Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 88314 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-02-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2009-2010
Appeal Filed On
08-04-2013
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.2308/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX,2(1), ROOM NO.561, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. / VS. CENTRUM DIRECT LTD., (FORMERLY KNOWN AS FCH CENTRUMDIRECT LTD) NEPTUNE APARTMENT II, SHOP NO.02 SMT.NARGIS DUTT ROAD, PALI HILL, BANDRA,(W) MUMBAI-400050 ( / APPELLANT) .. ( ! / RESPONDENT) ./I.T.A. NO.2712/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) CENTRUM DIRECT LTD., NEPTUNE APARTMENT II, SHOP NO.02 SMT.NARGIS DUTT ROAD, PALI HILL, BANDRA, MUMBAI-400050 / VS. ASSTT. COMMISSIONER OF INCOME TAX,2(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./PAN/GIR NO. :AABCC4763G $ / APPELLANT BY SHRI J D MISTRY ! % $ / RESPONDENT BY SHRI NEIL PHUILIP & ' % () / DATE OF HEARING :29.12.2014 *+ % () /DATE OF PRONOUNCEMENT : 20.2.2015 ITA. NO2308/MUM/2013 AND 2712/M/13 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER DATED 21.1.2013 PASSED BY LD CIT(A)-4, MUMBAI AND THEY RELATE TO THE ASSES SMENT YEAR 2009-10. 2. BOTH THE PARTIES ARE AGGRIEVED BY THE DECISION O F THE LD.CIT(A) WITH REGARD TO THE DISALLOWANCE MADE UNDER SECTION 14A O F THE ACT. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.4.69 CRORES. HOWEV ER, IT HAD DISALLOWED ONLY ADMINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 (THE RULES) AND DID NOT MAKE ANY DISALL OWANCE OUT OF INTEREST EXPENDITURE. THE AO BY APPLYING THE PROVISIONS OF R ULE 8D COMPUTED THE DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE AC T AT RS.1.55 CRORES AS AGAINST DISALLOWANCE OF RS.23,90,324/- (BUT MENTION ED AS RS.10,71,363/- IN THE STATEMENT OF FACTS FILED BEFORE LD CIT(A)) M ADE BY THE ASSESSEE. BEFORE THE LD.CIT(A) THE ASSESSEE SUBMITTED THAT IT HAD INVESTED ONLY THE AMOUNTS RECEIVED BY WAY OF SHARE CAPITAL IN PURCHAS ING THE MUTUAL FUND UNITS. IT WAS FURTHER SUBMITTED THAT THE BORROWING S WERE UTILIZED FOR SPECIFIC PURPOSES FOR WHICH THE LOANS WERE TAKEN. A CCORDINGLY, IT WAS CONTENDED THAT THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE OF INTEREST EXPENDITURE. THE ASSESSEE ALSO FURNISHED ALL THE DETAILS BEFORE THE LD. CIT(A). HENCE, THE LD. CIT(A) RESTORED THE ISSU E TO THE FILE OF THE AO. THE DECISION RENDERED BY THE LD. CIT(A) IS EXTRACTE D BELOW, FOR THE SAKE OF CONVENIENCE: 4. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS OF THE ASSESSEE. HON'BLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. CIT 328 ITR 81 THAT RULE 8D IS APPLICABLE FROM A.Y.08-09, THEREFORE, A.O. HAS RIGHTLY APPLIED RULE 8D FOR DISALLOWANCE, WHEREAS, ASSESSEE DOES NOT HAVE ANY O BJECTION AS FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS C ONCERNED. THE ITA. NO2308/MUM/2013 AND 2712/M/13 3 DISPUTE RELATES TO INTEREST ONLY. AS PER RULE 8D TH E PAYMENT OF INTEREST WHICH IS DIRECTLY RELATABLE TO OTHER ACTIV ITIES OTHER THAN THE DIVIDEND YIELDING INVESTMENT ARE NOT TO BE DISALLOW ED UNDER RULE 8D, WHEREAS, THE INTEREST WHICH IS DIRECTLY RELATABLE T O SUCH INVESTMENT WHICH YIELDS DIVIDEND IS TO BE DISALLOWED IN TOTO. FOR INTEREST WHICH IS NOT DIRECTLY RELATABLE TO EITHER SUCH INVESTMENT OR OTHER ACTIVITIES OF THE ASSESSEE, MAINLY FOR THE REASON THAT BORROWE D FUNDS AND ASSESSEE'S OWN FUNDS ARE MIXED UP IN OTHER ACCOUNTS OR FOR ANY OTHER REASON, THEN AS PER RULE 8D PROPORTIONATE INT EREST IS DISALLOWED PRESUMING THAT PROPORTIONATE BORROWED FU NDS HAVE BEEN USED FOR DIVIDEND YIELDING INVESTMENT. THE A.O. HAS MADE THE SAME PRESUMPTION IN THE CASE OF THE ASSESSEE AND, THEREF ORE, DISALLOWED THE INTEREST ACCORDINGLY AS PER RULE 8D, WHEREAS, A SSESSEE- HAS CLAIMED THAT THE ENTIRE INVESTMENTS HAVE BEEN MADE DIRECTLY OUT OF ITS OWN FUNDS, OUT OF SHARE CAPITAL MONEY ONLY. AS SESSEE HAS CLAIMED TO HAVE PAID NO INTEREST TO RATNAKAR BANK A ND HDFC BANK, DURING THE PERIOD OR FOR THE PERIOD WHEN THE INVEST MENTS WERE ACQUIRED AND WHATEVER FUND WAS LYING IN THOSE TWO A CCOUNTS AT THE TIME OF INVESTMENT WERE ASSESSEE'S OWN FUNDS ONLY A ND, THEREFORE, IT IS CLAIMED THAT NO INTEREST IS ALLOCABLE FOR DISALL OWANCE. THE ASSESSEE HAS CLAIMED THAT THE INITIAL INVESTMENT OF RS.8 CRORE IN HSBC ULTRA SHORT TERM BOND FUND MADE ON 20/4/07 WAS OUT OF THE SHARE CAPITAL OF RS.8 CRORE RECEIVED ON THE SAME DA Y IN RATNAKAR BANK LTD. AND WITH THE EXISTING BALANCE IN THE ACCO UNT ASSESSEE'S CREDIT BALANCE STOOD AT RS.8,44,09,281/-, OUT OF WH ICH THE INVESTMENT OF RS.8 CRORE IS MADE. SUBSEQUENTLY IN T HE HDFC BANK ASSESSEE RECEIVED SHARE CAPITAL MONEY OF RS.75,13,6 2,734/- IN HDFC BANK AND WITH THE EXISTING CREDIT BALANCE, THE TOTA L CREDIT BALANCE STOOD AT RS.76,18,86,838/-ON 12/3/08, OUT OF WHICH INVESTMENT HAS BEEN MADE BY THE ASSESSEE ON 12/3/08 OF RS.75,13,62 ,734/- IN OLPIPD HSBC LIQUID PLUS SCHEME AND ACCORDINGLY SUBS EQUENTLY ALSO THE SCHEME WERE SWITCHED OFF FOR RS.69 CRORE FROM O LPIPD HSBC LIQUID PLUS TO RELIANCE MUTUAL FUND ON 25/3/08, DIR ECTLY WITHOUT RECEIVING THE MONEY IN ANY BANK ACCOUNT AND, THEREF ORE IT IS CLAIMED THAT NONE OF THESE INVESTMENT HAVE BEEN MADE OUT OF BORROWED FUNDS. SUBSEQUENTLY ALSO, THE ASSESSEE HAS CLAIMED OF SIMILAR SWITCH OVER FROM EXISTING FUNDS TO OTHER FUNDS WITHOUT ANY NEW INVESTMENT OR WITHOUT ROUTING THROUGH THE BANK. IN THIS MANNER ASSESSEE HAS CLAIMED THAT ALL THE INVESTMENTS IN DIVIDEND YIELDI NG FUNDS ARE FROM ITS OWN CAPITAL /FUNDS AND, THEREFORE, NO INTEREST IS DISALLOWABLE. A.O.DOES NOT APPEAR TO HAVE EXAMINED THIS ASPECT, THEREFORE,A.O. IS DIRECTED TO EXAMINE THE ABOVE MENTIONED CLAIM O F THE ASSESSEE OF DIRECT NEXUS OF ITS OWN FUNDS/SHARE CAPITAL TO T HE INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME WHICH IS EXEMPT AND ACCORDINGLY RESTRICT THE DISALLOWANCE AS PER RULE 8 D ON PROPORTIONATE ITA. NO2308/MUM/2013 AND 2712/M/13 4 BASIS TO SUCH INVESTMENT WHICH DOES NOT HAVE DIREC T NEXUS WITH ASSESSEE'S OWN FUNDS. IN RESULT, THE GROUNDS NO.1 A ND 3 ARE TREATED AS PARTLY ALLOWED AND GROUND NO.2 WHICH IS THE ALTE RNATIVE GROUND, WHICH DOES NOT SURVIVE IN VIEW OF THE ABOVE DECISIO N, THEREFORE, THE SAME IS TREATED AS DISMISSED. 4. BEFORE US, THE LD A.R SUBMITTED THAT THE OWN FU NDS OF THE ASSESSEE ARE MORE THAN THE LOAN FUNDS AND HENCE THE INVESTME NTS SHOULD BE TAKEN AS GONE OUT OF OWN FUNDS ONLY. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF THE BOMBAY HIGH COURT RENDERED IN THE C ASE OF HDFC BANK. A PERUSAL OF THE WRITTEN SUBMISSIONS MADE BEFORE THE LD CIT(A) WOULD SHOW THAT THE ASSESSEE HAS FURNISHED SUFFICIENT DOCUMENT S TO SUBSTANTIATE ITS CONTENTIONS THAT THE AMOUNTS RECEIVED AS SHARE CAPI TAL ONLY HAS BEEN INVESTED IN MUTUAL FUND UNITS AND THEREAFTER THE RE DEMPTION FUNDS WERE USED TO MAKE RE-INVESTMENTS. HENCE, THERE IS PRIMA FACIE CASE IN FAVOUR OF THE ASSESSEE. HOWEVER, AS HELD BY THE LD CIT(A) , ALL THESE FINANCIAL STATEMENTS NEEDS TO BE VERIFIED BY THE DEPARTMENT. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIR ECTION TO EXAMINE THIS ISSUE AFRESH BY DULY VERIFYING THE FINANCIAL STATEM ENTS OF THE ASSESSEE AND ALSO BY DULY FOLLOWING THE DECISION OF HONBLE BOMB AY HIGH COURT RENDERED IN THE CASE OF HDFC BANK LTD. 5. IN THE RESULT, THE APPEALS OF BOTH THE PARTI ES ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20TH FEB, 2015 . *+ & , -. /0 20TH FEB, 2015 + % 5' 6 SD SD ( . . /H.L.KARWA) ( . . /B.R.BASKARAN) /JUDICIAL MEMBER / ACCOUNTANT MEMBER - & ' MUMBAI: 20TH FEB,2015. . . ./ SRL , SR. PS ITA. NO2308/MUM/2013 AND 2712/M/13 5 ! '!# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 7( ( ) / THE CIT(A)- CONCERNED 4. & 7( / CIT CONCERNED 5. 895 (: , ) : , - & ' / DR, ITAT, MUMBAI CONCERNED 6. 5; <' / GUARD FILE. = & / BY ORDER, TRUE COPY > ' (ASSTT. REGISTRAR) ) : , - & ' /ITAT, MUMBAI
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