ASST CIT CEN CIR 29, MUMBAI V. SHOPPERS STOP LTD, MUMBAI

ITA 2189/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2276 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KASHYAPDR
• Keywords: Sale consideration of property below Jantri Value; Earning of tax free income
• Section: 14A

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/2189/MUM/2012, /ASSESSMENT YEARS: 2008-09 ACIT, CENTRAL CIRCLE-29 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. SHOPPERS STOP LTD. EUREKA TOWERS, A-WING, 9 TH FLOOR, MINDSPACE, LINK ROAD MALAD(W),MUMBAI-400 064. PAN:AABCS 4383 A ./ITA/1753/MUM/2012, /ASSESSMENT YEARS: 2008-09 M/S. SHOPPERS STOP LTD. MUMBAI-400 064. VS. ACIT, CENTRAL CIRCLE-29 MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI SANJEEV KASHYAP-DR ASSESSEE BY: MS. AARTI SATHE / DATE OF HEARING: 27.07.2016 / DATE OF PRONOUNCEMENT: 27.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.23.1.2012 OF CIT(A)-40, MU MBAI THE ASSESSING OFFICER(A.O) AND THE ASSESSEE HAVE FILED THE PRESENT APPEALS. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF RETAILI NG A VARIETY OF HOUSEHOLD AND CONSUMER PRODUCTS,FILED ITS RETURN OF INCOME ON 29. 9.2008,DECLARING ITS INCOME AT RS.27.51 CRORES.THE AO COMPLETED THE ASSESSMENT U/S.143(3) O F THE ACT ON 16.12.10 DETERMINING THE INCOME OF THE ASSESSEE AT RS.36.26 CRORES. ITA/2189/M/12: 3. EFFECTIVE GROUND OF APPEAL RAISED BY THE AO IS ABOU T DELETING THE DISALLOWANCE OF UNASCERTAINED EXPENDITURE BEING REWARD POINTS AGAIN ST THE CURRENT YEARS SALES.DURING THE COURSE OF HEARING BEFORE US IT WAS BROUGHT TO OUR N OTICE THAT SIMILAR QUESTION AROSE IN THE APPEALS OF THE EARLIER YEAR AND THE TRIBUNAL HAD DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHILE DECIDING THE APPEALS FOR THE AY.2003-04&07-08 (ITA/NO.1835/MUM/ 2010,DT.25.1.2012 & ITA/5460/ MUM /2010,DT.24.2.12) . WE FIND THAT WHILE DECIDING THE APPEAL FOR THE AY.2003-04 THE TRIBUNAL HAD HELD AS UNDER :- 11.WE FULLY AGREE WITH THE AFORESAID FINDINGS OF T HE COMMISSIONER (APPEALS).THE FACTS, ISSUES, AND THE FINDINGS ARE BROUGHT OUT NICELY BY THE COMM ISSIONER(APPEALS). AS AND WHEN THE CUSTOMER OF THE ASSESSEE MAKES A PARTICULAR PURCHA SE THE CUSTOMER IS GIVEN A MONETARY RIGHT IN THE FORM OF REBATE IN THE COST OF GOODS THAT HE WILL PURCHASE AT A FUTURE DATE.THUS, AND WHEN A RIGHT IS GIVEN, THE ASSESSEE INCURS A LIABILITY W HICH IT HAS CLAIMED AS MARKETING EXPENDITURES. 2189&1753/M/12- (08-09)SHOPPERS STOP 2 THE ASSESSEE, BASED A HISTORICAL DATA IN A SCIENTIF IC MANNER, HAS ESTIMATED THAT ONLY 50% OF THE REWARD POINTS GIVEN ARE LIKELY TO BE ENCASHED BY TH E CUSTOMERS.OUT OF THIS 50% OF THE GROSS PROFIT MARGIN IS REDUCED AND THE BALANCE IS ONLY CL AIMED AS EXPENDITURE.ON A DIRECTION FROM THE BENCH THE ASSESSEE HAS ALSO FILED DATA FROM T HE AY 2005-06 TO THE AY 2010-11, WHICH SHOWS THAT THE POINTS LAPSED WAS SHOWN AS INCOME. T HE ASSESSEE HAS ALSO PROVED THAT THIS IS A CONSISTENT ACCOUNTING POLICY BEING FOLLOWED YEAR AF TER YEAR.ON THIS FACTUAL MATRIX, WE HOLD THE FINDINGS OF THE COMMISSIONER(APPEALS). CONSEQUENTLY , THE GROUND RAISED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS FOLLOWED BY THE TRIBUNAL WHILE DECIDING THE ORDER FOR THE AY.2007-08(SUPRA).RESPECTFULLY,FOLLOWING THE ABOVE ORDERS WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. ITA/1753/MUM/2012: 4. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS ABOUT DISALLOWANCE MADE BY THE AO U/S.14A OF THE ACT.DURING THE ASSESSMENT PROCEED INGS,THE AO FOUND THAT THE ASSESSEE HAD MADE INVESTMENTS IN SHARES, THAT T HE VALUE OF INVESTMENT AS ON 31.3.2008WAS RS.80.72 CRORES,THAT IT HAD CLAIMED IN TEREST EXPENDITURE OF RS. 11. 23 CRORES.HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S.14A R.W.RULE 8D OF THE INCOME TAX RULES,(1962)SHOULD NO T BE MADE.THE ASSESSEE SUBMITTED THAT IT HAD SUFFICIENT OWN FUNDS AND THER E WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE U/S.14A.HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE AND MADE AN ADDITION OF RS.1.50CRORES [RS.1.18 U/R 8D (II) + RS.32.40 LAKHS U/R 8D(III)] . 5. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND CONTENDED THAT DU RING THE YEAR UNDER APPEAL IT HAD MADE INVESTMENT OF RS.31.81 CRORES OUT OF TH E INTEREST FREE SURPLUS FUND, IT HAD SUFFICIENT FUNDS BY WAY OF CASH PROFITS OF R S.46.24 CRORES. THE ASSESSEE RELIED UPON THE CASE OF RELIANCE UTILITIES AND POWE R LTD. (313 ITR 450). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA REFERRED TO CASE OF GODREJ AND BOYCE MFG. CO.LTD. ( 328ITR81) AND HELD THAT AO WAS AUTHORISED TO MAKE REASONABLE DISALLOWANCE U /S.14A BY MAKING AN ESTIMATE OF ATTRIBUTABLE EXPENDITURE,THAT DISTINCTI ON BETWEEN THE INVESTMENTS OUT OF THE BORROWED FUNDS AND OWN FUNDS HAD BEEN TAKEN AWAY BY RULE 8D OF THE RULES.FINALLY,HE UPHELD THE ORDER OF THE AO. 2189&1753/M/12- (08-09)SHOPPERS STOP 3 6. BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) ARGUE D THAT ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE,THAT NO EXEMPT INCOME WAS S HOWN IN THE RETURN OF INCOME,THAT IT HAD MADE INVESTMENT IN THE SUBSIDIAR IES FOR STRATEGIC REASONS, THAT IT HAD SUFFICIENT NON-INTEREST BEARING FUNDS. SHE R EFERRED TO PAGE 20 OF THE PB WHEREIN DETAILS OF INVESTMENT MADE IN SUBSIDIARY CO MPANIES WAS GIVEN.SHE RELIED UPON THE CASE OF HDFC BANK LTD. (383 ITR529) . THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ASSESSEE HAD NOT CLAIMED ANY DEDUCTION I N RESPECT OF EXEMPT INCOME NOR HAS IT CLAIMED ANY EXPENDITURE AGAINST THE INCO ME WHICH DOES NOT FORM PART OF THE TOTAL INCOME.THUS, BOTH THE BASIC INGREDIENT S FOR MAKING A DISALLOWANCE U/S.14A ARE MISSING.SECONDLY,THE FUND FLOW STATEMEN T MADE AVAILABLE TO THE FAA,DURING THE APPELLATE PROCEEDINGS,CLEARLY SHOW T HAT IT HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMENTS(PG-1 OF THE PB).THE FAA H AS ADMITTED THAT FUNDS AVAILABLE TO THE ASSESSEE WERE MORE THAN THE INVEST MENTS MADE DURING THE YEAR UNDER CONSIDERATION.THEREFORE, IN OUR OPINION THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE AS PER THE PROVISIONS OF SECTIO N 14A R.W.R 8D OF THE RULES. CONSIDERING ALL THESE FACTORS WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE AO. HENCE, REVERSING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASS ESSEE . AS A RESULT APPEAL FILED BY THE AO STANDS DIS MISSED AND ASSESSEES APPEAL IS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY,2016. 27 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :27.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 2189&1753/M/12- (08-09)SHOPPERS STOP 4 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.