HIRAN ORGOCHEM LIMITED, MUMBAI V. A.C.I.T.-8(3), MUMBAI

ITA 1882/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92357 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 12-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER . / ITA NO. 1882/MUM/2011 / ASSESSMENT YEAR 2007-08 HIRAN ORGOCHEM LIMITED, 601/A/1, PALM COURT, M-BLOCK, LINK ROAD, MALAD (W), MUMBAI 400064 / VS. THE ACIT 8(3), MUMBAI. ! ./ ./ PAN/GIR NO. : AAACH 0977J ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ASSESSEE BY NONE RESPONDENT BY : SHRI PAWAN KUMAR BEERLA ( ) * / DATE OF HEARING : 21/04/2015 ( ) * / DATE OF PRONOUNCEMENT : 21/04/2015 / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-17 DATED 26/11/2010 FOR ASSESS MENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1. AS PER THE FACTS OF THE CASE AND AS PER LAW WH ETHER THE LEARNED CIT(A)-VIII , MUMBAI, WAS RIGHT IN CONFIRMING THE ADDITION OF RS. 2,69,379/- U/S.14A READ WITH RULE 8D. . / ITA NO. 1882/MUM/2011 / ASSESSMENT YEAR 2007-08 2 2. EARLIER THIS APPEAL WAS FIXED ON 12/2/2015 , WH EN NONE APPEARED ON BEHALF OF THE ASSESSEE AND IT WAS ADJOURNED TO 18/3 /2015. ON 18/03/2015 THE BENCH DID NOT FUNCTION, HENCE, THROUGH NOTICE B OARD APPEAL WAS ADJOURNED TO 21/04/2015. HOWEVER, ON 21/04/2015 NONE WAS PRE SENT ON BEHALF OF THE ASSESSEE. AS THE APPEAL IS SMALL WE PROCEED TO DEC IDE THE SAME ON MERITS AFTER CONSIDERING THE FACTS AVAILABLE ON RECORD AND AFTER HEARING LD. DR. 3. THE AO MADE DISALLOWANCE UNDER SECTION 14A OF TH E ACT BY APPLYING RULE 8D AT A SUM OF RS.2,69,379/- AS FOLLOWS: I) AS PER RULE 8D (2)(I) NIL II) AS PER RULE 8D(2)(II) INTEREST X AVE RAGE INVESTMENTS AVERAGE OF ASSETS = RS. 57,577 III) AS PER RULE 8D (2)(III) = 0.5% OF AVERAGE INVESTMENTS = RS.2,11,802 THUS, TOTAL DISALLOWANCE AS PER RULE 8D WORKS OUT TO RS.2,69,379/- THE SAME IS DISALLOWED U/S. 14A AND ADDED TO THE INCOME OF THE ASSESSEE. 3.1 THE ADDITION WAS AGITATED IN AN APPEAL FILED BE FORE LD. CIT(A) VIDE WHICH DISALLOWANCE MADE BY THE AO HAS BEEN CONFIRMED. 4. LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD . CIT(A). 5. WE HAVE HEARD LD. DR AND CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY LD. CIT(A). THE ADDITIO N WAS AGITATED BY ASSESSEE ON THE GROUND THAT ASSESSEE DID NOT RECEIVE EXEMPT INCOME, THEREFORE, NO DISALLOWANCE COULD BE MADE. ANOTHER FACT NOTED IN THE ORDER OF LD. CIT(A) IS THAT INVESTMENT GIVING RISE TO EXEMPT INCOME AMOUNT ING TO RS.78,22,761/ IS AS ON 31/3/2007 AND RS.1,52,08,001/- AS ON 31/3/200 6. IT IS ALSO MENTIONED THAT VARIOUS EXPENSES INCLUDING INTEREST AND FINA NCE CHARGES ARE CLAIMED AT RS.4,63,51,904/- AND ON THESE FACTS, IT IS CONCLUDE D BY LD. CIT(A) THAT IT IS NOT ESTABLISHED THAT SUCH INVESTMENTS ARE EXCLUSIVELY O UT OF OWN FUNDS. WE HAVE . / ITA NO. 1882/MUM/2011 / ASSESSMENT YEAR 2007-08 3 CONSIDERED ALL THESE FACTS AND AFTER DUE CONSIDERAT ION, WE FOUND THAT LD. CIT(A) HAS COMMITTED AN ERROR IN UPHOLDING THE DISALLOWANC E IN ITS ENTIRETY AS THE SAME IS BASED UPON RULE 8D, WHICH IS NOT APPLICABL E FOR THE YEAR UNDER CONSIDERATION AS PER DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. VS. DCIT, 328 ITR 81 (BOM). HOWEVER, A REASONABLE ESTIMATE HAS TO BE MADE. THOUGH IT HAS BEEN FOUND BY LD. CIT(A) THAT ASSESSEE HAS NOT CONCLUSIVELY ESTABLISHED THA T INVESTMENTS ARE MADE EXCLUSIVELY OUT OF OWN FUNDS BUT AT THE SAME TIME IT HAS TO BE NOTED THAT INVESTMENT HAS DECREASED FROM RS.1.52 CRORES TO RS. 78.2S LACS AND FOR THE YEAR UNDER CONSIDERATION THE RETURNED INCOME OF THE ASSE SSEE IS RS.1.84 CRORES. THEREFORE, ACCORDING TO THESE FACTS, IT CAN BE PRES UMED THAT INVESTMENT WAS MADE BY THE ASSESSEE FROM ITS OWN FUNDS. THERE ARE VARIOUS DECISIONS ACCORDING TO WHICH DISALLOWANCES ON ESTIMATE BASI S HAVE BEEN UPHELD UNDER SECTION 14A PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE. TAKING NOTE OF THOSE DECISIONS OF THE TRIBUNAL WE CONSIDER IT JUST AND PROPER TO UPHOLD THE DISALLOWANCE TO THE EXTENT OF RS.15,000/- AND BALANCE DISALLOWANCE IS DELETED. WE DIRECT ACCORDI NGLY. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 21/04/2015 ( 0 1 2 21/04/2015 ( SD/- SD/- ( / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 1 DATED 21/04/2015 . / ITA NO. 1882/MUM/2011 / ASSESSMENT YEAR 2007-08 4 / COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 4) ( ) / THE CIT(A)- 4. 4) / CIT 5. 56 %)78 , * 78 , / DR, ITAT, MUMBAI 6. 9 / GUARD FILE. / BY ORDER, & 5) %) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS