DCIT 15(1)(1), MUMBAI V. APOLLO LOGISOLUTIONS LTD, RAIGAD

ITA 1880/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9897 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDYADHAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 1880 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) DCIT 15(1)(1) R.NO.470, 4 TH FLOOR AAYAKAR BHAVAN, M.K.ROAD MUMBAI 400 020 VS. M/S. APO LLO LOGISOLUTIONS LTD., SURVEY NO.59, KON SAVIA RASAYAMI ROAD SOMAHANE PANVEL, RAIGAD PAN/GIR NO. AAECS1502L APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI V.VIDYADHAR ASSESSEE BY SHRI MADHUR AGARWAL DATE OF HEARING 05 / 03 /201 8 DATE OF PRONOUNCEME NT 07 / 03 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 24, MUMBAI DATED 23/12/2016 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT . 2. THE ONLY GROUND TAKEN BY THE REVENUE RELATES TO DELETION OF DISALLOWANCE OF INTEREST EXPENDITURE U/S.14A R.W.R 8D(2)(II) OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGA GED IN THE BUSINESS OF MANAGEMENT OF CONTAINER FREIGHT STATION, TRANSPORTATION OF CONTAINERS AND OTHER RELATED SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENTS ITA NO. 1880/MUM/2017 M/S. APOLLO LOGISOLUTIONS LTD., 2 DURING THE YEAR UNDER CONSIDERATION AND THE AR OF THE ASSESSEE WAS ASKED TO FURNISH APPLICABILITY OF SECTION 14A OF THE ACT AND WAS ALSO ASKED TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A R.W. RULE 8D SHOULD NOT BE MADE. LD. AO CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND HELD THAT NO ACTIV ITY COULD BE SAID TO BE AUTOMATIC AND THAT THERE WAS APPLICATION OF INTEREST BEARING FUNDS TOWARDS MAKING INVESTMENTS FOR EARNING OF EXEMPT INCOME. ACCORDINGLY , THE AO COMPUTED THE DISALLOWANCE U/S 14A IN R ESPECT OF INTEREST AND OTHER EXPENSES AT RS.64.56 LA KH S AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BY THE IMPUGNED ORDER, DISALLOWANCE OF INTEREST WAS DELETED BY CIT(A) BY OBSERVING THAT TOTAL NON - INTEREST BEARING FUNDS OF THE ASSESSEE AS ON 31/03/2012 WAS RS.5966 LAKHS WHICH INCLUDES SHAR E CAPITAL, RESERVES AND DEBENTURES , WAS MUCH MORE THAN THE INVESTMENTS OF RS.1552.25 LAKHS AS ON 31/03/2012. HENCE, THERE IS NO INTEREST EXPENDITURE INCURRED FOR EARNING THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE - COMPANY. THERE FORE IT HAS TO BE CONSTRUED THAT THE 2 ND LIMB OF RULE 8D 2(II) PERTAINING TO DISALLOWANCE OF INTEREST EXPENSES SHOULD BE CONSIDERED AS NIL. 6. HOWEVER, CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY AO U NDER RULE 8D 2 ( I II) AGAINST WHICH ASSES SEE IS NOT IN FURTHER APPEAL BEFORE US. 7. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US. LD. DR RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LEARNED AR INVITED OUR ATTENTION TO THE AUDITED BALANCE SHEET OF THE ASSESSEE TO ITA NO. 1880/MUM/2017 M/S. APOLLO LOGISOLUTIONS LTD., 3 DEM ONSTRATE THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE IN THE FORM OF SHARE CAPIT AL, RESERVES AMOUNTING TO RS.59 66 LAKHS, AGAINST WHICH INVESTMENT WAS ONLY TO THE TUN E OF RS.1552.25 LAKHS AS ON 31/03/2012. RELIANCE WAS PLACED ON THE DEC ISION OF JURISDICTIONAL HIGH COURT IN CASE OF HDFC BANK LTD., 366 ITR 505 IN SUPPORT OF THE PROPOSITION THAT IN CASE OF ASSESSEE HAVING ITS CAPITAL PROFIT, RESERVE AND SURPLUS, MORE THAN THE INVESTMENT, THEN IT IS PRESUMED THAT INVESTMENT IS OUT OF ASSESSE ES OWN INTEREST FREE FUNDS. IN THE INSTANT CASE BEFORE US THERE IS A CATEGORICAL FINDING BY THE CIT(A) WITH REGARD TO THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND RESERVES AMOUNTING TO RS.5966 LAKHS WHICH WAS MORE T HAN THE INVESTMENT OF RS.1552.25 LAKHS AS ON 31/03/2012. THIS FINDING OF CIT(A) IS AS PER MATERIAL ON RECORD AND WAS NOT CON T ROVERTED BY DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE JURISDICTIONAL H IGH COURT IN THE CASE OF HDFC BANK LTD., 366 ITR 505 AND RELIANCE UTILITIES & POW ER LTD., 313 ITR 340 (BOM), WE ARE INCLINED TO AGREE WITH THE LEARNED AR MR. MADHUR AGARWAL THAT CIT(A) HAS CORRECTLY DELETED THE DISALLOWANCE OF INTEREST. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 07 / 03 /201 8 S D/ - ( AMARJIT SINGH ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 07 / 03 /201 8 KARUNA SR. PS ITA NO. 1880/MUM/2017 M/S. APOLLO LOGISOLUTIONS LTD., 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//