KEWAL KIRAN REALTORS AND INFRASTURCTURE P.LTD, MUMBAI V. DCIT 12(3)(1), MUMBAI

ITA 1965/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4861 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 20-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS JYOTHILAKSHMI NAYAK
• Assessee Lawyers: YOGESH A TH
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI RAM LAL NEGI , JM ITA NO. 1965 / MUM/20 1 7 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. KEWAL KIRAN REALTORS & INFRA (P) LTD., B - 101 - 107, SYNTHOFINE INDUSTRIAL ESTATE, BEH IND VIRWANI INDUSTRIAL ESTATE GOREGAON (E), MUMBAI 400 063 VS. DCIT - 12(3)(1) ROOM NO.147A, 1 ST FLOOR AAYAKAR BHAVAN, M.K.ROAD MUMBAI 400 020 PAN/GIR NO. AACCK3920C ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI YOGESH A TH A R REVENUE BY MRS. JYOT HI LAKSHMI NAYAK DATE OF HEARING 05 / 02 /201 9 DATE OF PRONOUNCEMENT 08 / 02 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A) - 20, MUMBAI DATED 23/03/2015 FOR A.Y. 2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE U/S.14A OF THE ACT R.W.R. 8D OF THE RULES TO THE TUNE OF RS.3,50,190/ - IS I N ORDER IN THE FACTS A ND CIRCUMSTANCES OF THE CASE. ITA NO. 1965/MUM/2017 M/S. KEWAL KIRAN REALTORS AND INFRASTRUCTURE (P) LTD., 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION AND LAND DEVELOPMENT. THE ASSESSEE HAD ENTERED INTO JOINT VENTURE AND PARTNERSHIP FOR DEVELOPMENT OF LAND AND AS PER THE FACTS STATED IN THE ASSESSMENT ORDER, THE DEVELOPMENT PROJECTS WERE YET TO START AS AT THE END OF THE RELEVANT PREVIOUS YEAR. THE LD. AO OBSERVED THAT THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS.15,19,547/ - BY WAY OF DIVIDEND SINCE ASSESSE E HAD NOT MADE ANY DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT AGAINST SUCH EXEMPT INCOME , THE LD. AO INVOKED THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES AND MADE DISALLOWANCE UNDER SECOND AND THIRD LIMB OF RULE 8D(2) IN THE SUMS OF RS.2, 54,150/ - AND RS.96,040/ - RESPECTIVELY. THE TOTAL OF THIS DISALLOWANCE WORKS OUT TO RS 3,50,190/ - . THE ASSESSEE AGITATED THIS ISSUE BEFORE THE LD. CIT(A). THE LD. CIT(A) UPHELD THE ACTION OF THE LD. AO. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS. THE LD. AR BEFORE US STATED THAT THE DISALLOWANCE MADE UNDER THE THIRD LIMB OF RULE 8D(2) OF THE RULES TO THE TUNE OF RS.96,040/ - IS NOT PRESSED BY THE ASSESSEE. HE VEHEMENTLY CONTESTED THE DISALLOWANCE OF INTEREST MADE IN SECOND LIMB OF RULE 8D(2) OF THE RULES TO THE TUNE OF RS.2,54,150/ - ON THE GROUND THAT THE ASSESSEE HAD PAID INTEREST O N HOME LOAN TO THE TUNE OF RS.31,86,503/ - WHICH WERE ADMITTEDLY USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. APART FRO M THIS, THOUG H ASSESSEE HAD OBTAINED OTHER BORROWINGS BUT NO INTEREST AS ITA NO. 1965/MUM/2017 M/S. KEWAL KIRAN REALTORS AND INFRASTRUCTURE (P) LTD., 3 SUCH WAS PAID BY THE ASSESSEE ON THE SAID BORROWINGS . IN OTHER WORDS, IT WAS PLEADED THAT THE HOME LOAN BORROWINGS MADE BY THE ASSESSEE WERE SPECIFICALLY UTILISED ONLY FOR THE PURPOSE OF REGULAR B USINESS OF THE ASSESSEE AND NOT FOR ANY INVESTMENT ACTIVITY AND ACCORDINGLY, THE INTEREST PAID THEREON IN THE SUM OF RS.31,86,503/ - CANNOT BE SUBJECT MATTER OF COMPUTATION OF DISALLOWANCE U/S.14A R.W.R.8D(2) OF THE RULES. THE LD. AR ALSO STATED THAT ASSESS EE IS HAVING SUFFICIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL MINUS RESERVES AND SURPLUS TO THE TUNE OF RS 3.90 CRORES AND INTEREST FREE FUNDS IN THE FORM OF UNSECURED LOANS RECEIVED FROM DIRECTORS AND OTHERS TO THE TUNE OF RS.21.53 CRORES. THE ASSESSEE F ILED A TABULATION BEING THE FIGURES C U LLED OUT FROM THE BALANCE SHEET AS ON 31/03/2012 ALREADY FORMING PART OF THE RECORDS STATING THAT IT HAS SUFFICIENT INTEREST FREE FUNDS TO THE TUNE OF RS.25.43 CRORES AS AGAINST THE TOTAL INVESTMENT MADE TO THE TUNE OF RS.14 CRORES AS ON THE BALANCE SHEET DATE. WE FIND THAT THIS PROPOSITION OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD., REPORTED IN 313 ITR 340 AND HDFC BANK LTD., REPORTED IN 366 ITR 505 WHEREIN THE PROPOSITION THAT IF THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS AND INTEREST FREE FUNDS FOR MAKING INVESTMENT, THEN IT SHOULD BE PRESUMED THAT THE ENTIRE INVESTMENTS WERE MADE ONLY WITH THE OWN FUNDS OF THE ASSESSEE AND ACCORDINGLY , NO DISALLOWANCE OF INTEREST UNDER THE SECOND LIM B OF RULE 8D (2) C OULD BE MADE THEREON. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE LD ITA NO. 1965/MUM/2017 M/S. KEWAL KIRAN REALTORS AND INFRASTRUCTURE (P) LTD., 4 AO TO DELETE THE DISALLOWANCE MADE IN THE SUM OF RS 2,54,150/ - UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES IN THE FACTS OF THE INSTANT CASE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED . 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 02 /201 9 SD/ - ( RAM LAL NE GI ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 08 / 02 /201 9 KARUNA SR. PS 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//