BAPA ESTATE P.LTD, MUMBAI V. ACIT CEN CIR 38, MUMBAI

ITA 1490/MUM/2015

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4301 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD DR
• Assessee Lawyers: REEPAL G TRALSHAWALA LD
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1490/MUM/2015 ( ASSESSMENT YEAR: 2010-11) BAPA REAL ESTATE PRIVATE LIMITED 156, MAKER CHAMBER VI 220, JAMNALAL BAJAJ MARG NARIMAN POINT, MUMBAI-400 021 VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-38 AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 ! ' PAN/GIR NO. AABCB-4559-M ( !# APPELLANT ) : ( $%!# RESPONDENT ) A SSESSEE BY : REEPAL G. TRALSHAWALA, LD. AR RE VENUE BY : MANOJ KUMAR SINGH, LD. DR & DATE OF HEARING : 04/10/2018 '() / DATE OF PRONOUNCEMENT : 10/10/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010- 11 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INC OME-TAX (APPEALS)-41 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-41/ACCC-38/IT- 51/13-14 DATED 28/03/2014 QUA CONFIRMATION OF DISALLOWANCE U/S 14A. ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 2. THE REGISTRY HAS NOTED THAT THE APPEAL HAS BEEN FILED WITH A DELAY OF 255 DAYS, THE CONDONATION OF WHICH HAS BEE N SOUGHT BY THE ASSESSEE ON THE STRENGTH OF CONDONATION PETITION & AFFIDAVIT DATED 21/07/2017 EXECUTED BY ONE OF THE DIRECTOR OF THE A SSESSEE COMPANY. THE SAME IS SUPPORTED BY THE AFFIDAVIT DATED 10/03/ 2015 EXECUTED BY STAFF MEMBER OF THE ASSESSEE. THE DELAY HAS BEEN AT TRIBUTED TO THE LAPSE ON THE PART OF THE OFFICE STAFF TO HAND OVER THE IMPUGNED ORDER IN TIME TO THE HEAD OF THE ACCOUNTS DEPARTMENT. SINCE THE CIRCUMSTANCES ARE BEING SUPPORTED BY TWO DULY SWORN AFFIDAVITS, W E CONDONE THE DELAY AND PROCEED TO DISPOSE-OFF THE APPEAL ON MERI TS AS ARGUED BEFORE US. 3. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-38, MUMB AI [AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 15/03/2013 WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS.911. 11 LACS UNDER NORMAL PROVISIONS AFTER CERTAIN ADJUSTMENTS AS AGAI NST RETURNED INCOME OF RS.871.38 LACS E-FILED BY THE ASSESSEE ON 26/09/2010. THE BOOK PROFITS FOR THE PURPOSE OF COMPUTING MINIMUM ALTERNATIVE TAX [ MAT ] U/S 115JB HAS BEEN COMPUTED AT RS.911.11 LACS AS AGAINST RS.864.44 LACS COMPUTED BY THE ASSESSEE. DURING IMP UGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS ENGAGED IN REAL ESTATE & FINANCE ACTIVITIES. THE SOLE SUBJECT MATTER OF THE PRESENT APPEAL IS DISALLOWANCE U/S 14A. ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 4. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE EARNED EXEMPT INCOME BY WAY OF PROFIT FROM PARTNERSHIP FIRMS AMOUNTING TO RS.852.68 LACS AND AGAINST THE SAME, O FFERED SUO-MOTO DISALLOWANCE U/S 14A FOR RS.6,93,277/-. THIS DISALL OWANCE COMPRISED- OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.3 .68 LACS & EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.3.25 LACS. THE C OMPUTATION OF INCOME AS PLACED ON RECORD REVEAL THAT THE SAID DIS ALLOWANCE HAS BEEN WORKED OUT BY CONSIDERING ONLY THOSE INVESTMEN TS WHICH HAS YIELDED EXEMPT INCOME DURING IMPUGNED AY I.E. CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRMS. HOWEVER, DISREGARDING THE SAME, LD. AO WORKED OUT AGGREGATE DISALLOWANCE OF RS.46.66 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II ) FOR RS.25.25 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.21.4 1 LACS. AFTER ADJUSTING SUO-MOTO DISALLOWANCE OF RS.6.93 LACS, THE NET DISALLOWANCE WORKED OUT TO BE RS.39.73 LACS WHICH W AS ADDED TO THE INCOME OF THE ASSESSEE UNDER NORMAL PROVISIONS AS W ELL AS WHILE COMPUTING BOOK PROFITS FOR THE PURPOSE OF MAT U/S 115JB. IT IS PERTINENT TO NOTE THAT DIFFERENCE IN CALCULATIONS A S MADE BY THE ASSESSEE AND AS MADE BY LD. AO STEM FROM THE FACT T HAT LD. AO HAS CONSIDERED THE GROSS FIGURES OF INVESTMENTS IRRESPE CTIVE OF THE FACT THAT WHETHER THE SAME HAS YIELDED ANY EXEMPT INCOME OR NOT WHEREAS THE ASSESSEE HAS CONSIDERED ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING IMPUGNED AY. ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 5. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITHOU T ANY SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 28/03/2014 WHEREIN THE STAND OF LD. AO GOT CONFIRMED, INTER-ALIA, ON THE PREMISE THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE ACCOUNT S FOR THE PURPOSES OF EARNING EXEMPT INCOME AND ALSO COULD NOT PROVIDE D CO-RELATION BETWEEN FUNDS AVAILABLE AND FUNDS DEPLOYED. AGGRIEV ED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI REEPAL G.TRALASHAWALA, DRAWING OUR ATTENTION TO THE FINANCIAL STRUCTURE OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE HAS SUFFICIENT OWNED FUNDS IN THE SHAPE OF SHARE CAPITAL & RESERVES TO MAKE THE AFORESAID INVESTMENTS AND THEREFORE, INTEREST DISAL LOWANCE AS OFFERED BY THE ASSESSEE WAS SUFFICIENT. THE EXPENSES DISALL OWANCE AS COMPUTED BY THE ASSESSEE HAS BEEN JUSTIFIED BY PLAC ING RELIANCE ON THE JUDGMENT OF DELHI TRIBUNAL (SPECIAL BENCH) REND ERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.COM 415]. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH, JUSTIFIED THE STAND OF LOWER AUTHORITIES. 7. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRON OUNCEMENTS CITED BEFORE US. SO FAR AS THE EXPENSE DISALLOWANCE U/R 8 D(2)(III) FOR RS.3.25 LACS AS SUO-MOTO OFFERED BY THE ASSESSEE IS CONCERNED, THE SAME HAS BEEN COMPUTED AFTER CONSIDERING ONLY THOSE INVE STMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE IMPUGNED AY. THIS ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 COMPUTATION IS IN CONSONANCE WITH RATIO LAID DOWN B Y THE CITED DECISION OF THE DELHI TRIBUNAL (SPECIAL BENCH) REND ERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [SUPRA] AND THEREFORE, ACCEPTABLE TO US. RESULTANTLY, THE ADDITIONAL DISALLOWANCE OF RS.18.1 6 LACS [RS.21.41 LACS RS.3.25 LACS] AS WORKED OUT BY LD. AO U/R 8D (2)(III) STAND DELETED. 8. REGARDING INTEREST DISALLOWANCE, THE PERUSAL OF FINANCIAL STATEMENTS AS PLACED ON RECORD, REVEAL THAT THE ASS ESSEES OWN FUNDS IN THE SHAPE OF SHARE CAPITAL & RESERVES FAR EXCEEDS THE INVESTMENTS MADE BY THE ASSESSEE AND THEREFORE, IN CASE OF COMP OSITE FUNDS, A PRESUMPTION IS DRAWN IN ASSESSEES FAVOR THAT THE I NVESTMENTS WERE MADE FROM OWN RESOURCES RATHER THAN FROM BORROWED F UNDS AS PER THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES POWER LTD. [313 ITR 340] & CIT VS. HDFC B ANK [366 ITR 505] . THEREFORE, THE INTEREST DISALLOWANCE AS COMPUTED BY THE ASSESSEE, IN OUR OPINION, WAS QUITE SUFFICIENT TO M EET THE REQUIREMENTS OF LAW. RESULTANTLY, THE ADDITIONAL DISALLOWANCE OF RS.21.57 LACS [RS.25.25 LACS RS.3.68 LACS] AS WORKED OUT BY LD. AO U/R 8D(2)(II) STAND DELETED. 9. IN NUTSHELL, ACCEPTING THE SUO-MOTO DISALLOWANCE OF RS.6.93 LACS AS OFFERED BY THE ASSESSEE, THE ADDITIONAL AGGREGAT E DISALLOWANCE OF RS.39.73 LACS AS MADE BY LD. AO STAND DELETED. 10. THE APPEAL STAND ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2018. ITA NO.1490MUM/2015 BAPA REAL ESTATE PVT.LTD. ASSESSMENT YEAR-2010-11 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED :10.10.2018 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