTION TOWARDS INTEREST AMOUNTING TO RS.3,06,46, 564/- AND ALSO SIMULTANEOUSLY OFFERED INTEREST INCOME OF RS.2,69,5 3,348/-. THE AO NOTED THAT THE ASSESSEE HAD MADE INTEREST FREE ADVANCES TO ITS SISTER CONCERNS AMOUNTING TO RS.1,22,32,87,324/-. ON PAGE 2 OF THE ASSESSMENT OR DER, A CHART HAS BEEN PREPARED INDICATING TOTAL FUNDS AVAILABLE WITH THE ASSESSEE AT RS.4,59,31,59,102/- AND BORROWED FUNDS AT RS.14,92, 26,202/-. THE AO WORKED OUT THE PERCENTAGE OF BORROWED FUNDS TO TOTAL FUNDS AT 3.24%. CONSIDERING THE ITA NO.1428/M/09 2 TOTAL INTEREST FREE LOANS ADVANCED BY THE ASSESSEE AT RS.122.32 CRORES, IT WAS HELD THAT THE AMOUNT OF INTEREST BEARING BORROWED F UNDS UTILIZED FOR ADVANCING LOANS WERE PROPORTIONATELY AT RS.3,96,34,509/-. INT EREST ATTRIBUTABLE TO THESE INTEREST FREE FUNDS ADVANCED BY THE ASSESSEE WAS WO RKED OUT AT RS.6,11,115/- FOR WHICH THE ADDITION WAS MADE. NO RELIEF WAS ALLO WED IN THE FIRST APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS FOUND FROM THE ASSESSEES BALANCE- SHEET, COPY OF WHICH IS AVAILABLE AT PAGES 3 ONWARDS, THAT THE SHARE CAPITA L ALONG WITH THE RESERVES & SURPLUS REPRESENTING SHAREHOLDERS FUNDS IS AT RS.4 ,443,932,900/-. AS AGAINST THAT, THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE TOTAL INTEREST FREE FUNDS ADVANCED BY THE ASSESSEE ARE AT RS.122.32 CRO RES. IT IS THUS SEEN THAT AS AGAINST THE SHAREHOLDERS FUNDS AMOUNTING TO RS.444 .39 CRORES, ONLY A SUM OF RS.122.32 CRORES HAD BEEN ADVANCED BY THE ASSESSEE WITHOUT INTEREST. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. RELIAN CE UTILITIES & POWERS LTD. (2009) 313 ITR 340 (BOM) HAS HELD THAT IF THERE ARE INTERE ST FREE FUNDS AVAILABLE WITH THE ASSESSEE SUFFICIENT TO MEET ITS INVESTMENT AND AT THE SAME TIME LOAN HAS BEEN RAISED, IT CAN PRESUMED THAT THE INVESTMENTS W ERE MADE FROM INTEREST FREE FUNDS. THE DISALLOWANCE OF INTEREST WAS HELD TO BE NOT SUSTAINABLE BY THE HONBLE HIGH COURT. THIS JUDGMENT IS, IN TURN, BASED ON THE HONBLE APEX COURTS JUDGMENT IN EAST INDIA PHARMACEUTICAL WORKS VS. CIT (1997) 224 ITR 627 (SC). FROM THE FACTUAL POSITION RECORDED ABOVE, IT IS SEE N THAT THE INSTANT GROUND IS SQUARELY COVERED BY THE AFORENOTED DECISION OF THE HONBLE HIGH COURT, AS PER WHICH NO DISALLOWANCE OF INTEREST CAN BE MADE BECAU SE SHAREHOLDERS FUNDS ARE MUCH MORE THAN THE TOTAL INTEREST FREE LOANS ADVANC ED BY THE ASSESSEE COMPANY. THIS GROUND IS, THEREFORE, ALLOWED. 4. GROUND NO. 2 IS AGAINST UPHOLDING DISALLOWANCE O F INTEREST OF RS.62,49,925/- U/S.14A OF THE ACT. ITA NO.1428/M/09 3 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED IN THIS AP PEAL IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) IN WHIC H IT HAS BEEN HELD THAT DISALLOWANCE IS CALLED FOR U/S.14A IN SUCH CIRCUMST ANCES. HOWEVER, THE MANNER OF COMPUTATION OF SUCH DISALLOWANCE HAS BEEN RESTORED TO THE FILE OF AO FOR MAKING ON SOME REASONABLE BASIS. IT HAS FURTHER BEEN HELD IN THIS CASE THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE AS THESE ARE PROSPECTIVE . RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE IMPUGNED ORDER AND DIRE CT THE AO TO COMPUTE DISALLOWANCE U/S.14A. IF ANY, IN ACCORDANCE WITH T HE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORENOTED CASE OF GODREJ & BOYCE LTD. 6. IN THE RESULT THE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED ON THE 28TH DAY OF JANUARY, 2 011. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI: 28TH JANUARY , 2011. NG: COPY TO : 1.ASSESSEE. 2. DEPARTMENT. 3 CIT(A)-VI,MUMBAI. 4 CIT,CITY-6,MUMBAI. 5.DR,A BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.1428/M/09 4 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 19-01- 2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 19-01- 2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *