D.C.I.T. CIR.3(3), MUMBAI V. SHAPOORJI PALLONJI INFRASTRUCTURE CAPITAL CO. LTD., MUMBAI

ITA 207/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9238 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Earning of tax free income
• Section: 14A; 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO. 2 02 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 9 - 10 ) ACIT, CIRCLE - 3(3), MUMBAI VS. SHAPOORJI PALLOONJI AND CO. LTD., 41/44, S.P.CENTRE, MINOO DESAI MARG, COLABA, MUMBAI - 400005 ./ ./ PAN/GIR NO. : A AACS 6994 C ( / APPE LLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 20 7 /MUM/201 3 ( / ASSESSMENT YEAR :200 9 - 10 ) ACIT, CIRCLE - 3(3), MUMBAI VS. SHAPOORJI PALLONJI INFRASTRUCTURE CAPITAL CO LTD., 41/44, S.P.CENTRE, MINOO DESAI MARG, COLABA, MUMBA I - 400005 ./ ./ PAN/GIR NO. : A ABCS 4373 B ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : SHRI PORUS KAKA / DATE OF HEARIN G : 1 9 /03/2015 / DATE OF PRONOUNCEMENT 27 / 03/2015 / O R D E R PER R.C.SHARMA (A.M) : TH E SE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2009 - 2010. 2. AS THE SIMILAR GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS AND THE FACTS AND CIRCUMSTANCES ARE SAME, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND NOW DECIDED BY THIS CONSOLIDATED ORDER. ITA NO S . 202&207 /1 3 2 3. GROUNDS TAKEN IN ITA NO.202/MUM/2013 ARE AS UNDER : - ' WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE U/R 8 D (2)(III) AS AGAINST RS.2,14,85,474/ - MADE BY THE AO RELYING ON ITS DECISION IN ASSESSEE'S OWN CASE FOR A.Y 2008 - 09 WITH OUT APPRECIATING THE FACT THAT THE RELIEF ALLOWED BY HIM IN A.Y. 2008 - 09 IS ON THE DISALLOWANCE MADE BY THE AO U/R 8D (2)(II), WHEREAS THE DISALLOWANCE MADE DURIN G THE YEAR IS U/R 8D(2)(III). 4. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT WHILE DISALLOWING THE EXPENSES U/S.14A, THE AO OBSERVED AS UNDER : - 4.4 THE ASSESSEE ADMITS THAT APART FROM THE INTEREST ABOVE THERE ARE CERTAIN ADMINISTRATION EXPENSES INCURRED TO COLLECT DIVIDEND AND HAS ESTIMATED THE SAME TO BE RS.1,00,000/ - . THIS FIGURE IS HIGHLY DISPROPORTIONATE TO THE DIVIDEND INCOME OF RS. 9.68 CRORES EARNED BY THE ASSESSEE. IN THIS CIRCUMSTANCES, I HAVE NO CHOICE BUT TO PROCEED BY APPLYING RULE BD WHICH IS MANDATORY FROM A. Y - 08 - 09 ONWARDS IN VIEW OF THE DECISION OF TH E HON'B!E BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE CO. LTD. VS. DCIT IN ITA NO.626 & WP 758 OF 2010 DATED 12.08.2010 (328 ITR 81). IT IS CLARIFIED HERE THAT IN VIEW OF THE ASSESSEE'S SUO - MOTO DISALLOWANCE OF INTEREST AMOUNTING TO RS.13.07 CRORES, NO DISALLOWANCE IS BEING MADE UNDER RULE 8D(2) (II). HOWEVER IN REGARD TO ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III), THE DISALLOWANCE OF RS.2,14,85,474/ - IS BEING MADE AS COMPUTED BELOW .... ' 5. BY THE IMPUGNED ORDER THE CIT(A) RESTRICTED THE DISALLOWA NCE TO RS.10 LAKHS AFTER HAVING THE FOLLOWING OBSERVATION : - 4.5 I HAVE CONSIDERED THE AOS ORDER AS WELL AS THE APPELLANT AR'S SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT DURING THE YEAR THE APPEAL LIES OVER THE DISALLOWANCE MADE BY AO APPLIED RULE 8 D(2)(III) READ WITH SECTION 14A OF THE ACT WHEREIN THE DISALLOWANCE MADE BY AO WAS OF 0.5 % OF AVERAGE INVESTMENT WHICH COMES TO RS. 2,14,85,474/ - AGAINST THE APPELLANT'S DISALLOWANCE MADE SUO MOTTO WHILE FILING THE RETURN OF INCOME OF RS. 1,00,000 / - . I FI ND THAT THE AO HAS RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. GODREJ BOYCE AND COMPANY LTD .. VS. DCLT AND MADE THE DISALLOWANCE IN THE MECHANICAL MANNER WITHOUT ASSIGNING ANY REASONS FOR SAID DISALLOWANCE EXCEPT STATING THAT THE SAME HAS TO BF:: DONE IN ACCORDANCE TO PROVISIONS OF SECTION 14A READ WITH RULE 8D(2)(III) OF IT.RULES. 4.6 I FIND THAT DURING THE YEAR APPELLANT COMPANY GOT AMALGAMATED TO GROUP COMPANIES WHICH ARE INVESTMENT COMPANY OF THE APPELLANT ITA NO S . 202&207 /1 3 3 COMPANY GROUP. CONSEQUENT TO BOMBAY HIGH COURT DECISION DATED 617/2010 WHEREIN THE AMALGAMATION OF BOTH THE COMPANIES WERE APPROVED BY BOMBAY HIGH COURT W.E.F.01/04/2008. THE AFORESAID AMALGAMATION RESULTED IN INCREASE OF THE INVESTMENT OF THE APPELLANT COMPANY AS ON 31/ 3/2009 THE YEAR ENDING OF THE ACCOUNTING YEAR RELEVANT TO THE A.Y. - 09 - 10 WHICH IS SUBJECT MATTER OF APPEAL. I FIND THAT THE APPELLANT'S COMPANY'S DISALLOWANCE MADE IN EARLIER YEAR IN RELATION TO EXEMPT INCOME WERE DELETED BY MY PREDECESSOR CIT(A) CONSISTEN TLY IN EARLIER PRECEDING A.Y.' S AS ENUMERATED BY ME IN MY APPELLATE ORDER DATED 21/2/2012 IN THE CASE OF THE APPELLANT ITSELF FOR A.Y. 2008 - 09 IN PARA 4.2 & 4.3 OF THE SAID ORDER BEARING NO. CIT(A) - 7 / ADDL.CIT - 3(3)/IT - 408/ 10 - 11. I FIND THAT IN THE PRESENT A.Y. THERE IS NO OTHER CHANGE IN THE CASE OF APPELLANT EXCEPT THAT AMALGAMATION OF TWO GROUP COMPANIES IN THE APPELLANT COMPANY WHICH RESULTED THE INCREASE OF INVESTMENT WHICH CONSEQUENT IAL RESULTED INTO INCREASE OF AVERAGE INVESTMENT AS WORKED OUT BY THE AO IN PARA 4.4 OF THE ORDER. AS I FIND THAT MOS T OF THE INVES T MENT MADE BY THE APPELLANT COMPANY AS WELL AS OF THE AMALGAMATING COMPANIES ARE MADE MANY YEARS BEFORE AS STATED BY THE APPELLANT IN ITS SUBMISSION DATED 27/8/2012, WHICH IS EXTRACTED AS ABOVE I N PARA 4.2. 4.5 HAVING CONSIDERED THE APPELLANT'S SUBMISSION AS WELL AS AO'S'ORDER AND ALSO TAKING NOTE OF THE DISALLOWANCE MADE BY THE AO IN EARLIER ASSESSMENT YEAR FROM A. Y 2005 - 06 TO 2008 - 09 WHICH IS DELIBERATED BY ME IN MY ORDER OF APPELLANT S BEARI NG NO.CIT(A) - 7 1 ADDL.CIT - 3(3)/IT - 408/L 0 - 11 DATED 21/2.20 1 2 IN 'PARA 4.2 & 4.3 OF HE SAID ORDER. I AM OF THE CONSIDERED VIEW THAT IT WO ULD BE PROPER AND APPROPRIATE TO RESTRICT THE DISALLOWANCE UNDER RULE 8D(2)(III) OF RS. 10 0 LAKHS AGAINST THE APPELLANT 'S CLAIM OF RS.1 LAKH ONLY. ACCORDINGLY THE ADDITION MADE BY THE AO IS RESTRICTED TO THE EXTENT OF RS. 10 LAKHS. THUS THE ADDITION MADE BY THE AO TO THIS EXTENT IS CONFIRMED. THUS THE APPELLANT'S THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. LD. DR RELIED ON THE ORDER OF AO AND CONTENDED THAT THE AO WAS JUSTIFIED IN APPLYING RULE 8D. 7. ON THE OTHER HAND, LD. AR DREW OUR ATTENTION TO THE FACT THAT MOST OF THE INVESTMENT WAS MADE IN THE GROUP COMPANIES, THEREFORE, NO ADMINISTRATIVE OTHER EXPENDITURE WAS INCU RRED FOR MAINTAINING THOSE INVESTMENT. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ASSESSEE ITSELF HAS MADE A SUO MOTU DISALLOWANCE OF RS. 1 LAKH UNDER RULE 8D(2)(III ), HOWEVER, THE AO HAS COMPUTED DISALLOWANCE UNDER RULE 8D(2)(III) AT RS.2,14,85,474/ - . ITA NO S . 202&207 /1 3 4 THE ASSESSEE COMPANY IS BASICALLY ENGAGED IN THE CONSTRUCTION ACTIVITY HAVING TOTAL RECEIPTS OF RS. 3229.76 CRORES OUT OF WHICH DIVIDEND INCOME IS ONLY RS.9.68 CRORES, W HICH WORKS OUT TO BE 0.309% OF THE TOTAL RECEIPTS. WE FOUND THAT OUT OF TOTAL DIVIDEND INCOME OF RS.9.86 CRORES, THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS. 8 CRORES FROM THE GROUP CONCERN ONLY WHICH DO NOT REQUIRE ANY EXTRA EFFORTS ON ACCOUNT OF ADMINISTR ATIVE EXPENSES ETC. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR UPHOLDING THE DISALLOWANCE OF RS.10 LAKHS UNDER RULE 8D(2)(III) WHICH WAS CLAIMED BY THE ASSESSEE AT RS. 1 LAKH. 9. THE FACTS AND CIRCUMSTANCES IN ITA NO.207/MUM/2013, WHICH HAS BEEN FILED BY ANOTHER GROUP COMPANY, ARE EXACTLY SAME, WHEREIN THE CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.6,50,000/ - AGAINST THE DISALLOWANCE WORKS OUT BY THE ASSESSEE AT RS.2,50,000/ - . THE RELEVANT FINDING OF CIT(A) ARE PARA 4.4 , WHICH HA S NOT BEEN CONTROVERTED BY LD. DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 10. . IN THE RESULT, BOTH APPEALS OF REVENUE ARE DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON T HIS 27 /03/ 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27/03 /201 5 . . /PKM , . / 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//