UNI DERITEND LTD, MUMBAI V. ADDL CIT RG 1(3), MUMBAI

ITA 3416/MUM/2011

• Counselvise Citation: 341619914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AJAY I THAKORE
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , ! ' # $$, % ', & BEFORE SHRI R.S.SYAL, AM AND SHRI SANJAY GARG, JM ITA NO.3416/MUM/2011 : ASST.YEAR 2007-2008 M/S.UNI DERITEND LIMITED LIBERTY BUILDING SIR VITHALDAS THACKERSEY MARG MUMBAI 400 020. PAN : AAACU0028K. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 1(3) MUMBAI. ( '( / // / APPELLANT) * * * * / VS. ( +,'(/ RESPONDENT) '( - -- - . . . . / APPELLANT BY : SHRI AJAY I.THAKORE +,'( - . - . - . - . / RESPONDENT BY : SHRI SANJEEV JAIN * - /! / / / / DATE OF HEARING : 14.08.2013 012 - /! / DATE OF PRONOUNCEMENT : 16.08.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 07.02.2011, IN RELATION TO THE ASSESSMENT YEAR 2007-2008. 2. FIRST GROUND OF THE APPEAL IS AGAINST THE CONFIR MATION OF DISALLOWANCE OF ` 6.98 LAKH MADE U/S 14A READ WITH RULE 8D. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECEIVED CERTAIN EXEMPT INCOME. NO AMOUNT WAS OFFERED TOWARDS DISALL OWANCE U/S 14A. THE ASSESSING OFFICER MADE ADDITION OF ` 6,98,836 BY APPLYING RULE 8D. THE LEARNED CIT(A) UPHELD THE ASSESSMENT O RDER ON THIS ISSUE. ITA NO.3416/MUM/2011. M/S.UNI DERITEND LIMITED. 2 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSMENT YEA R INVOLVED BEFORE US IS 2007-2008. THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF GODREJ & BOYCE LTD. MFG. CO. V. DCIT [(2010) 328 IT R 81 (BOM)] HAS HELD THAT THE PROVISIONS OF RULE 8D CANNOT BE A PPLIED TO ANY ASSESSMENT YEAR PRIOR TO 2008-2009. SINCE THE ASSES SMENT YEAR UNDER CONSIDERATION IS PRIOR TO ASSESSMENT YEAR 2008-2009 , AS SUCH RULE 8D CANNOT BE INVOKED FOR THE PURPOSES OF COMPUTING DIS ALLOWANCE U/S 14A. WE, THEREFORE, VACATE THE ORDERS OF THE LOWER AUTHORITIES IN THIS REGARD. THE MATTER IS ACCORDINGLY SENT BACK TO THE AO FOR WORKING OUT THE DISALLOWANCE UNDER THIS PROVISION ON SOME `REAS ONABLE BASIS AS HAS BEEN HELD BY THE HONBLE HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. (SUPRA). 4. GROUND NO.2 IS AGAINST CONFIRMATION OF ADDITION OF ` 20,29,706 ON ACCOUNT OF UNDER-VALUATION OF CLOSING STOCK OF P OWER UNITS. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESS EE CLAIMED TO HAVE GENERATED POWER UNITS OF 75.03 LAKH KW FROM WINDMILL S INSTALLED AT SATARA DISTRICT IN MAHARASHTRA. OUT OF THE ABOVE, I T SOLD 51.15 LAKH KW UNITS FOR ` 1.62 CRORE GIVING SALE PRICE OF ` 3.17 PER UNIT. THE REMAINING POWER UNITS OF 23.87 LAKH KW WERE VALUED BY THE ASSESSEE AT ` 55.39 LAKH AT THE RATE OF ` 2.32 PER UNIT. THE ASSESSEE DID NOT MAINTAIN ANY RECORD REFLECTING THE COST OF PRODUCTI ON OF POWER UNITS. ON BEING CALLED UPON TO JUSTIFY THE VALUATION OF CL OSING STOCK, THE ASSESSEE STATED THAT MSEDCL PURCHASED UNITS AT THE RATE OF ` 2.32 PER ITA NO.3416/MUM/2011. M/S.UNI DERITEND LIMITED. 3 UNIT AND IT WAS THIS RATE WHICH WAS APPLIED BY THE ASSESSEE. REJECTING THIS CONTENTION, THE ASSESSING OFFICER TOOK AVERAG E SALE RATE DURING THE YEAR AT ` 3.17 PER UNIT AS A BASIS FOR VALUING THE CLOSING ST OCK. THIS LED TO THE ADDITION OF ` 20.29 LAKH, WHICH WAS UPHELD IN THE FIRST APPEAL. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THERE IS NO MATERIAL ON RECORD TO INDICATE THE METHOD OF VALUATION OF CLOSI NG STOCK BY THE ASSESSEE. SINCE THE ASSESSEE SOLD POWER UNITS AT TH E AVERAGE RATE OF ` 3.17 PER UNIT, WE ARE OF THE CONSIDERED OPINION THA T THE SAME RATE CAN BE APPLIED FOR VALUING THE CLOSING STOCK ON MAR KET VALUE BASIS. THE LEARNED AR DID NOT RAISE ANY OBJECTION TO THE S USTENANCE OF ADDITION BUT REQUESTED THAT THE SAME VALUE OF CLOSI NG STOCK FOR THIS YEAR SHOULD BE DIRECTED TO BE ADOPTED AS A VALUE OF OPENING STOCK FOR THE SUBSEQUENT YEAR. THERE CAN BE NO DOUBT ON THE P ROPOSITION THAT THE VALUE OF CLOSING STOCK FOR ONE YEAR HAS TO BE T AKEN AS THE VALUE OF OPENING STOCK FOR THE SUBSEQUENT YEAR. THE ASSESSEE IN THIS CASE VALUED STOCK AT THE RATE OF ` 2.32 PER UNIT BY CONSIDERING THE PURCHASE PRICE OF MSEDCL, WHEREAS WE HAVE HELD THAT SUCH CL OSING STOCK SHOULD BE VALUED AT AVERAGE SALE PRICE OF ` 3.17 PER UNIT. IT IS QUITE NATURAL THAT IF THE CLOSING STOCK FOR THE CURRENT Y EAR IS HELD TO BE LIABLE FOR VALUATION AT ` 3.17 PER UNIT, THEN THE OPENING STOCK FOR THE NEXT YEAR SHOULD ALSO BE VALUED ACCORDINGLY. BE THAT AS IT MAY, THIS GROUND IS DISMISSED. ITA NO.3416/MUM/2011. M/S.UNI DERITEND LIMITED. 4 6. GROUND NO.3 IS AGAINST THE CONFIRMATION OF DISAL LOWANCE OF ` 3.21 LAKH BEING FEES CHARGED BY KOTAK SECURITIES LI MITED AS MANAGEMENT FEE FOR MANAGING THE INVESTMENTS OF THE ASSESSEE. THE LEARNED AR WAS FAIR ENOUGH TO CONCEDE THAT THIS ISS UE HAS BEEN DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL AGAINST THE ASSESSEE IN HOMI K BABA V. ITO (INTERNATIONAL TAXATION) [(2011) 48 SOT 102 (MUM.)] . FOLLOWING THE PRECEDENT, WE ORDER FOR THE SUSTENA NCE OF THIS DISALLOWANCE. 7. LAST GROUND IS AGAINST NOT ALLOWING CREDIT FOR T AX DEDUCTED AT SOURCE AS CLAIMED BY THE ASSESSEE. WE DIRECT THE ASS ESSING OFFICER TO VERIFY THE ASSESSEES CLAIM IN THIS REGARD AND ALLO W CREDIT FOR TDS CERTIFICATE AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. 4 /5 %* 4/ - 6 7- 89 : ; ;3 / - #/ < => IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF AUGUST, 2013. ' 3 - 012 ?'*5 1 - $ SD/- SD/- (SANJAY GARG) (R.S.SYAL) % ' % ' % ' % ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; ?'* DATED : 16 TH AUGUST, 2013. DEVDAS* ITA NO.3416/MUM/2011. M/S.UNI DERITEND LIMITED. 5 ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2/ ' 3 - +%/;@ A @2// COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. +,'( / THE RESPONDENT. 3. B () / THE CIT, MUMBAI. 4. B / CIT(A) 2 MUMBAI. 5. @E$ +%/%* , , / DR, ITAT, MUMBAI 6. $F / GUARD FILE. ' 3* ' 3* ' 3* ' 3* / BY ORDER, ,@/ +%/ //TRUE COPY// 8 8 8 8/ // /= # = # = # = # ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI