M/S LAVGAN DOCKYARD PVT. LTD, MUMBAI V. THE INCOME TAX OFFICER WAR9(2)(2), MUMBAI

ITA 3124/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8678 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: RUTURAJ GURJAR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 3124 /MUM/20 1 6 (ASSESSMENT YEAR 20 0 9 - 1 0 ) M/S. LAVGAN DOCKYARD PVT. LTD. BAKHTAWAR, 4 TH FLOOR NARIMAN POINT MUMBAI - 400 021. PAN : A AACL6788P VS. ITO WARD 9(2)(2) MUMBAI - 400021. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RUTURAJ GURJAR DEPARTMENT BY MS. POOJA SWAROOP DATE OF HEARING 25 . 10 . 201 7 DATE OF PRONOUNCEMENT 25 . 10 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 28 - 02 - 16 PASSED BY LD CIT(A) - 20 AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO U/S 14A OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIP REPAIR AND ALLIED ACTIVITIES. THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT WAS RESTORED BACK TO HIS FILE BY THE TRIBUNAL AND ACCORDINGLY THE AO COMPLETED THE ASSESSMENT BY COMPUTING DISALL OWANCE U/S 14A OF THE ACT R.W. RULE 8D(2)(III) AT RS.3,05,315/, BEING 0.50% OF THE AVERAGE VALUE OF INVESTMENTS. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.35,61,668/ - . THE LD CIT(A) CONFIRMED THE ADDITION AND HENCE THE ASSESSEE HAS FILED THIS APPEAL. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD MADE INVESTMENTS IN FOUR SCHEMES OF MUTUAL FUNDS IN THE IMMEDIATELY PRECEDING YEAR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS REDEEMED THREE SCHEMES AND CONTINUE D TO HOLD INVESTMENT IN ONE SCHEME. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE 2 DID NOT MAKE ANY FRESH INVESTMENTS DURING THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE DIVIDENDS WERE RECEIVED BY THE END OF JULY, 2008 AND ALL THE DIVIDEND WER E RECEIVED DIRECTLY INTO THE BANK ACCOUNTS. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE DID NOT INCUR ANY EXPENDITURE IN EARNING THE DIVIDEND INCOME. HE FURTHER SUBMITTED THE ADMINISTRATIVE EXPENSES OF THE ASSESSEE STAND AT RS.48.97 LAKHS, OUT OF WHICH RS .39.00 LAKHS WAS INCURRED TOWARDS RENT OF STOCK YARD, WHERE BAUXITE WAS STORED. HE SUBMITTED THAT THE ABOVE SAID RENT CANNOT BE LINKED TO THE DIVIDEND INCOME. HE SUBMITTED THAT ALL OTHER EXPENSES ARE ALSO RELATED TO THE REGULAR BUSINESS ACTIVITIES OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN COMPUTING THE DISALLOWANCE U/S 14A BY APPLYING THE PROVISIONS OF RULE 8D, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD A.R ALSO PLACED RELIANCE ON THE DECISION DATED 10.4.2017 RENDERED BY THE CO - ORDINATE BENCH IN THE CASE OF M/S SOLITAIRE APPLIANCES P LTD (ITA NO.6922/MUM/2014). 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE DISALLOWANCE U/S 14A IS REQUIRED TO BE COMPUTED IN TERMS OF RULE 8D AND ACCORDINGLY CON TENDED THAT THE ORDER PASSED BY LD CIT(A) CANNOT BE FOUND FAULT WITH. 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAD MADE INVESTMENTS IN THE EARLIER YEARS AND HENCE ALL THE INVESTMENTS HAVE BEEN BROUGHT FORWARD DURING THE YEAR UNDER CONSIDERATION. NO FRESH INVESTMENTS HAVE BEEN MADE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS REDEEMED THREE INVESTMENTS DURING THE YEAR UNDER CONSIDERATION AND CONTINUED TO HOLD ONE INVESTMENT. BESIDES THE ABOVE, THE ASSESSEE H AS ALSO RECEIVED DIVIDEND INCOME OF RS.35.61 LAKHS DURING THE YEAR UNDER CONSIDERATION. THESE FACTS WOULD SHOW THAT THE LEVEL OF INVESTMENT ACTIVITY WAS LOW DURING THE YEAR UNDER CONSIDERATION AND HENCE, HAVING REGARD TO THE ACCOUNTS, WE ARE OF THE VIEW T HAT THE PROVISIONS OF RULE 8D SHOULD NOT HAVE BEEN APPLIED BY THE AO. WE NOTICE THAT THE ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE STAND AT RS.48.97 LAKHS, OUT OF WHICH RS.39.00 LAKHS PERTAIN TO RENT PAID FOR STOCK YARD. THE LD A.R ALSO SUBMITS THAT ALL THE 3 DIVIDEND INCOME HAS BEEN RECEIVED BY JULY, 2008. FURTHER, IT WAS STATED THAT SOME OTHER EXPENSES CANNOT ALSO BE RELATED TO THE INVESTMENT ACTIVITY. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE DISALLOWANCE REQUIRED TO BE MADE U/S 14A OF THE ACT MAY BE ESTIMATED AT RS.10,000/ - AND THE SAME WOULD MEET THE REQUIREMENT OF THAT SECTION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION U/S 14A OF THE ACT TO RS.10,000/ - . WE ORDER ACC ORDINGLY. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 25 . 10 .201 7. SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 25 / 10 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. R EGISTRAR) PS ITAT, MUMBAI