M/s. Mahavir Steel Industries Ltd., Pune V. Additional Commissioner of Income-tax,

ITA 1437/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1550 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NISHTHA TIWARI
• Assessee Lawyers: R G NAHAR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1437/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2009-10 M/S. MAHAVIR STEEL INDUSTRIES LTD., E/4/24 MIDC, BHOSRI, PUNE 411026 PAN : AABCM1744K ....... / APPELLANT ' / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE 9, AKURDI, PUNE / RESPONDENT ASSESSEE BY : SHRI R.G NAHAR REVENUE BY : MRS. NISHTHA TIWARI / DATE OF HEARING : 01-06-2016 / DATE OF PRONOUNCEMENT : 22-07-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 08-05- 2014 FOR THE ASSESSMENT YEAR 2009-10. THE SOLITARY GROUND RAIS ED BY THE ASSESSEE IN APPEAL IS AGAINST THE DISALLOWANCE OF ` 7,09,857/- U/S. 14A R.W. RULE 8D OF THE INCOME TAX RULES. 2 ITA NO. 1437/PN/2014, A.Y. 2009-10 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEA R ON 10-10-2009 DECLARING TOTAL INCOME OF ` 10,79,81,870/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTIC E U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF SCRUTINY A SSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVE D DIVIDEND INCOME OF ` 1,08,275/-. THE ASSESSEE HAD MADE TOTAL INVESTMENT IN SHARES TO THE TUNE OF ` 1,93,85,617/- AS ON 31-03-2009. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF RULE 8D AND MADE DISALLOWANC E OF ` 7,09,857/- U/S. 14A OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 29-12-2011, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPU GNED ORDER UPHELD THE FINDINGS OF ASSESSING OFFICER AND CONFIRMED THE DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE INCOME TAX RULES. 3. SHRI R.G NAHAR APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED THAT THE OWN FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE FUNDS INVESTED. THE LD. AR OF THE ASSESSEE REFERRED TO THE BALA NCE SHEET OF THE ASSESSEE AT PAGE 23 OF THE PAPER BOOK. THE LD. AR POINTED THAT THE TOTAL INVESTMENT AS ON 31-03-2009 IS ` 1,93,85,617/-, WHEREAS THE ASSESSEE HAS ITS OWN FUNDS COMPRISING OF SHARE CAPITAL AND RESERVES AND SURPLUS AGGREGATING TO ` 63,46,30,409/-. APART FROM THAT THE ASSESSEE HAS PROFIT OF ` 6,90,58,938/-. THE LD. AR FURTHER POINTED THAT THE BORROWED FUNDS IN THE FINANCIAL YEAR ENDING ON 31-03- 2009 HAVE REDUCED FROM THE FINANCIAL YEAR ENDING ON 31-03-2008. THE ASSESSEE 3 ITA NO. 1437/PN/2014, A.Y. 2009-10 HAS BEEN MAKING INVESTMENT OVER THE PERIOD OF TIME, THE IN VESTMENTS OF THE ASSESSEE AS ON 31-03-2008 WERE ` 1,72,40,563/-. THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY CO VERED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMM ISSIONER OF INCOME TAX VS. RELIANCE UTILITIES AND POWER LTD. REPORTED AS 313 ITR 340 (BOM) AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS . HDFC BANK LTD. REPORTED AS 366 ITR 505 (BOM). THE HON'BLE H IGH COURT HAS HELD THAT WHERE BOTH INTEREST FREE AND INTEREST BEARING FUNDS ARE AVAILABLE THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT W OULD BE MADE OUT OF INTEREST FREE FUNDS, IF THE INTEREST FREE FUNDS W ERE SUFFICIENT TO MEET THE INVESTMENTS. 4. ON THE OTHER HAND MRS. NISHTHA TIWARI REPRESENTING T HE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISS IONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION U/S. 14A R.W. RULE 8D. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE TOTAL INVESTMENT OF THE ASSES SEE IN SHARE AS ON 31-03-2009 IS ` 1,93,85,617/-. THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE DURING THE RELEVANT PERIOD ARE AS UNDER : SR. NO. PARTICULARS AMOUNT 1 SHARE CAPITAL ` 1,46,25,000/ - 2 RESERVES & SURPLUS ` 62,00,05,409/ - 3 PROFIT DURING THE YEAR ` 6,90,58,938/ - TOTAL `70,36,89,347/ - 4 ITA NO. 1437/PN/2014, A.Y. 2009-10 6. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF ` 1,08,275/-. AGAINST WHICH THE REVENUE HAS MADE DISALLOWANCE OF ` 7,09,857/- U/S. 14A R.W. RULE 8D. THE DISALLOWANCE MADE BY THE REVENUE U /S. 14A IS ALMOST SEVEN TIMES THE INTEREST FREE INCOME EARNED BY TH E ASSESSEE. FURTHER, IT IS EVIDENT FROM THE RECORDS THAT INTEREST FREE OWN FUNDS AVAILABLE WITH THE ASSESSEE ARE MUCH MORE THAN THE INVES TMENT MADE IN THE SHARES. THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF COMMISSIONER OF INCOME TAX VS. RELIANCE UTILITIES AND POWER L TD. (SUPRA) HAS HELD THAT, IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WO ULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUND G ENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SU FFICIENT TO MEET THE INVESTMENTS. 7. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BA NK LTD. (SUPRA) THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF T RIBUNAL. IN THE SAID CASE THE TRIBUNAL HAD DELETED THE DISALLOWANCE MA DE U/S. 14A ON THE GROUND THAT ASSESSEES OWN FUNDS AND NON-INTER EST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX FREE SEC URITIES. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SUZLON ENERGY LTD. REPORTE D AS 354 ITR 630 (GUJ.). 8. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISIONS DISCUSSED ABOVE, WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR OF THE A SSESSEE. THE REVENUE HAS NOT DISPUTED THE AVAILABILITY OF OWN AND N ON-INTEREST BEARING FUNDS WITH THE ASSESSEE TO COVER THE INVESTMENT S. HOWEVER, IT 5 ITA NO. 1437/PN/2014, A.Y. 2009-10 IS AN UNDISPUTED FACT THAT THE ASSESSEE IS HAVING HUGE INVESTMENT PORTFOLIO. THE ASSESSEE MUST HAVE BEEN INCURRING SAME EX PENDITURE TO MANAGE ITS INVESTMENT PORTFOLIO. KEEPING IN VIEW, THE QUANTU M OF INTEREST FREE INCOME EARNED BY ASSESSEE AND OTHER FACTO RS WE DEEM IT APPROPRIATE TO MAKE DISALLOWANCE OF ` 50,000/- U/S. 14A OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND DAY OF JULY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 22 ND JULY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE