BEEKALENE FABRICS LTD, MUMBAI V. ITO WD 6(1)(2), MUMBAI

ITA 3305/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84062 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Keywords: Depreciation; Earning of tax free income
• Section: 14A; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI . . , !' , # $ BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO.3305/MUM/2012 ( % % % % / ASSESSMENT YEAR : 2008-09 M/S. BEEKALENE FABRICS LTD., 110, NARAYAN DHURU STREET, MUMBAI-400 003 / VS. THE ITO, WARD 6(1)(2), AAYAKAR BHAVAN, MUMBAI-400 0020 & # ./ '( ./ PAN/GIR NO. : AAACAB 1876E ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: SHRI SHEKHAR GUPTA *+&) - , / RESPONDENT BY: SHRI VIJAY KUMAR BORA - ./# / DATE OF HEARING :05.11.2014 01% - ./# / DATE OF PRONOUNCEMENT :05.11.2014 2 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-14, MUMBAI DT.27.2.2012 PERTAINING TO A.Y.20 08-09. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF RS. 13,19,556/- AND GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS. 18 ,56,840/- U/S. 14A OF THE ACT. ITA NO. 3305/M/2012 2 3. THE ASSESSEE IS A MANUFACTURER OF MAN-MADE FABRI CS OF SHIRTING, SUITING AND FURNISHING MATERIALS. THE RETURN OF INC OME WAS FILED ON 29.9.2008 DECLARING TOTAL INCOME AT RS. 22,87,348/- . THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. 3.1. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTICED THAT THE AMOUNT OF RS. 2,80,97,343/ - IS ADDED TO THE GROSS BLOCK ON ACCOUNT OF ADDITION OF BUILDING NO;. 4. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS/DOCUMENTS RELATING TO THE ADDITIONS SO MADE. NECESSARY DETAILS WERE FILED. ON ANALYZING THE DET AILS FURNISHED BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAS ENTE RED INTO AN AGREEMENT WITH SIDDHIVINAYAK CONSTRUCTION PVT. LTD., FOR PUR CHASE OF FLAT FOR RS. 2,25,00,000/-. THE AO ALSO FOUND A COPY OF POSSESS ION LETTER DT. 19.2.2008. ON FURTHER ANALYZING THE COPIES OF BILLS FOR THE ALTERNATIONS/RENOVATIONS OF THE FLAT, THE AO NOTICE D THAT THE WORK WAS NOT COMPLETED TILL MAY, 2008. THE AO CONCLUDED BY OBSE RVING THAT THOUGH THE FLAT STAND IN THE NAME OF THE ASSESSEE COMPANY, THE SAME WAS NOT PUT TO USE DURING THE PREVIOUS YEAR. THE AO WENT ON TO DISALLOW THE CLAIM OF DEPRECIATION OF RS. 13,19,556/-. 3.2. PROCEEDING FURTHER, THE AO NOTICED THAT THE AS SESSEE HAS CLAIMED EXEMPT INCOME U/S. 10 OF THE ACT AGGREGATING TO RS. 2,02,09,422/-. THE AO FOUND THAT THE ASSESSEE HAS DEBITED INTEREST 59, 91,556/- IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO FURNIS H THE WORKING OF DISALLOWANCE U/S. 14A R.W. RULE 8D. THE WORKING W AS FURNISHED BY THE ASSESSEE THOUGH AT THE SAME TIME IT WAS CLAIMED THA T NO DISALLOWANCE U/S. 14A SHOULD BE MADE. AFTER CONSIDERING THE FACTS AN D THE SUBMISSIONS, THE AO COMPUTED THE DISALLOWANCE U/S. 14A R.W. RULE 8D AT RS. 18,56,841/-. ITA NO. 3305/M/2012 3 4. AGGRIEVED BY THESE TWO ADDITIONS, THE ASSESSEE C ARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THAT THE ASSESSEE HAS TAKEN THE POSSESSION OF THE FLAT WHICH IS ALSO SUPPORTED BY THE LETTER OF THE BUILDER DT. 19.2.2008 PLACED AT P AGE-7 OF THE PAPER BOOK. IT IS THE SAY OF THE LD. COUNSEL THAT SINCE THE FLA T WAS UNDER THE POSSESSION OF THE ASSESSEE, THE CLAIM OF DEPRECIATI ON CANNOT BE DENIED. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. THE POSSESSION OF FLAT IS NEVER DISPUTED BY THE REVENUE AUTHORITIES. WHAT HAS BEEN DISPUTED IS THAT WHETHER THE FLAT WAS PUT TO U SE FOR THE PURPOSE OF THE BUSINESS. EVEN BEFORE US, NO EVIDENCE HAS BEEN BRO UGHT ON RECORD TO SUGGEST THAT THE FLAT WAS ACTUALLY PUT TO USE IN TH E BUSINESS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, WE DENY TO INT ERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORD INGLY DISMISSED. 8. IN SO FAR AS GROUND NO. 2 IS CONCERNED, A PERUSA L OF THE BALANCE SHEET SHOWS THAT THE ASSESSEE IS HAVING OWN FUNDS A T RS. 36.38 CRORES WHEREAS THE INVESTMENTS ARE AT RS. 9.09 CRORES. UN DISPUTEDLY, OWN FUNDS ARE MUCH MORE THAN THE INVESTMENTS MADE. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS RELIANCE UTILITIES & POWER LTD. 313 ITR 340, IN OUR CONSID ERED OPINION, NO DISALLOWANCE CAN BE MADE U/S. 14A IN SO FAR AS INT EREST IS CONCERNED. ITA NO. 3305/M/2012 4 9. IN SO FAR AS OTHER DISALLOWANCE BEING 0.5% OF TH E AVERAGE VALUE OF INVESTMENT, WE FIND THAT THE SAME HAS BEEN MADE AS PER PROVISIONS OF THE LAW. NO INTERFERENCE IS CALLED FOR. THE AO IS DIR ECTED TO RECOMPUTE THE DISALLOWANCE BY DELETING THE INTEREST ELEMENT OF RS . 59,99,556/-. GROUND NO. 2 IS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/11/2014 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER MUMBAI; 3 DATED : 05.11.2014 . . ./ RJ , SR. PS 2 2 2 2 - -- - *. *. *. *. 4%. 4%. 4%. 4%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 67 *. , , / DR, ITAT, MUMBAI 6. 78 9 / GUARD FILE. 2 2 2 2 / BY ORDER, +. *. //TRUE COPY// : :: : / ; ; ; ; ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI