P N WRITER & CO. P. LTD, MUMBAI V. ACIT RG 7(1), MUMBAI

ITA 2783/MUM/2012

• Counselvise Citation: 278319914 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MORYA PRATAP
• Assessee Lawyers: SATISH R MODY
• Keywords: Earning of tax free income
• Section: 148; 90; 139; 143(3); 244A; 153A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA U , JU DICIAL MEMBER . / ITA NO. 2783 /MUM./ 2012 ( / ASSESSMENT YEAR : 2008 09 ) M/S. P.N. WRITER & CO. PVT. LTD. 105, DR. B. AMBEDKAR ROAD NEXT TO VOLTAS, LALBAUG MUMBAI 400 033 .. / APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE 7(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACP5966B / ASSESSEE BY : MR. SATISH R. MODY / REVENUE BY : MR. MORYA PRATAP / DATE OF HEARING 12.06.2014 / DATE OF ORDE R 18.06.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 27 TH DECEMBER 2011 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XIII , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) , OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSM ENT YEAR 2008 09 , ON THE FOLLOWING GROUNDS: M/S. P.N. WRITER & CO. PVT. LTD. 2 1. THE LEARNED CIT(A) ERRED ON FACTS AND LAW IN PARTLY UPHOLDING THE ASSESSING OFFICERS ORDER IN DISALLOWING ` 1,38,036 OUT OF INTEREST DISALLOWANCE OF ` 26,08,125 BY APPLYING RULE 8D(2)(II) ON ACCOUNT OF IN VESTMENTS IN SHARES, WHICH ARE INVESTMENTS MADE OUT OF OWN AND SURPLUS FUNDS 2. LEARNED CIT(A) ERRED ON FACTS AND LAW IN UPHOLDING THE ASSESSING OFFICERS ORDER IN DISALLOWING ` 3,70,027 OUT OF EXPENSES, BEING ONE HALF PERCENTAGE OF AVERAGE VALUE OF INVES TMENT IN RELATION TO EXEMPT INCOME BY APPLYING RULE 8D(2)(III), WHICH ARE INVESTMENTS MADE OUT OF OWN AND SURPLUS FUNDS. 3. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN NOT GRANTING INTEREST U/S 244A ON THE SELF ASSESSMENT TAX PAID, ON FACTS AND LAW. 2 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED INTEREST EXPENDITURE OF ` 26,08,125, IN ACCORDANCE WITH RULE 8D(2)(II), WHICH HAS BEEN REDUCED BY THE LEARNED COMMISSIONER (APPEA LS) AT ` 1,38,036, AND ADMINISTRATIVE EXPENSES ON ACCOUNT OF RULE 8D(2)(III), HAS BEEN CONFIRMED AT ` 3,70,024. THE ASSESSEES CASE WITH REGARD TO THE SAID DISALLOWANCE HAS BEEN THAT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF T HE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 07, WHICH CANNOT BE APPLIED IN THIS YEAR AND SECONDLY, IT HAD SUFFICIENT SURPLUS FUNDS IN THE PREVIOUS YEAR FROM WHICH INVESTMENTS HAVE BEEN MADE. DETAIL SUB MISSIONS WERE MADE BEFORE THE LEARNED COMMISSIONER (APPEALS), WHICH HAS BEEN INCORPORATED FROM PAGE 2 TO 4 OF THE APPELLATE ORDER. THUS, IN VIEW OF THE SUBMISSIONS MADE THEREIN , IT HAS BEEN CONTENDED THAT NO DISALLOWANCE UNDER THE HEAD INTEREST SHOULD BE MADE. SIMILARLY, ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE ALSO, NO M/S. P.N. WRITER & CO. PVT. LTD. 3 EXPENDITURE CAN BE HELD TO BE ATTRIBUTABLE TO MAKING THE INVESTMENT AND/OR EARNING OF THE EXEMPT INCOME. 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED UPON T HE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND SUBMITTED THAT THE LEARNED COMMISSIONER (APPEALS) HAS ANALYSED THE ASSESSEES SUBMISSION REGARDING AVAILABILITY OF FUNDS AND ALSO THE BORROWED FUNDS AND ONLY AFTER CONSIDERING THE ENTIRE FACTS , HE HAS REST RICTED THE DISALLOWANCE AT ` 1,38,036, OUT OF DISALLOWANCE ON ACCOUNT OF INTEREST OF ` 26,08,125. THEREFORE, THE FINDINGS GIVEN BY THE LEARNED COMMISSIONER (APPEALS) SHOULD NOT BE SET ASIDE. 4 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. ON A PERUSAL OF THE FINDING OF THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT HE HAS ANALYSED THE ASSESSEES INTEREST EXPENDITURE VIS A VIS THE UTILISATION OF THE LOAN FOR THE PURPOSE OF BUSINESS. HE HAS ALSO NOTED THE FACT THAT INVESTMENT TO THE TUNE OF ` 1,36,14,3 68, HAS BEEN PAID FROM CASH CREDIT BANK ACCOUNT AND, THEREFORE, INTEREST PAID ON SUCH CASH CREDIT ACCOUNT AND WORKING CAPITAL HAS TO BE DISALLOWED. BASED ON THESE FINDINGS, HE HAS RESTRICTED THE DISALLOWANCE AT ` 1,38,036, WHICH IS NOT ONLY REASONABLE BUT ALSO FACTUALLY AND LEGALLY CORRECT AND, HENCE, THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) ON THIS SCORE IS UPHELD. REGARDING ADMINISTRATIVE EXPENSES, THE ASSESSEES CASE HAS BEEN THAT IT HAS OFFERED ` 60,000, A S DIRECT EXPENDITURE FOR THE PURPOSE O F DISALLOWANCE AND THERE IS NO INDIRECT EXPENDITURE WHICH CAN BE SAID TO BE IN RELATION TO THE INVESTMENT YIELDING TAX FREE INCOME. THE LEARNED COMMISSIONER (APPEALS) AFTER ANALYZING THE FACTS OF THE CASE, HELD THAT SUCH A DISALLOWANCE HAS TO BE MADE IN AC CORDANCE WITH THE PROVISIONS OF RULE 8D(2)(III). SUCH A FINDING OF THE LEARNED COMMISSIONER (APPEALS) CANNOT BE DEVIATED WITH BECAUSE, NOTHING IS BORNE OUT FROM THE RECORD THAT WHICH ARE THE EXPENSES WHICH DO NOT M/S. P.N. WRITER & CO. PVT. LTD. 4 HAVE ANY BEARING OR CAN NOT BE SAID TO BE AT TRIBUTABLE FOR EARNING OF EXEMPT INCOME AND WHICH EXPENSES ARE DIRECTLY RELATABLE TO OTHER BUSINESS ACTIVITIES. IN THE ABSENCE OF SUCH DETAILS, THE FORMULA PRESCRIBED UNDER RULE 8D(2)(III), HAS TO BE APPLIED. IT IS FURTHER NOTICED THAT IN THE ASSESSMENT YE AR 2006 07 AND 2007 08, THE TRIBUNAL HAS UPHELD THE DISALLOWANCE @ 5% ON DIVIDEND INCOME AS A REASONABLE BASIS BECAUSE , PROVISIONS OF RULE 8D, WAS NOT APPLICABLE IN THOSE YEARS. THEREFORE, THE SAID FINDING OF THE TRIBUNAL WILL NOT BE APPLICABLE HERE IN THI S YEAR BECAUSE PROVISIONS OF RULE 8D, IS ADMITTEDLY APPLICABLE FROM THE ASSESSMENT YEAR 2008 09, AND THUS THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) IS UPHELD ON LEGAL AND FACTUAL GROUNDS. THUS, GROUND NO.1 AND 2 ARE DISMISSED. 5 . NOW, WE TAKE UP THE ISSUE RAISED IN GROUND NO.3 I.E., NON GRANTING OF INTEREST UNDER SECTION 244A, ON ACCOUNT OF SELF ASSESSMENT TAX PAID. 6 . THE ASSESSEES CASE BEFORE THE LEARNED COMMISSIONER (APPEALS) HAD BEEN THAT IT HAD PAID SELF ASSESSMENT TAX OF ` 4.50 CRORES IN THE MON TH OF JULY 2008, ON ESTIMATED BASIS, BECAUSE IT HAS NOT PAID ADVANCE TAX DURING THE YEAR. THE RETURN OF INCOME WAS FILED ON 8 TH JANUARY 2009. THE ASSESSING OFFICER, WHILE GRANTING AND ISSUING REFUND, HAD NOT ALLOWED INTEREST ON THE SELF ASSESSMENT TAX FOR THE ENTIRE PERIOD FROM THE DATE OF ITS PAYMENT TILL THE ISSUE OF REFUND . ON BEHALF OF THE ASSESSEE, R ELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL, BANGALORE BENCH, IN VIJAY BANK AND ALSO ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT V/S S U TL EJ INDUSTRIES LTD., [2010] 37 DTR 25 (DEL.). THE LEARNED COMMISSIONER (APPEALS) THOUGH HELD THAT IN PRINCIPLE, THE ASSESSEE SHOULD BE ENTITLED TO INTEREST ON THE SELF ASSESSMENT TAX PAID UNDER SECTION 140A AND THE COMPUTATION OF INTEREST ON SUCH SELF ASSES SMENT TAX, IS TO BE GIVEN IN TERMS OF SECTION M/S. P.N. WRITER & CO. PVT. LTD. 5 244A(1)(B) I.E., FROM THE DATE OF PAYMENT OF SUCH AMOUNT UPTO THE DATE ON WHICH THE REFUND IS ACTUALLY GRANTED. HOWEVER, HE HELD THAT THE FACTS OF THE ASSESSEES CASE ARE DIFFERENT FROM THAT OF THE DECISION OF THE HONBLE DELHI HIGH COURT BECAUSE, IN THE PRESENT CASE, THE ASSESSEE HAS PAID SELF ASSESSMENT TAX OF ` 4.50 CRORES ON ESTIMATED BASIS AND IT CANNOT BE SAID THAT IT IS A TAX PAYABLE ON THE BASIS OF ANY RETURN BECAUSE, THE RETURN WAS FILED MUCH LATER. HEN CE, THE ASSESSEE IS NOT ENTITLED FOR INTEREST UNDER SECTION 244A. 7 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE NATURE OF TAX PAID BY THE ASSESSEE WAS SELF ASSESSMENT TAX ONLY AND ONCE IT IS A SELF ASSESSMENT TAX, INTEREST HAS TO BE ALLOWED UNDER SECT ION 244A. IN SUPPORT OF HIS CONTENTION, HE STRONGLY RELIED UPON THE ORDER OF THE HONBLE KARNATAKA HIGH COURT IN CIT V/S VIJAYA BANK, [2011] 338 ITR 489 (KAR.) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN S U TLEJ INDUSTRIES LTD. (SUPRA). 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). 9 . AFTER CAREFULLY CONSID ERING THE RIVAL SUBMISSIONS AND ON A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE BASIC REASON FOR DECLINING THE GRANT OF INTEREST UNDER SECTION 244A, ON THE SELF ASSESSMENT TAX PAID BY THE ASSESSEE IS THAT, THE ASSESSEE HAS NOT PAID THE SELF ASSESSMENT TAX ALONG WITH THE RETURN OF INCOME , BUT PRIOR TO THE DATE OF FILING OF THE RETURN OF INCOME AND THAT TO BE ON THE BASIS OF ESTIMATION AND, THEREFORE, IT IS NOT A TAX WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 140A, SO AS TO BE ENTITLED FOR INTEREST UNDER SECTION 244A. IN OUR VIEW, SUCH AN INTERPRETATION FOR DENYING THE INTEREST UNDER SECTION 244A , IN THE PRESENT CASE, IS NOT TENABLE. SECTION 140A(1), READS AS UNDER: M/S. P.N. WRITER & CO. PVT. LTD. 6 140A. [(1) WHERE ANY TAX IS PAYABLE ON THE BASIS OF ANY RETURN REQUIRED TO BE FURNISHED UNDER SECTION 115WD OR SECTION 115WH OR SECTION 139 OR SECTION 142 OR SECTION 148 OR SECTION 153A OR, AS THE CASE MAY BE, SECTION 158BC , AFTER TAKING INTO ACCOUNT, (I) THE AMOUNT OF TAX, IF ANY, ALRE ADY PAID UNDER ANY PROVISION OF THIS ACT; (II) ANY TAX DEDUCTED OR COLLECTED AT SOURCE; (III) ANY RELIEF OF TAX OR DEDUCTION OF TAX CLAIMED UNDER SECTION 90 OR SECTION 91 ON ACCOUNT OF TAX PAID IN A COUNTRY OUTSIDE INDIA; (IV) ANY RELIEF OF TAX CLAIMED UNDER SECTION 90A ON ACCOUNT OF TAX PAID IN ANY SPECIFIED TERRITORY OUTSIDE INDIA REFERRED TO IN THAT SECTION; AND (V) ANY TAX CREDIT CLAIMED TO BE SET OFF IN A CCORDANCE WITH THE PROVISIONS OF SECTION 115JAA OR SECTION 115JD , THE ASSESSEE SHALL BE LIABLE TO PAY SUCH TAX TOGETHER WITH INTEREST PAYABLE UNDER ANY PROVISION OF THIS ACT FOR ANY DELAY IN FURNISHING THE RETURN OR ANY DEFAULT OR DELAY IN PAYMENT OF ADVANCE TAX, BEFORE FURNISHING THE RETURN AND THE RETURN SHALL BE ACCOMPANIED BY PROOF OF PAYMENT OF SUCH TAX AND INTEREST. 10 . ON A PERUSAL OF THE ABOVE, IT IS EVIDENT THAT SELF ASSESSMENT TAX IS PAYABLE ON THE INCOME SHOWN IN ANY RETURN OF INCOME REQUIRED TO BE FURNISHED UNDER VARIOUS PROVISIONS OF THE ACT, AFTER TAKING INTO ACCOUNT, THE AMOUNT OF TAX, IF ANY, PAID EARLIER WHICH CAN ALSO INCLUDE ADVANCE TAX; ANY TAX DEDUCTED OR COLLECTED AT SOURCE; ANY TAX CREDITED ; ANY TAX CLAIMED TO BE SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JAA ; OR ANY RELIEF OF TAX OR DEDUCTION OF TAX CLAIMED UNDER SECTION 9 0, 90A OR SECTION 91. THUS, THE SELF ASSESSMENT TAX INCLUDES ANY AMOUNT OF TAX WHICH HAS ALREADY BEEN PAID UNDER THE PROVISIONS OF THIS ACT. IN THIS CASE, THE ASSESSEE HAS PAID THE TAX FOR THE PURPOSE OF ITS TAXABLE INCOME FOR THE ASSESSMENT YEAR 2008 09, IN THE MONTH OF JULY 2008. THE DUE DATE FOR FILING THE RETURN OF INCOME WAS 30 TH SEPTEMBER 2008. IF THE TAX HAS BEEN PAID PRIOR TO THE DATE OF FILING OF RETURN OF M/S. P.N. WRITER & CO. PVT. LTD. 7 INCOME, THEN IT HAS TO BE CONSTRUED AS AMOUNT OF TAX ALREADY PAID AS CONTEMPLATED IN CLAUSE (I) OF SUB SECTION (1) OF SECTION 140A. THUS, TH E REASONING OF THE LEARNED COMMISSIONER (APPEALS), CANNOT BE UPHELD. THE TAX PAID BY THE ASSESSEE FOR A SUM OF ` 4.50 CRORES, IS NOTHING BUT TAX PAID UNDER SELF ASSESSMENT TAX FOR THE PURPOSE OF SECTION 140A AND ONCE THAT IS SO, THE ASSESSEE IS ENTITLED FOR INTEREST UNDER SECTION 244A . THIS IS FULLY SUPPORTED BY THE DECISION OF HON'BLE KARNATA HIGH COURT IN VIJAYA BANK (SUPRA) AND ALSO THE DECISION OF HON'BLE DELHI HIGH COURT IN S U TLEJ INDUSTRIES LTD. (SUPRA) . THUS, WE HOLD THAT THE ASSESSEE IS ENTITLED TO REFUND OF SELF ASSESSMENT TAX ALONG WITH THE INTEREST UNDER SECTION 244A, WHICH IS TO BE CALCULATED FROM THE DATE OF PAYMENT OF TAX TILL THE DATE OF REFUND. ACCORDINGLY, GROUND NO.3, RAISED BY THE ASSESSEE I S TREATED AS ALLOWED. 11 . 11 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY A LLOWED . 19 TH JUNE 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 19 TH JUNE 2014 SD/ - . D . KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 19 TH JUNE 2014 M/S. P.N. WRITER & CO. PVT. LTD. 8 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / IT AT, MUMBAI