S.B. BILLIMORIA & CO, MUMBAI V. ADDL CIT 11(3), MUMBAI

ITA 297/MUM/2012

• Counselvise Citation: 29719914 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 10-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2012
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: K K VED; N A PATADE
• Keywords: Question of law
• Section: 14A

Judgement Text

. , , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO. 297 / MUM/20 1 2 ( / ASSESSMENT YEAR : 2007 - 08 ) M/S S.B.BILLIOMORIA & CO., MUMBAI, MEHER CHAMBERS, R.KAMANI ROAD, BALLARD ESTATE, MUMBAI - 400001 VS. ADCIT - 11(3), MUMBAI ./ ./ PAN/GIR NO. : A A AFS 7376 P ( / APPEL LANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI K.K.VED & SH.N.A.PATADE /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 2 6 /03/2015 / DATE OF PRONOUNCEMENT 17/04 /2 015 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 23 - 11 - 2011 , FOR THE A.Y.200 7 - 08 IN THE MATTER OF ORDER PASSED U/S. 250(6) OF THE I.T.ACT, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY T HE ASSESSEE : - THE APPELLANT OBJECTS TO THE ORDER DATED NOVEMBER 23, 2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX - 2, MUMBAI ON THE FOLLOWING AMONG OTHER GROUNDS: PAYMENT TO RETIRED PARTNERS 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) [HEREINA FTER REFERRED TO AS CIT(A)] ERRED IN HOLDING THAT THE SUM OF RS.L,63,26,270 PAID TO ITA NO. 297 / 1 2 2 RETIRED PARTNERS WAS NOT EXCLUDIBLE/DEDUCTIBLE IN COMPUTING THE TAXABLE INCOME OF THE APPELLANT. DISALLOWANCE UNDER SECTION 14A 2. THE CIT(A) ERRED IN CONFIRMING DISALL OWANCE OF INTEREST EXPENSES OF RS.3,51 ,078 UNDER SECTION 14A READ WITH RULE 8D. 3. THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF OTHER EXPENSES OF RS.L,74,591 UNDER SECTION 14A READ WITH RULE 8D. ALLEGED UNDISCLOSED PROFESSIONAL RECEIPTS 4. THE CIT (A) ERRED IN CONFIRMING ADDITION OF RS.85,619 AS ALLEGED UNDISCLOSED PROFESSIONAL RECEIPTS ON THE BASIS OF THE ANNUAL INFORMATION RETURN (AIR). GENERAL 5. THE APPELLANT PRAYS FOR RELIEF AS PER THE GROUNDS OF APPEAL. 6. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 7. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO THE GROUNDS OF APPEAL. 2. AT THE OUTSET, IT WAS SUBMITTED BY LD. AR THAT GROUND NO.1 WITH REGARD TO DISALLOWANCE OF PAYMENT MADE TO PARTNER AMOUNTIN G TO RS.1,63,26,270/ - HAS ALREADY BEEN DECIDED AGAINST THE ASSESSEE AND THE ASSESSEE HAS ALSO FILED APPEAL BEFORE THE HONBLE HIGH COURT WHEREIN SUBSTANTIAL QUESTION OF LAW HAS BEEN ACCEPTED BY THE HONBLE HIGH COURT VIDE ORDER DATED 28 - 7 - 2009. IN THIS RES PECT ASSESSEE HAS FILED FORM NO.8 BEING DECLARATION U/S.158A(1) OF THE ITAT CLAIMING THAT IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HIGH COURT. 3. AS THE ASSESSEE HAS ALREADY FILED DECLARATION U/S.158A(1), THE ASSESSEE NEEDS NOT TO FILE APPEAL TO TH E HONBLE HIGH COURT ON THIS ISSUE, AND HE IS BOUND BY THE DECISION OF THE HONBLE HIGH COURT IN RESPECT OF APPEAL FILED FOR PRECEDING YEAR. WE DIRECT ACCORDINGLY. ITA NO. 297 / 1 2 3 4. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF INTEREST U/S.14A READ WITH RULE 8D AMO UNTING TO RS.3,51,078/ - AND ALSO OTHER EXPENSES OF RS.1,74,591/ - . 5. IT WAS SUBMITTED BY LD. AR THAT NO SATISFACTION WAS RECORDED BY THE AO BEFORE INVOKING SECTION 14A. FURTHERMORE, IT WAS CONTENDED THAT THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION IS 2007 - 08, WHEREIN RULE 8D IS NOT APPLICABLE AS PER THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., 328 ITR 81 . 6. WE HAVE CONSIDERED RIVAL CONTENTION AND FOUND THAT ASSESSEE HAS RECEIVED TAX FREE DIVIDEND FROM THE INVESTMENT IN PREFERENCE SHARES AND MUTUAL FUND, WHICH WAS CLAIMED AS EXEMPT U/S.10. HOWEVER, IN THE RETURN OF INCOME NO DISALLOWANCE WAS MADE BY THE ASSESSEE U/S.14A. THE AO APPLIED RULE 8D AND WORKED OUT DISALLOWANCE. THE CONTENTION OF LD. AR WAS THAT AS SESSEE WAS HAVING OWN FUNDS MUCH MORE THAN THE BORROWED FUNDS AND THE INVESTMENT WAS MADE OUT OF OWN FUNDS AND NOT BORROWED FUNDS. ACCORDINGLY, NO DISALLOWANCE OF INTEREST IS WARRANTED. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD. AND RELIANCE UTILITIES, WHEREIN IT WAS HELD THAT IN CASE OWN FUNDS ARE AVAILABLE WITH THE ASSESSEE, IT IS PRESUMED THAT INVESTMENT HAS BEEN MADE OUT OF THE OWN FUNDS. IT IS ALSO A MATTER OF RECORD THAT RULE 8D IS NOT AP PLICABLE FOR THE RELEVANT ASSESSMENT YEAR 2007 - 08 UNDER CONSIDERATION, HOWEVER, REASONABLE DISALLOWANCE IS WARRANTED AS PER VERDICT OF HONBLE HIGH COURT IN CASE OF GODREJ & BOYCE MFG. CO. (SUPRA). IN THE INTEREST OF JUSTICE AND FAIRPLAY, WE RESTORE THIS I SSUE BACK TO THE FILE ITA NO. 297 / 1 2 4 OF AO FOR DECIDING AFRESH AFTER CONSIDERING ASSESSEES CONTENTION REGARDING INTEREST FREE FUNDS AVAILABLE TO IT MORE THAN THE BORROWED FUNDS. WE DIRECT ACCORDINGLY. 7. THE AO HAS ALSO MADE AN ADDITION OF RS.85,619/ - AS UNDISCLOSED PRO FESSIONAL RECEIPTS ON THE BASIS OF ANNUAL INFORMATION RETURN (AIR). THE CONTENTION OF THE ASSESSEE WAS THAT AS AGAINST PROFESSIONAL FEES AS PER AIR OF RS.28,33,14,309/ - , THE ASSESSEE HAS OFFERED PROFESSIONAL FEES IN THE RETURN OF INCOME AT RS.67,08,97,552/ - . TH E PROFESSIONAL FEE OFFERED IN THE RETURN OF INCOME WAS MUCH MORE THAN THE PROFESSIONAL RECEIPT SHOWN IN THE AIR. FURTHER THE CONTENTION OF THE LD. AR WAS THAT MINOR DIFFERENCE OF RS.85,619/ - MAY BE DUE TO THE ACCOUNTING SYSTEM BEING FOLLOWED BY THE AS SESSEE WHICH IS CASH. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE HAS OFFERED MUCH MORE PROFESSIONAL RECEIPTS THAN THE PROFESSIONAL RECEIPTS SHOWN IN THE AIR. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ADDITION SO MADE BY THE AO AMOUN TING TO RS.85,619 / - , WHICH MAY BE DUE TO DIFFERENT ACCOUNTING SYSTEM BEING FOLLOWED BY PAYER OF SUCH FEES. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE . O RDER PRONOUNCED IN THE OPEN COUR T ON THIS 17/04 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 17/04 /201 5 . . /PKM , . / PS ITA NO. 297 / 1 2 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBA I 6. / GUARD FILE. //TRUE COPY//