HEENA CHHEDA, MUMBAI V. ASST CIT 18(2), MUMBAI

ITA 3336/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101243 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 20-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND PAWAN SINGH , JM ./ I.T.A. NO . 3336 / MUM/20 1 3 ( / ASSESSMENT YEA R : 200 8 - 09 ) SMT.HEENA CHHEDA, B - WING, 4 TH FLOOR, RUBY HOUSE, J K SAWANT MARG, DADAR (W), MUMBAI - 400028 / VS. ASSTT. COMMISSIONER OF INCOME TAX - 18(2) , MUMBAI . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : ADDPC7587Q / APPELLANT BY MS.MRUGAKSHI K JOSHI / R EVENUE BY SHRI MOHANDAS / DATE OF HEARING : 5.10. 201 5 / DATE OF PRONOUNCEMENT: 5.10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20. 2.2013 PASSED BY THE LD.CIT(A) - 1 6 , MUMBAI FOR THE ASSESSMENT YEAR 200 8 - 09 , WHEREIN THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE I NCOME TAX ACT,1961. 2 . WE HEARD THE PARTIES AND PERUSED THE RECORD. THE AO NOTICED THAT THE ASSESSEE HAS EARNED FOLLOWING INCOMES DURING THE YEAR UNDER CONSIDERATION WHICH ARE EXEMPT FROM TAX: A) SHARE OF PROFIT 10(2A): RS.14,38,563/ - B) LONG TERM CAPI TAL GAIN 10(38): R S . 28,166/ - C) PPF 10(11) : RS. 27,394/ - D) DIVIDEND 10(34) : RS. 55,513/ - TOTAL RS. 15,49,636/ - ITA NO. 3336 / MUM/20 1 3 2 THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. HENCE, THE AO COMPU TED THE DISALLOWANCE U/S 14A OF THE ACT AS PER RULE 8D OF THE INCOME TAX RULES, 1962 AT RS.24,89,876 / - AND THE SAME WAS ALSO CONFIRMED BY THE LD.CIT(A). AGGRIEVED WITH THIS, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3 THE LD. COUNSEL APPEARING FOR TH E ASSESSEE SUBMITTED THA T THE RE IS NO NECESSITY TO MAKE ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE. SHE SUBMITTED THAT THE ASSESSEE HAS UTILIZED ONLY INTEREST FREE FUNDS FOR MAKING INVESTMENT S IN SHA R ES AND PARTNERSHIP FIRM , FROM WHICH THE EXEMPT INCO ME WAS EARNED. THE LD. COUNSEL INVITED OUR ATTENT ION TO PAGE 9 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT THE ASSESSEE WAS HAVING INTEREST FREE LOANS TO THE TUNE OF RS.9.85 CRORES AND INTEREST BEARING LOANS OF RS.1.85 CRORES AS ON 31.3.2008. THE LD. COUNSEL FURTHER SUBMITTED THAT THE INTEREST BEARING LOANS WERE FULLY UTILIZED FOR MAKING INVESTMENT IN A PARTNERSHIP FIRM NAMED M/S ADITYA DEVELOPER S . THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE DID NOT RECEIVE ANY EXEMPT INCOME FROM M/S ADITYA DEVELOPER S AND IT HAS RECEIVED ONLY INTEREST INCOME FROM THE SAID FIRM. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS DEDUCTED THE INTEREST EXPENDITURE AGAINST THE INTEREST INCOME EARNED FROM M /S ADITYA DEVELOPERS . AC CORDINGLY, THE LD. COUNSEL SUBMITTED THAT THE NEXUS BETWEEN THE INTER E ST BEARING FUNDS AND INVESTMENT MADE IN M/S ADITYA DEVELOPERS HAS BEEN ESTABLISHED BY THE ASSESSEE, WHICH PROVES THAT THE INTEREST BEARING FUNDS WERE NOT UTILIZED IN MAKING INVESTMENTS, WHICH GENERATE EXEMPT INCOME. ACCORDINGLY, TH E LD.AR SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIF IED IN MAKING DISALLOWANCE OUT OF INTEREST EXPENDITURE U/S 14A OF THE ACT . THE LD. COUNSEL SUBMITTED TH AT THE AO HAS NOT EXAMINED THE S E FACTUAL ASPECT S AND HE HAS PROCEEDED TO COMPUTE THE DISALLO WANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE ITA NO. 3336 / MUM/20 1 3 3 RULES WITHOUT RECORDING HIS DIS SATISFACTION ABOUT THE CLAIM MADE BY THE ASSESSEE. 4. WITH REGARD TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE AS PER RULE 8D(2)( I II) OF THE IT RULES, THE LD. AR DID NOT RAISE ANY OBJECTION. 5 . ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASSESSEE IS RAISING THESE CONTENTION S FOR THE FIRST TIME BEFORE THE TRIBUNAL AND SUBMITTED THEY REQUIRE VERIFICATION AT THE END OF THE ASSESSING OFFICER. 6. WE HE ARD THE RIVAL CONTENTIONS AND PERUSED THE RE C ORD. WE NOTICE THA T THE ASSESSEE HAS RAISED THE QUESTION OF NEXUS BETWEEN THE INTEREST BEARING LOANS AND INVESTMENT S, BEFORE THE LD. CIT(A) AND THE SAME HAS BEEN DISCUSSED BY HIM IN PARA 2.2 OF HIS ORDER. A P ERUSAL OF THE DOCUMENTS FURNISHED BY THE ASSESSEE, PRIMA FACIE SHOWS THAT THE ASSESSEE HAS UTILIZED THE INTEREST BEARING L OANS FOR MAKING INVESTMENT IN THE PART NER SHIP FIRM NAMED M/S ADITYA DEVELOPERS. A PERUSAL OF THE BALANCE S H EE T WOULD ALSO SHOW THAT T HE ASSESSEE IS POSSESSING INTEREST FREE LOAN S, WHICH SUFFICIENTLY COVERS THE INVESTMENT MADE IN SHARES/PARTNERSHIP FIRM , THAT EARN S EXEMPT INCOME. THE ASSESSEE HAS ALSO FURNISHED THE PAST YEARS DETAILS AT PAGE 10 OF THE PAPER BOOK TO BUTTRESS HIS ARGUMEN T THAT THE INTEREST BEARING LOANS HAVE BEEN UTILIZED FOR MAKING INVESTMENT IN THE FIRM M/S ADITYA DEVELOPERS. HENCE, PRIMA FACIE IT APPEARS THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE , SINCE THEY HAVE NOT BEEN USED FOR MAKING INVESTMENT IN SHARES/FIRMS . 7. HOWEVER , WE NOTICE THAT THESE FACTUAL ASPECTS HAVE NOT BEEN EXAMINED BY THE TAX AUTHORITIES . HENCE, IN OUR VIEW THEY REQUIRE VERIFICATION AT THE END OF THE AO. ACCORDINGLY , WE SET ASIDE THE ORDER OF LD . ITA NO. 3336 / MUM/20 1 3 4 CIT(A) WITH REGA R D TO THE INTEREST DISAL LOWANCE MADE UNDER RULE 8D (2)(II) AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE UTILIZATION OF INTEREST BEARING LOANS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW BY DULY CONSIDERING TH E DISCUSSIONS MADE SUPRA . 7 . WITH REGARD TO THE DISALLOWANCE MADE UNDE R RULE 8 D(2)(III), WE CONFIRM THE SAME, SINCE THE LD.AR DID NOT OBJECT TO IT . 8 . IN THE RESULT, THE APPEAL FILE BY THE AS S ES SEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED ACCORDINGLY ON 5 TH OCTOBER, 2 015. 5 TH OCTOBER, 2 015 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 5 TH OCTOBER, 2 015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI