PAINTERIOR (INDIA), MUMBAI V. ADDL CIT RG 13(1), MUMBAI

ITA 1808/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83790 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N MOTIWALLA SHRI O P MEENA
• Keywords: Earning of tax free income
• Section: 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER ITA NO.1808/MUM/2013 ASSESSMENT YEAR: -2009-10 M/S PAINTERIOR (INDIA) C/O. H.N. MOTIWALLA & CO., 508 SHARDA CHAMBERS, 33, NEW MARINE LINES, MUMBAI 400 020. VS.` ADDL. CIT RG. 13(1) MUMBAI PAN:- AAAFP4830F APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.12.2012 OF CIT(A) FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 24, MUMBAI , ERRED IN CONFIRMING DISALLOWANCE OF RS . 1,77 , 134 / - UNDER SECTION 14A R . W. RULE 80 OF THE INCOME TAX ACT, 1961 , PARTICULARLY WHEN, THE APPELLANT HAD INVESTED IN SHARES , MUTUAL FUNDS AND DEBT FUND RS. 6 , 14,68,893/- OUT OF ITS OWN FUND OF RS. 6,78,55,355 / - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE SAID LEARNED COMMISSIONER OF INCOME TAX , HAS ALSO ERRED IN CONFIRMING DISALLOWANCE OF RS . 1 , 77 , 134 / - UNDER SECTION 14A R . W. RULE 60 OF THE ACT WITHOUT ESTABLISHING THAT A PART ICULAR EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF EX EMPTED INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE SAID LEARNED COMMISSIONER OF INCOME TAX , HAS ALSO ERRED IN CONFIRMING DISALLOWANCE OF RS. 1, 77 , 134/- UNDER SECTION 14A R.W. RULE 60 OF THE ACT WITHOUT APPRECIATING T HAT OUT OF TOTAL INVESTMENT OF RS. ,14,68,893/- THE INVESTMENT IN DEBT FUND IS RS. 2,5 7,13,769/- ASSESSEE BY SHRI H.N. MOTIWALLA REVENUE BY SHRI O.P. MEENA DATE OF HEARING 09.09.2014 DATE OF PRONOUNCEMENT 12.09.2014 M/S PAINTERIOR (INDIA) 2 | P A G E 2. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 14, 30,609/- DURING THE YEAR UNDER CONSIDERATION AND CLAIMED THE SAME AS EXEMPT . THE ASSESSING OFFICER NOTED THAT IN THE FORM 3CD, THE AUDITORS HAVE SHOWN DISALLOWANCE AS PER RULE 8D(2)(III) AT RS. 1,77,134/- BUT HAVE STATED THAT R ULE 8D(2)(III) IS NOT APPLICABLE ON ASSESSEES EXEMPT INCOME, SINCE ITS INCOME IS DIV IDEND INCOME. ACCORDINGLY THE ASSESSING OFFICER ISSUED A SHOW-CASUE NOTICE TO THE ASSESSEE AS TO WHY DISALLOWANCE U/S 14A R.W.R 8D OF THE INCOME TAX RULE S, SHOULD NOT BE MADE. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T IT HAS NOT INCURRED ANY EXPENSES FOR EARNING THE DIVIDEND INCOME, THEREFORE, N O DISALLOWANCE U/S 14A R.W.R 8D IS CALLED FOR. IN SUPPORT OF ITS CONTENTION THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS (P.) LTD. (326 ITR 1) AS WELL AS THE DECISION OF THIS TRIBUNAL IN THE CAS E OF JCIT VS. HOLLAND EQUIPMENTS CO. B.V. (3 SOT 810) . THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE DIS ALLOWANCE U/S 14A R.W.R 8D(2)(III) AT RS. 1,77,134/- AS WORKED OUT BY THE A UDITORS OF THE ASSESSEE. 3. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOWA NCE MADE BY ASSESSING OFFICER. 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES, MUT UAL FUNDS AND DEBT FUNDS. THE INVESTMENTS HAVE BEEN MADE FROM THE ASSESSEES O WN FUND, THEREFORE, THE ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING T HE DIVIDEND INCOME. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. BNP PARIBAS SA ( 32 M/S PAINTERIOR (INDIA) 3 | P A G E TAXMANN.COM 276) AS WELL AS IN THE CASE OF CIT VS. M/S GLENMARK PHARMACEUTICALS LTD (30 TAXMANN.COM 167) AND SUBMITTED THAT WHEN THE ASSESSEE HAS USED ITS OWN FUNDS FOR THE PURPOSE OF IN VESTMENT IN MUTUAL FUNDS AND SHARES THEN NO DISALLOWANCE U/S 14A CAN BE MADE. 5. ALTERNATIVELY, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT FOR THE PURPOSE OF COMPUTATION OF DISA LLOWANCE AS PER RULE 8D(2)(III) , THE ASSESSING OFFICER TOOK THE ENTIRE INVESTMENT INCLUDING THE DEBT FUND WHICH DOES NOT GENERATE ANY TAX FREE INCOME. TH US THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AS IT IS BASED ON WRONG F IGURE OF INVESTMENT. 6. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT WH EN THE ASSESSEE HAS MADE THE INVESTMENT IN SHARES AND EQUITY FUNDS WHICH HAS GENERATED THE DIVIDEND INCOME IN QUESTION, CLAIMED BY THE ASSESSEE AS EXEMPT FROM TAX THEN THE PROVISIONS OF SECTION 14A ARE APPLICABLE. HE HAS RE LIED UPON THE ORDERS OF AUTHORITIES BELOW. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSING OFFICER HAS TAKEN THE AMOUNT OF DISALLOWANCE U/S 14A AS COMPUTED BY THE AUDITORS OF THE ASSESSEE W ITHOUT CONSIDERING THE CRUCIAL FACT THAT THE TOTAL INVESTMENT OF THE ASSES SEE INCLUDES THE INVESTMENT IN DEBT FUNDS WHICH DOES NOT GENERATE THE DIVIDEND INCOME, C LAIMED BY THE ASSESSEE AS EXEMPT FROM TAX. THEREFORE, THE ISSUE REQUIRES A PROPER VERIFICATION AND EXAMINATION OF THE FACTS FOR COMPUTATION OF DISALLO WANCE UNDER RULE 8D(2)(III) M/S PAINTERIOR (INDIA) 4 | P A G E AND ONLY SUCH INVESTMENT HAS TO BE TAKEN INTO ACCOU NT WHICH RESULTS IN TAX FREE INCOME AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE RECORD OF ASSESSING OFFICER TO RECONSIDER AND ADJUDICATE THE SA ME AFTER VERIFICATION AND EXAMINATION OF THE FACT AS WELL AS CONTENTIONS OF T HE ASSESSEE. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF SEPTEMBER 2014 SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 12-9 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI