ACIT 17(1), MUMBAI V. P.D. WAREHOUSING CORPORATION, MUMBAI

ITA 2524/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2082 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: R C JAIN
• Keywords: Rule of consistency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI AMARJIT SINGH , J M ./ ITA NO . 2524 / MUM/20 1 4 ( / ASSESSMENT YEAR : 20 0 9 - 2010 ) ACIT - 17(1), MUMBAI VS. M/S P.D.WAREHOUSING CORPORATION, GUPTA MILLS ESTATE, DARUKHANA, REAY ROAD, MUMBAI ./ ./ PAN/GIR NO. : A A AFP 1508 J ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI B.S.BIS T /ASSESSEE BY : SHRI R.C.JAIN / DATE OF HEARING : 07 / 10 / 2015 / DATE OF PRONOUNCEMENT 14 /12 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDE R OF CIT(A), DATED 29 - 1 - 2014 , FOR THE ASSESSMENT YEAR 200 9 - 2010 , IN THE MATTER OF ORDER P ASSED U/S.143(3) OF THE I.T.ACT . 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DISALLOWING NET INTEREST EXPENDITURE IN PLACE OF GROSS INTEREST EXPENDITURE AS CONSIDE RED BY THE AO. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT DUR ING THE COURSE OF ASSESSMENT IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD DISALLOWED AN AMOUNT OF RS.18,93,320 / - APPLYING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AS PER DETA ILED WORKING APPENDED TO THE AUDIT REPORT. SCRU TINY OF THE WORKING OF DISALLOWANCE U / S 14A BY THE AO ITA NO. 2524 /M/1 4 2 REVEALED THAT THE WHILE APPLYING THE RULE 8 D , THE ASSESSEE HAD WORKED OUT THE DISALLOWANCE BY TAKING THE NET INTEREST AMOUNT OF RS.1,74,88,302/ - (I.E. GROS S INTEREST PAID AT RS. 2,94,55,700 - 1,19,,67,390 THE INTEREST RECEIVED) INSTEAD OF GROSS INTE REST PAID AT RS. 2,94,55,700/ - . IT WAS SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN FINANCING BUSINESS AND THEREFORE WORKING UNDER RULE 8 D (2) IS TO BE BASED ON NET INTEREST COST ONLY, A POSITION ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS AND RULE OF CONSISTENCY DEMANDS THAT THE DEPARTMENT ADOPTS A CONSISTENT VIEW ON THE ISSUE. MOREOVER, RULE 8 D (2) NOWHERE STATES THAT THE GROSS INTEREST IS REQUIRED TO BE CONSIDERED A S AGAINST THE NET INTEREST WHICH IS THE OUTGO ESPECIALLY IN A CASE LIKE THE ASSESSEE, WHO ARE ENGAGED I N FINANCING BUSINESS. 4. BY THE IMPUGNED ORDER THE CIT(A) DIRECTED THE AO TO DISALLOW NET INTEREST EXPENDITURE BY FOLLOWING THE ORDER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MORGAN STANLEY INDIA SECURITIES (P) LTD., 55 DTR 177 , AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD CAREFULLY. WHILE DEALING WITH AN IDENTICAL ISSUE IN THE CASE OF MORGAN STANLEY INDIA SECURITIES (P) LTD. (2011) 55 DTR (MUMBAI)(TRIB) 177, THE TRIBUNAL HELD THAT 'NO STRONG GROUNDS HAVE BEEN ADVANCED BY THE DEPARTMENTAL AUTHORITIES TO DISCARD THE METHOD ADOPTED BY THE ASSESSEE IN DISALLOWING THE INTEREST UNDER S. 14A. THERE CAN BE NO DISPUTE THAT SINCE THE AMOUNT OF INTEREST DEBITED TO THE P&L ALE IS ON NET BASIS, THE DISALLOWANCE OF INTEREST SHOULD ALSO BE MADE ONLY WITH REFERENCE TO THE NET INTEREST, AS WAS DONE BY THE ASSESSEE.' ITA NO. 2524 /M/1 4 3 6. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF ACIT, CIR - 5(1) VS. M/S KESHAV SHARES & STOCKS LTD., ITA NO. 4394/DEL/2011, BY T HE DELHI BENCH OF THE TRIBUNAL. 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR DIRECTING THE AO TO DIS ALLOW NET IN TEREST EXPENDITURE WHILE WORKING OUT DISALLOWANCE U/S. 14A R.W.RULE 8D. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /12 / 201 5 . SD/ - SD/ - ( AMARJIT SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 14 /12 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPO NDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//