STEMCOR INDIA P. LTD, MUMBAI V. DCIT 1(3), MUMBAI

ITA 3450/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4543 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: FAROOKH IRANI
• Keywords: Earning of tax free income; Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BE NCH, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NO. 3450/MUM/2013 ( / ASSESSMENT YEAR: 2008-09 M/S. STEMCOR INDIA PVT. LTD., NIRMAL BLDG., 10 TH FLOOR, BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI-400 021 / VS. THE DCIT - 1(3), AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. AAHCS 9299R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI FAROOKH IRANI / RESPONDENT BY: SHRI LOVE KUMAR / DATE OF HEARING :12.01.2016 !' / DATE OF PRONOUNCEMENT : 12.01.2016 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-2, MUMBAI DATED 28.3.2013 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE RELATE TO THE ADDITION OF RS. 15,13,374/- MADE U/S. 14A OF THE ACT. ITA. NO.3450/M/2013 2 3. THE ASSESSEE COMPANY IS A DEALER IN STEEL AND RA W MATERIAL. RETURN FOR THE YEAR WAS ELECTRONICALLY FILED ON 30. 9.2008 DECLARING TOTAL INCOME AT RS. 3,65,6,733/-. THE RETURN WAS S ELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND ACCORDINGLY STATUTORY N OTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 3.1. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE ASSESSEE WAS ASKED TO SHOW CASE AS TO WHY DISALLOWA NCE U/S. 14A SHOULD NOT BE MADE AS PER RULE 8D IN VIEW OF SHARE INVESTMENT OF RS. 17.36 CRORES REFLECTED IN THE BALANCE SHEET WHEREON INCOME ARISING IF ANY, IS EXEMPT. 3.2. THE ASSESSEE CONTENDED THAT NO DISALLOWANCE SH OULD BE MADE AS NO DIVIDEND INCOME HAS BEEN RECEIVED DURING THE YEAR. HOWEVER, THE AO NOTICED THAT THE ASSESSEE HAS CHARGED ITS PR OFIT & LOSS ACCOUNT BY INTEREST EXPENDITURE OF RS. 5,32,364/- ON BORROW ED FUNDS. THE AO WAS OF THE STRONG BELIEF THAT DISALLOWANCE U/S. 14A HAS TO BE MADE EVEN IF NO INCOME IS RESULTED OR MADE OR EARNED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. ACCORDING TO THE AO, THE INTEREST EXPENDITURE CANNOT BE COMPLETELY IGNORED WHILE WORK ING OUT THE DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE ACT. TH E AO PROCEEDED BY COMPUTING THE DISALLOWANCE BY INVOKING THE PROVISI ONS OF SEC. 14A R.W. RULE 8D AND THE DISALLOWANCE SO COMPUTED WAS A T RS. 15,13,374/-. 4. BEFORE THE LD. CIT(A), THE ASSESSEE STRONGLY CON TENDED THAT THE INVESTMENTS ARE OF STRATEGIC IN NATURE MADE IN THE GROUP CONCERN WITH A SOLE OBJECTIVE OF ENSURING CONSISTENT AND UN INTERRUPTED SUPPLY ITA. NO.3450/M/2013 3 OF FINES TO BRAHMANI RIVER PELLETS LTD PLANT. IT WAS STRONGLY CONTENDED THAT THE SHARES IN ARYAN MINING & TRADIN G CORPN., HAVE BEEN ACQUIRED FOR THE PURPOSE OF BUSINESS AND HENC E EXPENDITURES INCURRED WAS FOR THE PURPOSE OF BUSINESS. THE CLAI M OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE LD. CIT(A) WHO CON FIRMED THE DISALLOWANCE MADE BY THE AO. 5. AGGRIEVED BY WHICH, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THERE IS NO D ENYING THAT THE INVESTMENTS IN SHARES OF ARYAN MINING & TRADING COR PN WAS MADE TO ENSURING CONSISTENT AND UNINTERRUPTED SUPPLY OF RAW MATERIAL TO ITS BRAHMANI RIVER PELLETS LTD PLANT. THUS IT CAN BE S AFELY CONCLUDED THAT THE INVESTMENT MADE IN ITS ASSOCIATED COMPANY WAS PURELY ON ACCOUNT OF COMMERCIAL EXPEDIENCY. SINCE THE INVEST MENT IS OF STRATEGIC NATURE, IN OUR CONSIDERED OPINION, NO DIS ALLOWANCE U/S. 14A IS CALLED FOR. WE DRAW SUPPORT FROM THE DECISION O F THE TRIBUNAL IN THE CASE OF M/S. J.M. FINANCIAL LTD IN ITA NO. 45 21/M/2012 AND ALSO FROM THE DECISION OF THE HONBLE HIGH COURT OF DELH I IN THE CASE OF ORIENTAL STRUCTURAL ENGINEERS LTD IN ITA NO. 605 O F 2012. 6.1. A SIMILAR VIEW IS ALSO TAKEN BY THE CO-ORDINA TE BENCH OF CHENNAI IN THE CASE OF EIH ASSOCIATED HOTELS LTD. IN ITA NOS. 1503 AND 1624/MDS/2012. FOR THE SAKE OF COMPLETENESS OF THE ADJUDICATION, IT WOULD NOT BE OUT OF PLACE TO REFER TO THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CHEM INVEST LTD IN ITA NO. 749 OF 2014 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT NO DISALLOWANCE CAN BE MADE U/S. 14A IN THE YEAR WHEN THERE IS NO ITA. NO.3450/M/2013 4 EXEMPT INCOME EARNED BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE HONBLE HIGH COURT O F DELHI IN THE LIGHT OF OUR DISCUSSION MADE ELSEWHERE, WE SET ASID E THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE IMPU GNED DISALLOWANCE MADE U/S. 14A R.W. RULE 8D OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 12 TH JANUARY, 2016. SD/- SD/- (C.N. PRASAD) (N.K. BILLAIYA) %& /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; ) DATED : 12 TH JANUARY, 2016 . & . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. +,-&&./ , ./' , / DR, ITAT, MUMBAI 6. -012 / GUARD FILE. / BY ORDER, +& //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI