ASHOK HARILAL TANNA, KALYAN V. CIT CIR 3, KALYAN

ITA 2253/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0655 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 05-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI DT GARASIA, JM AND SHRI MANOJ KUMAR AGG AR WAL, AM I.T.A. NO. 2253/MUM/2015 ASSESSMENT YEAR: 2011 - 12 MR. ASHOK HARILAL TANNA 202, ARCHIES CO - OP HSG SOCIETY LTD, OAK BAUG, NEW STATION ROAD, KALYAN - 421301. VS. CIT CIRCLE - 3 2 ND FLOOR, RANI MANISON, MURBAD ROAD KALYAN. PAN: AAIPT0759P (APPELLANT) : (RESPONDENT) APPELLANT BY : SHRI JAYANT BHATT (AR) MR. SANJIV G. BRAHME RESPONDENT BY : SHRI K. RAVIKIRAN (DR) DATE OF HEARING : 06/04 /2017 DATE OF PRONOUNCEMENT : 12 /05 /2017 O R D E R PER D. T. GARASIA, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1 MUMBAI, DATED 23/01/2015 ARISING OUT OF ORDER OF ACIT, CIRCLE - 3, KALYAN DATED 07/02/2014 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. THE ONLY GROUND READS AS UNDER: - 1. THE LD. CIT(A) I, THANE HAS ERRED IN CONFIRMING THE ORDER OF THE ACIT, CIRCLE - 3, KALYAN FOR MAKING ADDITION OF RS.9,96,763/ - U/S 14A OF THE I.T. ACT, 1961. MR. ASHOK HARILAL 2 ITA NO. 2253/MUM/2015 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD SHOWN INVESTMENT IN SHARES AND CERTAIN OTHER ASSETS, WHEREFROM HE HAD EARNED DIVIDEND INCOME OF RS.8,98,542/ - . THE ASSESSEE HAS ALSO SHOWN INVESTMENT IN VARIOUS FIRMS AND E ARNED INTEREST AND REMUNERATION INCOME. IN ADDITION TO ABOVE, THE ASSESSEE HAS SHOWN SHARE OF PROFIT AMOUNTING TO RS.1,19,42,886/ - FROM THESE FIRMS, WHICH IS EXEMPT U/S 10(2A) OF THE INCOME TAX ACT. IN THE BALANCE - SHEET, THE ASSESSEE HAS ALSO SHOWN UNSECUR ED LOAN AMOUNTING TO RS.2,73,24,307/ - AND SECURED LOAN OF RS.40,24,068/ - FROM ICICI AND BHARAT CO - OPERATIVE BANK. IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAD DEBITED AN INTEREST OF RS.18,36,342/ - . SINCE THE ASSESSEE HAD NOT DISALLOWED ANY EXPENDITURE, A S PER PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, IN RESPECT OF TAX FREE DIVIDEND INCOME OF RS.8,98,542/ - , THEREFORE, THE ASSESSING OFFICER HAS DETERMINED THE DISALLOWABLE EXPENDITURE UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1961, AS UNDER: - PARTICULARS AMOUNT (RS.) AMOUNT (RS.) I. DIRECT EXPENDITURE RELATING TO EXEMPT INCOME D - MART CHARGES NIL II. AMOUNT COMPUTED AS PER RULE 8D (2)(II) [A X B /C] 7,84,137 A= INTEREST EXPENSES 18,36,342 B= AVERAGE INVESTMENT 4,25,25,168 C= AVERAGE TOTAL ASSET 9,95,88,185 III. 0.5% OF AVERAGE INVESTMENT (0.5% * RS.4,25,25,168/ - ) 2,12,626 TOTAL DISALLOWANCES AS PER RULE 8D (I+II+III) RS.9,96,763/ - MATTER CARRIED TO CIT(A) AND CIT(A) HAS UPHELD THE ACTION OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING THE LD. AR FIRSTLY CONTENDED BEFORE US THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BAN K 366 ITR 505 (BOM) WHEREIN IT IS HELD THAT WHEN THE MR. ASHOK HARILAL 3 ITA NO. 2253/MUM/2015 ASSESSEE HAS OWN FUND AND OTHER NON - INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN TAX FREE SECURITIES AND WHEN THE ASSESSEES CAPITAL PROFIT SURPLUS AND CURRENT DEPOSIT WERE HIGHER THAN INVESTM ENT IN TAX FREE SECURITIES IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THERE WAS A QUERY FROM THE BENCH WHETHER THE ASSESSEE IS IN FINANCIAL BUSINESS OR NOT. THE LD. AR SUBMITTED THAT THE ASSESSEE IS NOT IN FINANCIAL BUSINESS BUT THIS JUDGMENT IS APPLICABLE. 5 . IN RESPONSE TO THIS QUERY THE LD. DR SUBMITTED BEFORE US THAT HONBLE PUNJAB AND HARYANA HIGH COURT IN 53 TAXMANN.COM 297 (PUNJAB & HARYANA) HAS CONSIDERED THE DE CISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITY AND AFTER CONSIDERING THE JUDGMENT HAS HELD THAT AFTER EXAMINING THE BALANCE SHEET OF THE ASSESSEE, IT SHALL BE PRESUMED THAT THE FUNDS AVAILABLE WITH THE ASSESSEE WERE SUFFICIENT TO MEET THE INVESTMENTS OUT OF ITS OWN FUNDS AND THAT BORROWED FUNDS WERE NOT UTILIZED FOR INVESTMENT. THEREFORE, INTEREST, IF ANY, PAID ON BORROWED FUNDS CANNOT BE DISALLOWED IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. DU RING THE COURSE OF HEARING THE LD. AR SUBMITTED THAT LET THIS ISSUE GO BACK TO THE FILE OF A.O. AND THE ASSESSEE WILL BE ABLE TO PROVE THAT THE ASSESSEE HAS NOT PAID ANY INTEREST ON INVESTMENT MADE. THEREFORE, MATTER MAY BE RESTORED TO THE A.O. TO RE - CALCU LATE THE SAME. 6 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAD UTILIZED MIXED FUND ON WHICH THE INTEREST HAS BEEN PAID ON BORROWED FUND WAS RELATABLE TO INTEREST ON INVESTMENT MADE IN TAX FREE FUNDS. THIS MATTER REQUIRES RE - EXAMINATION BY THE A.O. THEREFORE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE A.O. TO RE - EXAMINE THE SAME K EEPING IN VIEW THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK (SUPRA) AND THE DECISION OF MR. ASHOK HARILAL 4 ITA NO. 2253/MUM/2015 HONBLE PUNJAB AND HARYANA HIGH COURT (SUPRA). THE ASSESSING OFFICER IS DIRECTED TO DECIDE AS PER LAW KEEPING IN VIEW OF THE DECISION OF ABOVE HIGH COURTS AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7 . IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. JUDGMENT PRONOUNCED IN THE OPEN COURT ON 12 TH MAY 2017 . SD/ - SD/ - ( MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (D.T. GARASIA) JUDICIAL MEMBER MUMBAI, DATED: 12 TH MAY, 2017 *RAHUL SHARMA* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, I BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI