BEEKAYLON SYNTHETICS P.LTD, MUMBAI V. ADDL CIT CIR 1(10, MUMBAI

ITA 2459/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9866 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 11-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: JAY SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA/2459/MUM/2015-BEEKELON 1 , INCOME-TAX APPELLATE TRIBUNAL -JBENCH M UMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./2459/MUM/2015, /ASSESSMENT YEAR: 2010-11 M/S. BEEKAYLON SYNTHETICS PVT. LTD. 10,JASVILLE,2 ND FLOOR,9 MARINE LINES, OPP.LIBERTY CINEMA,MUMBAI-400 020 PAN:AAACB 2976 M VS. ADDL.CIT- 1(1) AAYAKAR BHAVAN MUMBAI. ( /APPELLANT) ( / RESPONDENT) / REVENUE BY: MS.ARJU GARODIA /ASSESSEE BY: SHRI JAY SHAH / DATE OF HEARING: 11/07/2017 / DATE OF PRONOUNCEMENT: 11/07/2017 / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 21/01/2015 OF CIT (A)-2,MUMBAI,THE ASSESSEE HAS FILED THE PRES ENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF POLYESTER YARN AND GENERATION AND SALE OF ELECTRICITY, FILED ITS RETURN OF INCOME ON 20/09/2010,DECLARING INCOME OF RS. 6.61 CRORES.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT, U/S.143 (3) OF THE ACT,ON 07/ 02/2013,DETERMINING ITS INCOME AT RS . 6.81 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE MA DE UNDER SECTION 14A OF THE ACT, AMOUNTING TO RS. 14.18 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 34.08 LAKHS,THAT ON ITS OWN IT HAD MADE A DISALLOWANCE OF RS. 3.43 LAKHS,THAT IT HAD PAID RS. 1.86 CRORES AS INTE REST ON VARIOUS BORROWINGS. HE OBSERVED THAT THE ASSESSEE HAD NOT ESTABLISHED CLEAR NEXUS BETWEEN TH E OWN FUNDS AND THE INVESTMENTS, THAT THE INTEREST EXPENDITURE FOR THE YEAR UNDER CONSIDERATI ON WAS NOT ATTRIBUTABLE TO ANY PARTICULAR INCOME/RECEIPT, THAT DISALLOWANCE OF EXPENDITURE RE LATED TO EXEMPT INCOME HAD TO BE MADE AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (RULES).THE ASSESSEE ARGUED THAT WHILE CALCULATING THE DISALLOW ANCE UNDER RULE 8D (2) (II) OF THE RULES THE INTEREST PAID ON TERM LOANS SHOULD NOT BE TAKEN INT O CONSIDERATION, THAT IT WAS PAID FOR AVAILING LOANS FOR SPECIFIC PURPOSES. THE AO OBSERVED THAT T HE ASSESSEE MAINTAINED A COMMON BANK ACCOUNT IN WHICH ALL SORTS OF RECEIPTS INCLUDING TE RM AND OTHER LOANS WERE DEPOSITED THAT FROM THE SAME BANK ACCOUNT ALL EXPENDITURE IS WERE INCURRED INCLUDING PAYMENT FOR MAKING INVESTMENTS. ITA/2459/MUM/2015-BEEKELON 2 INVOKING THE PROVISIONS OF RULE 8D OF THE RULES,HE MADE A DISALLOWANCE OF RS. 18.32 LAKHS. CONSIDERING THE SUO MOTU DISALLOWANCE OF RS. 3.43 L AKHS MADE BY THE ASSESSEE, THE AO ADDED A SUM OF RS. 14, 88,400 /-TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSIONS.THE FA A REFERRED TO THE ORDER OF HIS PREDECESSOR FOR THE AY.2008-09 AND CONFIRMED THE OR DER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) CONTENDED THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMEN TS, THAT IT HAD NOT UTILISED ANY BORROWED FUNDS, THAT OWN FUNDS AVAILABLE FOR THE YEAR UNDER CONSIDERATION AMOUNTED TO RS. 47.18 CRORE, THAT THE INVESTMENT MADE BY THE ASSESSEE FOR THE YE AR WAS OF RS. 4.93 CRORE ONLY, THAT THE OWN FUNDS WERE NEARLY 10 TIMES THAT OF THE INVESTMENTS. HE REFERRED TO THE CASE OF HDFC BANK LTD. (383 ITR 529) OF THE HONORABLE BOMBAY HIGH COURT AN D ARGUED THAT NO DISALLOWANCE UNDER RULE 8D(II)SHOULD HAVE BEEN MADE, THAT THE ASSESSEE ITSE LF AT MADE A DISALLOWANCE OF WHICH 3.43 LAKHS UNDER THE HEAD ADMISSION TO EXPENSES,THAT THE AO HA D NOT GIVEN ANY FINDING ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE,THAT WITHO UT REJECTING THE CLAIM MADE BY THE ASSESSEE THE AO SHOULD NOT HAVE MADE FURTHER DISALLOWANCE. HE RE FERRED TO THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. (328 ITR 1).HE FURTHER ARGUED THA T THE MAJOR EXPENDITURE UNDER THE HEAD INTEREST EXPENSES WAS NOT FOR MAKING INVESTMENT,THA T INTEREST WAS PAID ON TERM LOANS/CAR LOAN, THAT THE AO/FAA HAD NOT CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US INCLUDING THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. WE FIND THA T THE ASSESSEE HAD SUFFICIENT OWN FUNDS DURING THE YEAR UNDER CONSIDERATION FOR MAKING THE INVESTM ENTS. THE ASSESSEE HAD OWN FUND OF RS.47 CRORES(APP.),WHEREAS INVESTMENTS,RESULTING IN EXEMP T INCOME,WERE OF RS.4 CRORES(APP.).THE HONORABLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD (SUPRA)HAS HELD THAT IF AN ASSESSEE POSSESSED SUFFICIENT OWN FUND THE PRESUMPT ION WAS THAT INVESTMENT WAS MADE FROM OWN FUND AND NOT FROM BORROWED FUNDS.SIMILAR VIEW WAS T AKEN BY THE HONBLE COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD.(313 ITR340).BESIDES ,THE ASSESSEE HAD DISALLOWED RS.3.43 LAKHS ITA/2459/MUM/2015-BEEKELON 3 ON ITS OWN UNDER THE HEAD ADMINISTRATIVE EXPENSES A ND THE AO HAD NOT GIVEN ANY REASON FOR REJECTING THE STAND TAKEN BY THE ASSESSEE.SO,IN OUR OPINION,THERE WAS NO NEED TO MAKE ANY FURTHER DISALLOWANCE.REVERSING THE ORDER OF THE FAA,WE ALLO W THE EFFECTIVE GROUND RAISED BY THE ASSESSEE. AS A RESULT,APPEAL FI LED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN TH E OPEN COURT ON 11 TH , JULY , 2017. 11 , 2017 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 11.07.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.