Appeal details
Counselvise Citation
[2018] 121 COUNSELVISE.COM (IT) 9863 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-09-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
Not Allotted
Assessment Year
2011-2012
Appeal Filed On
06-03-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 1536 /MUM/20 1 7 (ASSESSMENT YEAR 20 11 - 12 ) SOLVAY PHARMA INDIA LIMITED (NOW MERGED WITH ABBOTT INDIA LIMITED) 3 - 4, CORPORATE PARK, SI ON TROMBAY ROAD MUMBAI - 400 071. PAN : AAACB5170B VS. ACIT RANGE 2(1)(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI MADHUR AGGRWAL DEPARTMENT BY S HRI NISHANT SOMAIYA DATE OF HEARING 2 6 . 9 . 201 8 DATE OF PRONOUNCEMENT 26 . 9 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7.12.2016 PASSED BY THE LEARNED CIT(A) - 3, MUMBAI AND IT RELATES TO A.Y. 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION RENDERED BY THE LEARNED CIT(A) ON FOLLOWING ISSUES : - (A) DISALLOWANCE MADE U/S. 14A OF THE ACT. (B) CHARGING OF INTEREST U/S. 234C OF THE ACT. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MA NUFACTURE AND SALE OF PHARMACEUTICAL FORMULATIONS THROUGH THIRD PARTIES ON LOAN LICENSEE BASIS. THE ASSESSEE HAD INVESTED HIS FUNDS IN MUTUAL FUND SCHEMES, MAINLY LI QUID FUND SCHEMES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF ` 84.92 LAKHS. THE ASSESSEE DISALLOWED A SUM OF ` 2.19 LAKHS U/S. 14A OF THE ACT. THE ASSESSING OFFICER TOOK THE VIEW THAT DISALLOWANCE SHOULD BE COMPUTED IN ACCORDANCE WITH RULE 8D OF THE I.T. RULES. SOLVAY PHARMA INDIA LIMITED (NOW MERGED WITH ABBOTT INDIA LIMITED) 2 THE ASSESSING OFFICER NOTICED THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE U/R. 8D(2)(I) & 8D(2)(II) OF THE I.T. RULES . THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE U/R. 8D(2)(III) OUT OF ADMINISTRATIVE EXPENSES AT THE RATE OF 0.50% OF THE AVERAGE VALUE OF INVESTMENT S AND DISALLOWED A SUM OF ` 13.18 LAKHS. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. 3. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS INVESTED ITS SURPLUS FUNDS IN LIQUID SCHEME OF MUTUAL FUNDS ONLY, WHICH DOES NOT REQUIRE MUCH ANALYSIS. HE SUBMITTED THAT THE DIVIDEND INC OME IS ALSO EITHER REINVESTED OR RECEIVED DIRECTLY INTO THE BANK ACCOUNT. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS NOT REALLY INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME. HE SUBMITTED THAT THE ASSESSEE HAS , HOWEVER, VOLUNTARILY DISALL OWED A SUM OF ` 2.19 LAKHS TO MEET THE REQUIREMENT S OF SECTION 14A. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF RULE 8D, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WITHOUT POINTING OUT ANY MISTAKES IN THE WORKINGS OF THE ASSESSEE. 4. ON THE CONTRARY, THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 5. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTION S OF THE ASSESSEE. A P ERUSAL OF THE INVESTMENT PORTFOLI O OF THE ASSESSEE WOULD SHOW THAT THE ASSESSEE HAS INVESTED IN FOUR SCHEMES OF MUTUAL FUNDS , OUT OF WHICH TWO ITEMS HAVE BEEN BROUGHT FORWARD FROM EARLIER YEARS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE NEW INVESTMENT S IN ONLY TWO SCHEMES . SINCE INVESTMENT ACTIVITY OF THE ASSESSEE IS LIMITED AS STATED ABOVE, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF RULE 8D OF THE I.T. RULES WITHOUT RECORDING DISSATISFACTION ON THE METHODOLOGY ADOPTED BY THE ASSESSEE. C ONSIDERING LOW LEVEL OF INVESTMENT ACTIVITY, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF ` 2.19 LAKHS MADE BY THE ASSESSEE U/S. 14A OF THE ACT WOULD MEET THE REQUIREMENT S OF SECTION 14A OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE SOLVAY PHARMA INDIA LIMITED (NOW MERGED WITH ABBOTT INDIA LIMITED) 3 LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE DISALLOWANCE MADE BY THE ASSESSEE. 6. THE N EXT ISSUE RELATES TO INTEREST CHARGED U/S. 234C OF THE ACT BY THE ASSESSING OFFICER. THE LEARNED AR SUBMITTED THAT INTEREST U/S. 234C OF THE ACT SHOULD BE COM PUTED ON THE RETURNED INCOME OF THE ASSESSEE AND FURTHER THE ADVANCE TAX PAID BY THE ASSESSEE SHOULD BE CON SIDERED WHILE COMPUTING THE SAME . THE LEARNED AR SUBMITTED THAT THERE WAS ERROR IN THE ASSESSMENT ORDER IN COMPUTING INTEREST U/S. 234C OF THE ACT . 7. WE HAVE HEARD LEARNED DR ON THIS ISSUE. THERE SHOULD NOT BE ANY DISPUTE THAT INTEREST U/S. 234C OF THE ACT HAS TO BE COMPUTED ON THE RETURNED INCOME AS PER MANDATE OF SECTION 234C OF THE ACT , AFTER DULY CONSIDERING THE ADVANCE TAX PAID BY THE ASSESS EE . ACCORDING TO THE LD A.R, THERE IS MISTAKE IN THE COMPUTATION OF INTEREST. HENCE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE CLAIM OF THE ASSESSEE BY DULY CONSIDERING THE RETURNED INCOME AS WELL AS ADVANCE TAX PAID BY THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 26 . 9 .201 8 . SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI ; DATED : 26 / 9 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI SOLVAY PHARMA INDIA LIMITED (NOW MERGED WITH ABBOTT INDIA LIMITED) 4 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI
