SAFE CLEARING & FORWARDING P. LTD, MUMBAI V. ITO 7(2)(2), MUMBAI

ITA 2193/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7753 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VINITA SHAH SHRI RAJ
• Keywords: Earning of tax free income
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI , , , , ! BEFORE SHRI RAJENDRA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.2193/MUM/2015 ( '# $# / ASSESSMENT YEAR: 2011-12) M/S. SAFE CLEARING & FORWARDING PVT. LTD. 105, ASHIRWAD BUILDING, AHMADABAD STREET, MUMBAI 400 009 / VS. INCOME TAX OFFICE R 7(2)(2) MUMBAI ./ ./PAN/GIR NO. : AABCS6419H ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 24.03.2017 /DATE OF PRONOUNCEMENT: 29.03.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 19.02.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY: SHRI RAKESH JOSHI & MS. VINITA SHAH REVENUE BY: SHRI RAJGURU M. V. ITA NO.2193/M/2015 A.Y.2011-12 2 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F LEARNED ASSESSING OFFICER IN DISALLOWING A SUM OF RS.11,17, 140/- U/S.14A R.W.R. 8D OF THE INCOME TAX RULES, 1962 BY ALLEGING THAT THE SAID EXPENSES HAVE BEEN INCURRED FOR EARNING EXEMPT INCO ME, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE THE SAID GROUND OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS E- RETURN OF INCOME ON 24.09.2011 DECLARING TOTAL TAXA BLE INCOME TO THE TUNE OF RS.NIL AFTER SETTING OFF THE BROUGHT FORWARD LOS SES OF EARLIER YEARS. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX A CT, 1961 ( IN SHORT THE ACT). THE CASE WAS SELECTED FOR SCRUTINY AND NOTI CES U/S.143(2) OF THE ACT DATED 01.08.2012 AND 142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE WHICH WERE DULY SERVED UPON THE ASSESSEE. THE ASSESSEE A LSO CLAIMED THE INTEREST EXPENDITURE AND ALSO VARIOUS OTHER ADMINISTRATIVE E XPENSES IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER APPLIED THE PR OVISION U/S.14A R.W.RULE 8D OF THE ACT AND DISALLOWED THE EXPENDITU RE TO THE TUNE OF RS.11,17,140/-. FEELING AGGRIEVED THE ASSESSEE HAS FILED THE APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1:- 4. UNDER THIS ISSUE, THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE U/S.14A READ WITH RULE 8D OF THE ACT TO THE TUNE OF RS.11,17,140/-. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS EARNED THE EXE MPT INCOME TO THE TUNE OF RS.30,131/-. THE LEARNED REPRESENTATIVE OF THE ASS ESSEE HAS ARGUED THAT THE ITA NO.2193/M/2015 A.Y.2011-12 3 ASSESSEE WAS HAVING THE RESERVE AND SURPLUS FUND TO THE TUNE OF RS.64,40,000/- WHEREAS THE INVESTMENT TO THE TUNE O F RS.61,15,864/- WHICH IS LESS, THEREFORE, IN THE SAID CIRCUMSTANCES THE I NVESTMENT IS REQUIRED TO BE CONSIDERED ON BEHALF OF THE ASSESSEES ASSET HENCE NO EXPENDITURE ON ACCOUNT OF INTEREST IS LIABLE TO BE ASSESSED IN VIE W OF THE LAW SETTLED IN HONBLE BOMBAY HIGH COURT IN CASE TITLED AS HDFC BA NK VS. DCIT 366 ITR 505 (BOMBAY) AND IN CASE TITLED AS CIT VS. RELI ANCE UTILITIES 313 ITR 340. HOWEVER, ON THE OTHER HAND THE LEARNED REPRES ENTATIVE OF THE DEPARTMENT HAS PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE BALANCE SHEET AS ON 31.03.2011 IS ON THE FILE AT PAGE 4 OF THE PAPER BOOK WHICH SPEAKS THAT THE ASSESSEE WAS HAVIN G THE RESERVE AND SURPLUS FUND TO THE TUNE OF RS.64,40,000/- AND THE INVESTMENT TO THE TUNE OF RS.61,15,864/- WHICH IS LESS THAN THE RESERVE AND S URPLUS FUND. IN VIEW OF THE LAW SETTLED IN HONBLE BOMBAY HIGH COURT IN CAS E TITLED AS CIT VS. RELIANCE UTILITIES 313 ITR 340, IN WHICH IT IS SPEC IFICALLY HELD THAT WHEREAS AN ASSESSEE HAS HIS OWN FUND AS WELL AS BORROWED FU NDS, A PRESUMPTION CAN BE MADE THAT THE ADVANCES FOR NON-BUSINESS PURPOSES HAVE BEEN MADE OUT OF THE OWN FUNDS AND THAT THE BORROWED FUNDS HAVE N OT BEEN USED FOR THIS PURPOSE. IN VIEW OF THE LAW SETTLED IN HDFC BANK VS. DCIT 366 ITR 505 (BOMBAY), IT IS SPECIFICALLY HELD THAT WHERE THE AS SESSEE HAVE OWN FUNDS MORE THAN THE INVESTMENT THEN IT WOULD ASSUME THAT THE ASSESSEE HAS MADE THE INVESTMENT FROM HIS OWN FUND AND HE DID NOT UTI LISE THE BORROWED FUNDS IN THE INVESTMENT IN THE TAX FREE SECURITIES. MORE OVER, IT ALSO CAME INTO THE NOTICE THAT THE ASSESSEE DID NOT CLAIM ANY EXPENDIT URE. IT ALSO CAME INTO THE NOTICE THAT THE ASSESSEE HAS EARNED THE EXEMPT INCO ME TO THE TUNE OF RS.30,131/- AND THE EXPENDITURE WAS ASSESSED TO THE TUNE OF RS.11,17,140/- ITA NO.2193/M/2015 A.Y.2011-12 4 WHICH DOES NOT SEEMS JUSTIFIABLE IN VIEW OF ABOVE MENTIONED LAW, WE ARE OF THE VIEW THAT THE ASSESSEE HAS INVESTED HIS OWN FUNDS TO EARN THE EXEMPT INCOME, THEREFORE NO EXPENDITURE IS LIABLE TO BE AS SESSED ON ACCOUNT OF INTEREST EXPENDITURE IN VIEW OF THE PROVISION OF SE CTION 14 READ WITH RULE 8D OF THE ACT. HOWEVER, WE RESTRICT THE EXPENSES A SSESSED BY THE ASSESSING OFFICER IN VIEW OF THE PROVISION U/S.8D(I II) OF THE ACT TO THE TUNE OF RS.19,139/- AND DELETE THE REMAINING EXPENDITURE ASSESSED BY THE ASSESSING OFFICER. ACCORDINGLY, THIS ISSUE IS HERE BY DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2017 . SD/- SD/- ( RAJENDRA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 29 TH #$ , 2017 MP & '$ / COPY OF THE ORDER FORWARDED TO : 1 . / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. , , , , / DR, ITAT, MUMBAI 6. + -$ / GUARD FILE. / BY ORDER, ! ! //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI