Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 3218 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-08-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2011-2012
Appeal Filed On
08-01-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO.162/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) THE ACIT- 14(1)(1), 4 TH FLOOR, ROOM NO. 460, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400 020. VS. M/S. ACRON DEVELOPERS (P) LTD. ACRON PLAZA, OPP. SHAH INDUSTRIAL ESTATE, DEONAR, MUMBAI- 400 088. ./ ./ PAN/GIR NO. : AAECA7043C ( ! / APPELLANT ) .. ( '#! / RESPONDENT ) /REVENUE BY : SHRI. O.P. MEENA $%& /ASSESSEE BY : SHRI. DEEPAK TIKEKAR ' ( ) &* / DATE OF HEARING : 17/08/2016 +,-. ) &* / DATE OF PRONOUNCEMENT: 24/08/2016 !' / O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST ORDER DATED 28/10/2014 PASSED BY THE LD. CIT(APPEALS)-21, MUMBA I FOR THE ASSESSMENT YEAR 2011-12, WHEREBY THE LD. CIT(A) HAS DIRECTED T HE ASSESSING OFFICER TO EXCLUDE THE SHARE APPLICATION MONEY OF RS. 13,73,00 ,000/- BEING PART OF INVESTMENT MADE BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE U/S 14A. 2 ITA NO 162/MUM/2015 ASSESSMENT YEAR: 2011-12 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF PROJECT DEVELOPMENT AND RENTING OF PROP ERTIES, FILED ITS RETURN OF INCOME FOR THE A.Y. 2011-12 DECLARING THE TOTAL INC OME OF RS. 6,56,54,270/-. THE ASSESSEE ALSO FILED REVISED RETURN DECLARING TH E TOTAL INCOME OF RS. 6,82,26,590/-. THE A.O COMPLETED THE ASSESSMENT ORD ER U/S 143 (1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) MAKING DI SALLOWANCE OF RS. 42,44,405/- U/S 14A OF THE ACT. IN APPEAL THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SHARE APPLICATION MONEY OF RS. 13,73,00,000/- BEING PART OF INVESTMENT MADE BY THE ASSESSEE FOR T HE PURPOSE OF COMPUTATION OF DISALLOWANCE U/S 14A OF THE ACT APPLYING RULE 8D . 3. THE REVENUE HAS RAISED THE ONLY ISSUE IN APPEAL WHICH READS AS UNDER:- 1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SHARE APPLICATION MONEY OF RS. 13,73,00,000/- BEING PART OF INVESTMENT MADE BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE U/S 14A, WITHOUT APPREC IATING THE FACT THAT THE SAID INVESTMENT WOULD RESULT IN E XEMPT INCOMES WHICH MAY ARISE IN FUTURE, HOWEVER THE EXPE NDITURE PERTAINING TO THE SAID INVESTMENTS IS DEBITED TO TH E P&L ACCOUNT DURING THE F.Y.' 4. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) SUBMITTED THAT THE LD. CIT(A) HAS PASSING THE IMPUGNED ORDER WITHOUT APPRE CIATING THE FACT THAT THE INVESTMENT OF RS. 13,73,00,000/- MADE BY THE ASSESS EE WOULD RESULT IN EXEMPT INCOMES WHICH MAY ARISE IN FUTURE. MOREOVER THE ASS ESSEE HAS DEBITED EXPENDITURE PERTAINING TO THE SAID INVESTMENTS IS I N P & L ACCOUNT DURING THE FINANCIAL YEAR. HENCE, THE ORDER OF THE LD. CIT(A) IS LIABLE TO THE SET ASIDE. 3 ITA NO 162/MUM/2015 ASSESSMENT YEAR: 2011-12 5. ON THE OTHER HAND THE LEARNED AUTHORIZED REPRESE NTATIVE (AR) SUBMITTED THAT THE SHARE APPLICATION IN ACRON HOTELS, ACRON H OSPITALITY AND ACRON INFRA AMOUNTING TO RS. 13,73,00,000/- SHOULD NOT BE INCLU DED WHILE WORKING OF AVERAGE VALUE OF TAX FREE INCOME UNDER RULE 8D(2)(I II) OF THE INCOME TAX RULES. RELYING UPON THE DECISIONS RENDERED BY THE ITAT KOL KATA IN ITA NO. 267/KOL/2013 (CO NO. 29/KOL/2013) DATED 07/10/2015, IN ITO VS. LGW LIMITED, DECISION DATED 16/01/2013 PASSED BY THE ITAT, MUM BAI BENCH IN RAINY INVESTMENTS PVT. LTD. VS. ACIT IN ITA NO. 549 1/MUM/2013 AND DECISION DATED 15/01/2014 PASSED BY THE ITAT MUMBAI IN GARWARE WALL ROPES LTD. VS. ACIT SUBMITTED THAT THE LD. CIT(A) HAS PASSED THE IMPU GNED ORDER AS PER DECISION RENDERED BY THE ITAT BENCHES IN THE CASES AFORESAID. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD CAREFULLY INCLUDING DECISIONS RELIED UPON BY THE PARTIES. W E NOTICE THAT THE IN ITO VS. LGW LTD. (SUPRA), IT HAS BEEN HELD THAT THE SHARE A PPLICATION MONEY GETS CONVERTED INTO SHARES ONLY ON ALLOTMENT BY THE COMP ANY. TILL SUCH TIME THE SHARE APPLICATION MONEY IS CONVERTED INTO SHARES, T HE APPLICANT DOES NOT HAVE ANY RIGHTS OF A SHAREHOLDER/MEMBER. THEREFORE, SHAR E APPLICATION MONEY CANNOT BE CONSIDERED AS INVESTMENT WHICH IS LIKELY TO EARN TAX FREE DIVIDEND INCOME. HENCE, THERE CAN BE NO DISALLOWANCE U/S 14A OF THE ACT. IN GARWARE WALL ROPES LTD. VS. ACIT, THE CO-ORDINATE BENCH HAS HELD THAT WHERE ASSESSEE MADE CERTAIN INVESTMENT WITH AN OBJECT OF ACQUIRING CONTROLLING STAKE IN A GROUP CONCERN AND NOT FOR EARNING ANY INCOME OUT OF INVESTMENT, ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 14A, READ WITH RULE 8D IN ORDER TO DISALLOW A PART OF INCIDENTAL DIVIDE ND INCOME EARNED ON SAID INVESTMENT. SIMILARLY IN RAINY INVESTMENTS PVT. LT D. VS. ACIT(SUPRA) THE CO- ORDINATE BENCH HAS HELD THAT SHARE APPLICATION MONE Y CANNOT BE REGARDED AS AN INVESTMENT IN SHARES, OR AN ASSET YIELDING TAX-F REE INCOME, AND NEITHER IS IT CAPABLE OF YIELDING ANY TAX-FREE INCOME, THUS NO DI SALLOWANCE CAN BE MADE U/S 4 ITA NO 162/MUM/2015 ASSESSMENT YEAR: 2011-12 14A. IN THE PRESENT CASE AS PER THE WORKING OF THE AVERAGE VALUE OF TAX FREE INVESTMENT UNDER RULE 8D SUBMITTED BY THE ASSESSEE, THE ASSESSEE HAD MADE INVESTMENT OF RS. 13,73,00,000/-. IN VIEW OF THE DE CISION RENDERED BY THE KOLKATTA ITAT AND CO-ORDINATE BENCHES OF THE ITAT, MUMBAI, THE ASSESSING OFFICER SHOULD NOT HAVE INCLUDED THE SHARE APPLICAT ION MONEY WHILE WORKING OUT THE AVERAGE VALUE OF INVESTMENT UNDER RULE 8D. THEREFORE, THE LD. CIT(A) HAS RIGHTY ISSUED THE DIRECTION TO THE A.O TO EXCLU DE SHARE APPLICATION MONEY OF RS. 13,73,00,000/- FOR THE PURPOSE OF COMPUTATIO N OF DISALLOWANCE OF U/S 14A. WE, THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE ITAT IN AFORESAID CASES, UPHOLD THE ORDER PASSED BY THE LD. CIT(A) AND DISMISS THE SOLE GROUND OF APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE F OR ASST. YEAR 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016 SD/- SD/- ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER ' /( MUMBAI; 0 DATED: 24/08/2016
