ACIT CEN CIR 29, MUMBAI V. SHOPPERS STOP LTD, MUMBAI

ITA 1914/MUM/2013

• Counselvise Citation: 191419914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 08-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADGIRI
• Keywords: Depreciation
• Section: 14A; 115JB; 147

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1914/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2005-06 ACIT CEN CIR 29, R.NO.411, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, CHURCHGATE, MUMBAI-400020 VS SHOPPERS STOP LTD. M/S EUREKA TOWERS, A-WINGH, 9 TH FLOOR, MINDSPACE, LINK ROAD, MALAD (W), MUMBAI-400064 PAN: AABCS4383A ( $% / APPELLANT) ( &'$% / RESPONDENT) ( ) / REVENUE BY : SHRI B. YADGIRI '*+ '*+ '*+ '*+ ) ) ) ) / ASSESSEE BY : NONE ' ' ' ' ( (( ( +, +, +, +, / DATE OF HEARING : 09-06-2014 -.# ( +, / DATE OF PRONOUNCEMENT : 09-06-2014 ' ' ' ' , 1961 ( (( ( 254 )1( +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT. 07.01.2013 OF THE CIT(A)- 40,MUMBAI, ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF INTEREST OF R S. 11,47,500/- U/S 14A, IGNORING THE EVIDENCE RELIED ON BY THE A.O. 2. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 3. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUND S STATED ABOVE, THE ORDER OF THE LD. CIT(A)- 40, MUMBAI, MAY BE SET ASIDE AND THAT OF THE ASSESS ING OFFICER RESTORED. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF RETAINI NG OF HOUSEHOLD & CONSUMER PRODUCTS & BOOKS,FILED ITS RETURN OF INCOME ON 28/10/2005 DECL ARING INCOME AT RS.16,41,11,849/-.AO FINALISED THE ASSESSMENT U/S.143(3) R.W.SECTION 147 OF THE ACT,ON 23.12.2011, DETERMINING THE INCOME OF THE ASSESSEE AT RS.2.71 CRORES UNDER THE NORMAL PROVISIONS AND AT RS. 24.73 CRORES U/S. 115JB OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 3.97 CRORES IN ITS PROFIT & LOSS ACCO UNT UNDER THE HEAD INTEREST PAYMENT AND FINANCING CHARGES AGAINST BORROWED MONEY,THAT IT HA D CLAIMED THAT SAME WAS UTILISED FOR THE PURPOSE OF BUSINESS, INVESTMENT IN BALANCE-SHEET HA D INCREASED BY RS. 1.33 CRORES. HE DIRECTED THE ASSESSEE TO FURNISH DISALLOWANCE OF EXPENDITURE U/S 14A PERTAINING TO INVESTMENT FROM WHICH INCOME WAS EXEMPT. 3 .AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO HELD THAT THE ASSESSEE COULD NOT DIRECTLY LINKED THE INVESTMENT TO APPEAR IN THE BALANCE-SHEE T AND MADE DURING THE YEAR TO THOSE SOURCES OF FUNDS IS NOT TO BE GENERATED FROM BUSINESS OPERATIO N, THAT NO FUND FLOW STATEMENT HAD FURNISHED BY IT, THAT INVESTMENT WAS MADE OUT OF SINGLE BANK ACC OUNT ON WHICH THE ASSESSEE HAD AVAILED CASH CREDIT/OVERDRAFT FACILITY. FINALLY,HE HELD THAT ASS ESSEE WAS COVERED BY THE PROVISIONS OF SECTION 14A AND ACCORDINGLY,HE MADE A DISALLOWANCE OF RS. 1 1.47 LAKHS. 2 ITA NO. 1914/MUM/2013 SHOPPERS STOP LTD 4. ASSESEE PREFERRED AN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ASSESSMENT ORDER,FA A HELD THAT IDENTICAL ISSUE HAD ARISEN FOR AYS 2006-07 AND 2007-08 IN ASSESSEES OWN CASE BEFO RE THE TRIBUNAL, THAT WHILE DECIDING THE ISSUE FOR THOSE YEARS (ORDER DATED 30.08.2011 -ITA NOS. 1448 AND 4475/MUM/2010) TRIBUNAL HAD DELETED THE DISALLOWANCE MADE U/S 14A MADE BY THE A O). FOLLOWING THE ORDER OF THE TRIBUNAL, HE DIRECTED THE AO TO DELETE THE DISALLOWANCE OF RS. 1 1.47 LAKHS. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT MATER MIGHT BE DECIDED ON MERITS.NO ONE APPEARED ON BEHALF OF THE ASSESSEE.AFTER GOING THROUGH THE ORDERS OF THE FAA, WE ARE OF THE OPINION THAT HE HAD RIGHTLY DELETED THE DISALLOWANC E MADE BY THE AO.WHILE ADJUDICATING THE APPEAL FOR THE YEAR 2006-07 AND 2007-08(SUPRA),TRIB UNAL HAD HELD AS UNDER: WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RELEVA NT MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS DECISION S CITED. THE ASSESSEE IS RUNNING A RETAIL DEPARTMENTAL STORES IN THE NAME AND STYLE OF SHOPP ERS STOP, WHICH IS SPREAD ACROSS THE COUNTRY. