TOSHVIN ANALYTICAL P.LTD, MUMBAI V. DCIT 1(3), MUMBAI

ITA 3089/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3660 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER / I .TA NO.3089/MUM/2013 ( / ASSESSMENT YEAR:2008-09 M/S. TOSHVIN ANALYTICAL PVT. LTD., 103 SJ HOUSE, 1 ST FLOOR, SITARAM MILLS COMPOUND, N.M. JOSHI MARG, LOWER PAREL, MUMBAI-400 011 / VS. THE DCIT 1(3), AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. AABCT 4482D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI MIHIR NANIWADEKAR / RESPONDENT BY: SHRI SUNIL KUMAR AGARWAL / DATE OF HEARING :08.08.2016 ! / DATE OF PRONOUNCEMENT :12.08.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-7, MUMBAI DATED 27.12.2012 PERTAINING TO ASS ESSMENT YEAR 2008-09. 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE U/S. 14A R. W. RULE 8D OF THE ACT. ITA NO.3089/M/2013 2 3. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT NOTICED THAT ASSESSEE EARNED EXEMPT INCOME OF RS. 16,06,621 /- AS DIVIDEND INCOME. THE ASSESSING OFFICER APPLYING RULE 8D R.W . SECTION 14A AND ARRIVED AT THE AMOUNT OF DISALLOWANCE TO BE MADE AT RS. 16,58,130/- AND SINCE THE ASSESSEE HIMSELF DISALLOWED RS. 84,48 7/- TOWARDS EXPENDITURE ATTRIBUTABLE FOR EARNING DIVIDEND INCOM E, HE RESTRICTED THE DISALLOWANCE TO BALANCE AMOUNT OF RS. 15,73,643 /- U/S. 14A OF THE ACT. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CONTENDING THAT THE ASSESSING OFFICER HAS NOT RECOR DED ANY DISSATISFACTION WITH REFERENCE TO THE ACCOUNTS OF T HE ASSESSEE IN ARRIVING AT THE DISALLOWANCE MADE BY THE ASSESSEE T OWARDS EXPENSES ATTRIBUTABLE FOR EARNING DIVIDEND INCOME. IT WAS F URTHER CONTENDED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY VALID REASONS FOR NOT ACCEPTING THE EXPENDITURE DISALLOWED BY THE ASSESSE E FOR EARNING EXEMPT INCOME THEREFORE NO DISALLOWANCE IS REQUIRED TO BE MADE UNDER SECTION 14A. IT WAS FURTHER CONTENDED BEFORE THE LD. CIT(A) THAT IN ANY CASE THE AVAILABLE SURPLUS/RESERVES ARE MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE DURING THE ASS ESSMENT YEAR, THEREFORE NO DISALLOWANCE IS WARRANTED U/S 14A OF T HE ACT. HOWEVER, THE LD. CIT(A) HAVING AGREED THE CONTENTION OF THE ASSESSEE THAT ASSESSING OFFICER HAS NOT ASSIGNED ANY REASONS FOR REJECTING THE ASSESSEES ESTIMATION OF EXPENDITURE FOR EARNING EX EMPT INCOME STILL HE SUSTAINED THE ORDER OF THE ASSESSING OFFICER OBS ERVING THAT ASSESSEE HAS MADE INVESTMENTS MUCH MORE THAN THE AV AILABLE FUNDS. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. FURTHER, REFERR ING TO PAGE-3 OF THE ITA NO.3089/M/2013 3 LD. CIT(A)S ORDER, THE LD. COUNSEL FOR THE ASSESSE E SUBMITS THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AVAILA BLE SURPLUS/OWN FUNDS ARE STOOD AT RS. 11,76,24,026/- AS AGAINST TH E INVESTMENTS MADE DURING THE ASSESSMENT YEAR AT RS. 9,70,14,760/ -. THEREFORE HE SUBMITS THAT THE OBSERVATION OF THE LD. CIT(A) THAT INVESTMENTS MADE ARE MORE THAN THE FUNDS AVAILABLE IS NOT CORRECT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE O RDER OF THE LD. CIT(A) FOR THE SUBSEQUENT ASSESSMENT YEAR 2009-10 A ND SUBMITS THAT THE LD. CIT(A) RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AS TO WHETHER THE INVESTM ENTS WERE MADE OUT OF ACCUMULATED FUNDS OR NOT AND IN CASE SUCH INVEST MENTS ARE MADE OUT OF ACCUMULATED FUNDS, NO DISALLOWANCE IS REQUIR ED TO BE MADE. THEREFORE, HE PRAYS THAT SIMILAR DIRECTION MAY BE G IVEN FOR THIS ASSESSMENT YEAR ALSO. HE ALSO PLACES RELIANCE ON T HE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD VS DCIT (383 ITR 529) FOR THE PROPOSITION THAT IF THERE ARE SUFFICIENT ACCUMULATED FUNDS AND ASSESSEE MAKES INVESTMENTS, E VEN IF THERE WERE SOME BORROWINGS, THE PRESUMPTION IS THAT THE I NVESTMENTS ARE MADE OUT OF OWN FUNDS ONLY AND NOT FROM THE BORROWE D FUNDS AND IN SUCH CIRCUMSTANCES, DISALLOWANCE U/S. 14A IS NOT WA RRANTED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, APPARENTLY, T HE ASSESSING OFFICER HAS NOT RECORDED ANY DISSATISFACTION WITH REFERENCE TO THE MAINTENANCE OF ACCOUNTS AND THE EXPENSES DISALLOWED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. THE ASSESSING O FFICER HAS NOT ITA NO.3089/M/2013 4 RECORDED ANY REASONS FOR NOT ACCEPTING THE EXPENDIT URE DISALLOWED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. ON A PER USAL OF THE LD. CIT(A)S ORDER, WE ALSO NOTICED THAT THE FUNDS AVAI LABLE WITH THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENTS MADE DU RING THIS ASSESSMENT YEAR. THEREFORE, IN VIEW OF THE SUBMISS IONS MADE BEFORE THE LD. CIT(A) THAT THE FUNDS AVAILABLE WITH THE AS SESSEE ARE MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO VERIFY AS TO WHETHER THE FUNDS AVAILABLE WITH THE ASSESSEE ARE M ORE THAN THE INVESTMENTS AND IN CASE THE AVAILABLE FUNDS ARE MOR E THAN THE INVESTMENTS, NO DISALLOWANCE IS REQUIRED TO BE MADE U/S. 14A R.W. RULE 8D(2)(II) IN VIEW OF THE DECISION OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF HDFC BANK (SUPRA). THEREFORE, WE DI RECT THE ASSESSING OFFICER TO DECIDE THE ISSUE IN THE LIGHT OF THE DEC ISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD VS DCIT (383 ITR 529). IN SO FAR AS THE DISALLOWANCE U/S. RULE 8 D(2)(III) IS CONCERNED, THE ASSESSING OFFICER IS DIRECTED TO REC OMPUTE THE DISALLOWANCE BY EXCLUDING THE INVESTMENTS WHICH DO NOT YIELD ANY EXEMPT INCOME WHILE ARRIVING AT THE AVERAGE VALUE O F INVESTMENTS AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2016. SD/- SD/- (RAMIT KOCHAR) (C.N. PRASAD ) / ACCOUNTANT MEMBER $ % /JUDICIAL MEMBER MUMBAI; ( DATED 12 TH AUGUST, 2016 . % . ./ RJ , SR. PS ITA NO.3089/M/2013 5 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI