WELSPUN SYNTEX LTD, MUMBAI V. DCIT CEN CIR 22, MUMBAI

ITA 2221/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1465 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 05-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Earning of tax free income
• Section: 153A; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI , , , , ' BEFORE SHRI C.N.PRASAD, JM AND SHRI RAJESH KUMAR, AM / I.T.A. NO. 2221 /MUM/2015 ( # $# / ASSESSMENT YEAR: 2007-08) M/S. WELSPUN SYNTEX LIMITED TRADE WORLD, B WING, 9 TH FLOOR, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013 / VS. DCIT, CENTRAL CIRCLE 22 R.NO.465, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 ./ ./PAN/GIR NO. : AAACW0489L ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 05.01.2017 /DATE OF PRONOUNCEMENT: 04.04.2017 / O R D E R PER C.N.PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 15.01.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-51, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] F OR THE A.Y. 2007-08. 2. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHA LF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT. THE RECORDS SHOW THA T NOTICE WAS SERVED ON ASSESSEE BY: NONE REVENUE BY: SHRI SAURABHKUMAR RAI ITA NO. 2221 M/201 5 A.Y.20 07-08 2 THE ASSESSEE ON 09.12.2016 FIXING THE DATE OF HEARI NG AS 05.01.2017 AND THE COPY OF THE ACKNOWLEDGE IS ALSO ON RECORD. SINCE T HE ASSESSEE IS NOT COMING FORWARD TO PROSECUTE THE CASE WE ARE DISPOSI NG OFF THIS APPEAL AFTER HEARING THE LEARNED DR. 3. THE ASSESSEE IN ITS APPEAL HAS RAISED THE FOLLOW ING GROUNDS:- 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT: - (I) THE ORDER PASSED U/S.143(3) R.W.S. 153A BY THE AO IS WITHOUT JURISDICTION AND BAD IN LAW AS THE JURISDICTION U/S.153A IS VITIATED; AND (II) THE ADDITIONS MADE BY THE AO ARE BEYOND THE SC OPE OF PROVISIONS OF SECTION 153A. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIO NS OF RS.99,25,101/- (SUBJECT TO CERTAIN RELIEF ALLOWED I N RESPECT OF APPARENT MISTAKES) MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING CERTAIN EXPENDITURE CLAIMED TO HAVE BEEN INCURRED RELATING TO EXEMPT IN COME INVOKING THE PROVISIONS OF SECTION 14A. B. THE LD. CIT(A) FAILED TO APPRECIATE THAT:- (I) HAVING REGARD TO THE ACCOUNTS THERE IS NO REASO N AND BASIS IN REACHING TO DIS-SATISFACTION WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT THAT NO EXPENDITURE WAS INCURRED IN RELATION TO DIVIDEND INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME; (II) THE INVESTMENT IN SHARES WAS MADE OUT OF SURPL US FUNDS AVAILABLE WITH THE APPELLANT; (III) THERE WAS SHAREHOLDERS FUNDS OF RS.10,885.41 LAKHS ON WHICH NO INTEREST WAS PAID AS AGAINST INVESTMENT IN SHARE OF RS.2,254.01 LAKHS AND AS SUCH INVESTMENT IN SHARES IS COVERED BY THE SHAREHOLDERS FUNDS; AND ITA NO. 2221 M/201 5 A.Y.20 07-08 3 (IV) THE INVESTMENT IN SHARES WAS MADE OUT OF BUSIN ESS STRATEGY AND THERE WAS NO MAJOR CHANGE IN SUCH INVESTMENT. C. IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS , CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE W AS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVAN T CONSIDERATIONS AND FACTORS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIO N OF RS.99,25,101/- (SUBJECT TO CERTAIN RELIEF ALLOWED I N RESPECT OF APPARENT MISTAKES) MADE BY THE AO TO THE BOOK PR OFIT OF THE APPELLANT BY WAY OF ADDING BACK DISALLOWANCE MA DE U/S.14A R.W.R 8D AND THEREBY ERRED IN ENHANCING THE BOOK PROFIT ARTIFICIALLY. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE B OOK PROFIT MEANS NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCO UNT LAID BEFORE THE ANNUAL GENERAL MEETING OF A COMPANY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF TH E COMPANIES ACT, 1956 AS ADJUSTED BY CERTAIN ADJUSTM ENT SPECIFIED IN THE EXPLANATION 1 TO SECTION 115JB(2) AND THERE IS NO SCOPE FOR THE AO TO MAKE ANY FURTHER ADJUSTMENT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITS THAT TH E ASSESSING OFFICER VERY MUCH HAS JURISDICTION IN PASSING THE ORDER U/S.143( 3) R.W.S.153A OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE LE ARNED DR VEHEMENTLY SUBMITS THAT THE ASSESSING OFFICER HAS PROPERLY INV OKED THE PROVISION OF SECTION 14A OF THE ACT IN RESPECT OF THE EXEMPT INC OME AND MADE DISALLOWANCE OF RS.99,25,101/-. ITA NO. 2221 M/201 5 A.Y.20 07-08 4 5. WE HAVE HEARD THE LEARNED DR AND PERUSED THE ORD ERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AND DISALLOWED RS.99,25,101/- U/S.14A OF THE ACT, WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS OF ACT AS WELL AS BOOK PROF ITS U/S.115JB OF THE ACT. WE FIND THAT THE ASSESSMENT YEAR IN QUESTION I S 2007-08 AND THE PROVISIONS OF RULE 8D HAVE NO APPLICATION AS HELD B Y THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. (2010) 328 ITR 81 (BOM). IT WAS HELD THAT THE PROVISIONS OF RULE 8D ARE PROSPECTIVE AND ARE APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-0 9. HOWEVER, A REASONABLE DISALLOWANCE SHOULD BE MADE U/S.14A OF T HE ACT. IN THIS CASE ADMITTEDLY, THE DIVIDEND INCOME RECEIVED BY THE ASS ESSEE IS RS.87,282/- AND THEREFORE ASSUMING FOR A MOMENT THAT THE ASSESSEE H AD INCURRED CERTAIN EXPENDITURE FOR EARNING THE DIVIDEND INCOME IN ANY CASE SUCH EXPENDITURE SHOULD NOT EXCEED THE DIVIDEND INCOME EARNED BY THE ASSESSEE. IN THE CIRCUMSTANCES, WE HOLD THAT THE EXPENDITURE ATTRIBU TABLE FOR EARNING DIVIDEND INCOME SHOULD NOT EXCEED RS.87,282/- THERE FORE A REASONABLE EXPENDITURE OF RS.25,000/- CAN BE ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME. THUS WE DIRECT THE ASSESSING OFFICER TO R ESTRICT THE DISALLOWANCE U/S.14A TO RS.25,000/- ONLY AS AGAINST RS.99,25,101 /- MADE IN THE ASSESSMENT ORDER. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ITA NO. 2221 M/201 5 A.Y.20 07-08 5 ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2017 . SD/- SD/- (RAJESH KUMAR) (C.N.PRASAD) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 4 TH -+ , 2017 MP % &$% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. . ( ) / THE CIT(A)- 4. . / CIT 5. 1 , 1 , / DR, ITAT, MUMBAI 6. 0 23 / GUARD FILE. / BY ORDER, + + //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI