JT.CIT(OSD) 2(2)(2), MUMBAI V. PUDUMJEE INDUSTRIES LTD, MUMBAI

ITA 1953/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7893 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR LD
• Assessee Lawyers: DHAVAL SHAH LD DR
• Keywords: Rule 8D
• Section: 143(3); 14A; 115JB; 12; 10; 11

Judgement Text

1 ITA NO.1953/MUM/2018 M/S. PUDUMJEE INDUSTRIES LTD. ASSESSMENT YEAR-2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , $ $$ $% , ' BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1953/MUM/2018 ( / ASSESSMENT YEAR: 2014-15) D CIT - 2 (2)( 2 ) ROOM NO.545, 5TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. M/S. PUDUMJEE INDUSTRIES LTD. 60, JATIA CHAMBERS, DR. V.B. GANDHI MARG MUMBAI-400 023. ./ ./PAN/GIR NO. AAACP-0487-B ( () /APPELLANT ) : ( *+() / RESPONDENT ) REVENUE BY : SHRI MANOJ KUMAR LD. DR ASSESSEE BY : SHRI DHAVAL SHAH - LD. DR ',-& / DATE OF HEARING : 11/04/2019 / ,-& / DATE OF PRONOUNCEMENT : 23/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-5, MUMBAI, [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO.CIT(A)- 2 ITA NO.1953/MUM/2018 M/S. PUDUMJEE INDUSTRIES LTD. ASSESSMENT YEAR-2014-15 5/ITO-2(2)(3)/IT-270/2016-17/172/17-18 DATED 29/12/2017 ON FOLLOWING GROUNDS OF APPEAL: - 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING ADDITION MADE ON ACCOUNT OF DISAL LOWANCE U/S 14A R.W. RULE 8D(II) OF THE ACT WITHOUT APPRECIATING THE FACT THAT FROM AY 2008-09 DISALLOWANCE HAS TO BE MANDATORILY BE CALCULATED AS PER RULE 8D?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING ADDITION MADE ON ACCOUNT OF DISAL LOWANCE U/S 14A R.W. RULE 8D(II) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE DECISION IN THE CASE OF M/S. HDFC LTD IS NOT APPLICABLE SINCE THE SAME HAS BEEN RENDERED KEEPING IN MIND TH E INVESTMENT OF BANK AND HENCE BANK SPECIFIC?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING AO NOT TO ADD THE DISALLOWANCE U /S 14A TO THE BOOK PROFIT U/S 115JB WHILE COMPUTING THE TOTAL INCOME OF THE APPELLANT RELYING ON THE DECISION OF THE SPECIAL BENCH OF ITAT DELHI IN THE CASE OF VIREET INVESTMENT PVT LTD (82 TAXMANN.COM 415) OVERLOOKING THE FACT THAT THE AO HAD CORRECTLY MADE THE COMPUTATION AS P ER CLAUSE (F) IN EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT WHICH MANDATES DISALLOWANCE OF EXPENDITURE RELATABLE TO THE INCOME TO WHICH SECTION 10 OR SECTION 11 OR SECTION 12 OF THE ACT APPLIES?' AS EVIDENT FROM GROUNDS OF APPEAL, THE ONLY ISSUE I NVOLVED UNDER THE APPEAL IS DISALLOWANCE U/S 14A. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX- CIRCLE-2(2)(2), MUMBAI [AO] U/S. 143(3) ON 19/12/2016 WHEREIN THE I NCOME OF THE ASSESSEE WAS DETERMINED AT RS.108.38 LACS AFTER SOL E DISALLOWANCE U/S. 14A AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 29/09/2014. THE DISALLOWANCE U/S 14A FOR RS.108.38 LACS WAS ALSO AD DED BACK WHILE COMPUTING BOOK PROFITS U/S. 115JB. 2. THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS STATED TO BE ENGAGED IN MANUFACTURING AND SELLING OF PAPER & PULP . DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.10.23 LACS BUT DID NOT OFFER ANY SUO-MOTO DISALLOWANCE U/S 14A AGAINST THE SAME. THE ASSESSEE HAD CLOSING INVE STMENT OF RS.17.72 3 ITA NO.1953/MUM/2018 M/S. PUDUMJEE INDUSTRIES LTD. ASSESSMENT YEAR-2014-15 CRORES. THE ASSESSEE, INTER-ALIA, SUBMITTED THAT THE INVESTMENTS WERE SOURCED OUT OF INTERNAL ACCRUALS. HOWEVER, NOT SATI SFIED, LD. AO, APPLYING RULE 8D, COMPUTED AGGREGATE DISALLOWANCE OF RS.108. 38 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II ) FOR RS.99.52 LACS AND EXPENSE DISALLOWANCE AT 0.5% OF AVERAGE INVESTMENTS U/R 8D(2)(III) FOR RS.8.86 LACS. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH P ARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 29/12/2 017 WHEREIN LD. FIRST APPELLATE AUTHORITY WHILE CONFIRMING EXPENSE DISALL OWANCE U/R 8D(2)(III), DELETED INTEREST DISALLOWANCE U/R 8D(2)(II) IN VIEW OF THE FACT THAT ASSESSEES OWN FUNDS WERE MORE THAN THE INVESTMENTS AND THEREF ORE, NO DISALLOWANCE WAS REQUIRED IN TERMS OF JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. HDFC BANK LTD. (2014 366 ITR 505) . THE ADJUSTMENT OF DISALLOWANCE U/S 14A WHILE COMPUTING BOOK PROFITS U/S. 115JB WAS DELETED BY PLACING RELIANCE ON THE DECISION OF DELHI TRIBUN AL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.CO M 415]. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE [AR], AT THE O UTSET, DREW OUR ATTENTION TO THE FACT THAT IDENTICAL ISSUE AROSE IN ASSESSEES FAVOR FOR AY 2013-14 AND THE REVENUE AGITATED THE ISSUE IN SIMIL AR MANNER BEFORE THIS TRIBUNAL VIDE ITA NO. 1933/MUM/2018 ORDER DATED 13/ 03/2019, A COPY OF WHICH HAS BEEN PLACED ON RECORD. IT HAS BEEN SUBMIT TED THAT THE REVENUES APPEAL WAS DISMISSED AND THEREFORE, THE ISSUE UNDER CONSIDERATION WAS 4 ITA NO.1953/MUM/2018 M/S. PUDUMJEE INDUSTRIES LTD. ASSESSMENT YEAR-2014-15 SQUARELY COVERED BY THE EARLIER DECISION OF TRIBUNA L IN ASSESSEES OWN CASE. THE LD. DR COULD NOT CONTROVERT THE AFORESAID POSITION. 5. UPON CAREFUL CONSIDERATION, WE FIND THAT UNDISPU TED POSITION THAT EMERGES IS THE FACT THAT THE ASSESSEES OWN FUNDS W ERE MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE AND THEREFORE, A P RESUMPTION WAS TO BE DRAWN IN ASSESSEES FAVOR THAT THE INVESTMENTS WERE MADE OUT OF OWN FUNDS AS HELD BY HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. HDFC BANK LTD. (2014 366 ITR 505). THIS POSITION HAS BEEN REITERATED BY HONBLE APEX COURT IN THE RECENT DECISION OF CIT VS. RELIANCE INDUSTRIES LTD. (CIVIL APPEAL NO. 10 OF 2019 DATED 02/01/2019) WHEREIN HONBLE COURT HAS HELD AS UNDER: - INSOFAR AS THE FIRST QUESTION IS CONCERNED, THE ISS UE RAISES A PURE QUESTION OF FACT. THE HIGH COURT HAS NOTED THE FINDING OF THE TRIBUNAL TH AT THE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE WERE SUFFICIENT TO MEET ITS INVESTMENT . HENCE, IT COULD BE PRESUMED THAT THE INVESTMENTS WERE MADE FROM THE INTEREST FREE FU NDS AVAILABLE WITH THE ASSESSEE. THE TRIBUNAL HAS ALSO FOLLOWED ITS OWN ORDER FOR AS SESSMENT YEAR 2002-03. IN VIEW OF THE ABOVE FINDINGS, WE FIND NO REASON TO INTERFERE WITH THE JUDGMENT OF THE HIGH COURT IN REGARD TO THE FIRST QUESTION. ACCORD INGLY, THE APPEALS ARE DISMISSED IN REGARD TO THE FIRST QUESTION. SECONDLY, THIS ISSUE HAS ALREADY BEEN ADJUDICATED B Y THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2013-14. THEREFORE, NO I NFIRMITY COULD BE FOUND IN THE IMPUGNED ORDER SO FAR AS THE DISALLOWANCE OF INTEREST EXPENDITURE U/R 8D(2)(II) IS CONCERNED. 5 ITA NO.1953/MUM/2018 M/S. PUDUMJEE INDUSTRIES LTD. ASSESSMENT YEAR-2014-15 6. THE ADDITION OF DISALLOWANCE OF SECTION 14A WHIL E COMPUTING BOOK PROFITS U/S. 115JB HAS BEEN DELETED BY LD. FIRST APPELLATE AUTHORITY BY PLACING RELIANCE ON THE DECISION OF DELHI TRIBUNAL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.CO M 415]. NO CONTRARY DECISION HAS ALSO BEEN PLACED ON RECORD BY THE REVE NUE. THERE IS NOTHING ON RECORD WHICH SUGGEST THAT THE ASSESSEE HAS DEBIT ED ANY ACTUAL EXPENDITURE IN THE PROFIT & LOSS ACCOUNT AND SECOND LY, THIS ISSUE HAS ALSO BEEN ADJUDICATED BY TRIBUNAL IN ASSESSEES FAVOR FO R AY 2013-14. VIEWED FROM ANY ANGLE, THE IMPUGNED ORDER WOULD REQUIRE NO INTERFERENCE IN THIS REGARD. 7. RESULTANTLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) $ $$ $ / JUDICIAL MEMBER $ $$ $ / ACCOUNTANT MEMBER MUMBAI; DATED : 23/04/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. !'# , # , / DR, ITAT, MUMBAI 6. ! %&' / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.