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAS INVESTED RS. 24.21 CRORES, OUT OF WHICH THE AO HAD DISALLOWED RS. 1,54,86,125/- OUT O F INTEREST EXPENDITURE BY INVOKING SECTION 14A OF THE ACT. THE CASE OF THE ASSESSEE IS THAT THE AS SESSEE IS HAVING SUFFICIENT OWN FUNDS AND WHEN HE HAS BORROWED FUNDS EVEN IF HE IS HAVING OWN FUNDS, THE PRESUMPTION ALWAYS GOES IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE MADE INVESTMENTS OUT OF OWN FUNDS, THEREFORE, THE PROVISIONS OF SECTION 14A OF THE ACT, IS NOT APPLICABLE TO THE CASE OF TH E ASSESSEE. THE AO HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE INVESTMENTS HAVE BEEN MADE OUT FROM BORROWED FUNDS FROM THE BANK AND THE OVERDRAWN BALANCES ARE TOO OBVIOUS, THEREFORE, INVESTMENTS COULD NOT HAVE BEEN SOURCED FROM ANY OTHER SOURCE OTHER THAN THE OVERDRAWN BALANCES. THE CIT(A) CONFIRMED THE ORDER OF THE AO BY APPROVING THE SAID FINDINGS OF THE AO AND DIRECTED THE AO TO FOLLOW THE DECISION ITAT IN THE CASE OF DAGA CAPITA L INVESTMENT LTD. AND WORK OUT THE DISALLOWANCE IN TERMS OF THE METHOD SPELT OUT IN RU LE 8D. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ESTABLISHED THAT THE ASSESSEE HAS GOT SUFFICIENT OWN FUNDS TO MAKE INVESTMENTS BY WAY MATERIAL EVIDENCE VIDE PAGES 89 & 10 OF THE ASSESSE ES PAPER BOOK. IT IS SEEN THAT THE INCREASE IN INVESTMENT DURING THE YEAR IS ONLY BY RS. 242.10 MI LLIONS WHEREAS THE SHAREHOLDER FUND OF THE ASSESSEE HAS INCREASED TO 1752 MILLIONS. IT IS OBVI OUS THAT INCREASE IN SHAREHOLDER FUND ITSELF IS MORE THAN 7 TIMES, THAN THE INVESTMENT MADE BY THE ASSESSEE DURING THE YEAR. IT IS ALSO SEEN THAT THE PROFIT AFTER TAX FOR THE YEAR ITSELF IS 271.05 MILLIONS. IF WE ADD BACK THE AMOUNT OF DEPRECIATION OF RS. 139.35 MILLIONS, WHICH ITA NOS .1448 & 4475/ M/2010 M/S SHOPPERS STOP LTD. IS A NON-CASH ALLOWANCE, THE CASH PROFIT WILL FURTHER SWELL BY TH IS AMOUNT. IT CAN, THUS, BE SEEN THAT ONLY CASH PROFIT FROM OPERATIONS IS MORE THE INVESTMENTS MADE BY THE ASSESSEE DURING THE YEAR. IN THIS CONNECTION, WE REFER TO THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM.) WHEREIN IT WAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN , THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST FREE FUNDS GEN ERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INV ESTMENTS. WE, THEREFORE, FIND THAT THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN TH E SAID CASE IS SQUARELY APPLIES TO THE FACTS OF THE CASE OF THE ASSESSEE. RESPECTFULLY FOLLOWING TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE SUBMISSIONS OF THE ASSESSEE TH AT ASSESSEE IS HAVING SUFFICIENT OWN FUNDS AND WHEN HE HAS BORROWED FUNDS EVEN IF HE IS HAVING OWN FUNDS, THE PRESUMPTION ALWAYS GOES IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE MADE INVES TMENTS OUT OF OWN FUNDS, THEREFORE, THE PROVISIONS OF SECTION 14A OF THE ACT, IS NOT APPLIC ABLE TO THE CASE OF THE ASSESSEE. IN VIEW OF THE SAID DISCUSSION, WE SET ASIDE THE ORDER OF THE CIT( A) AND DELETE THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT. ACCORDINGLY, THE GROUNDS RAISED IN AY 2006-07 IS ALLOWED. RESPECTFULLY FOLLOWING THE ORDER FOR THE SUBSEQUENT YEARS, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEA L FILED BY THE AO STANDS DISMISSED. 1+2 '*+ VF/KDKJH VF/KDKJH VF/KDKJH VF/KDKJH ( UKK UKKUKK UKK 3 ( + 45. 3 ITA NO. 1914/MUM/2013 SHOPPERS STOP LTD ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH ,JUNE,2014 . 0 ( -.# 6 7' 9 TWU , 201 4 . ( / 8 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7' /DATE: 09.06 . 2014. SK 0 0 0 0 ( (( ( &+9 &+9 &+9 &+9 : 9#+ : 9#+ : 9#+ : 9#+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR E BENCH, ITAT, MUMBAI / 9=/ &+' , . . . 6. GUARD FILE/ / 1 '9+ '9+ '9+ '9+ &+ &+&+ &+ //TRUE COPY// 0' / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI