CORBEL ESTATES & INVESTMENTS P. LTD( NOW MERGED WITH ANDROMEDA INVESTMENT & FINANCE P.LTD), MUMBAI V. DCIT 6(2), MUMBAI

ITA 3509/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48499 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Section: 6; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI PRAMOD KUM AR (A.M.) ITA NO. 3509/MUM /2010 ASSESSMENT YEAR 2006-07 CORBEL ESTATES & INVESTMENTS PVT. LTD., (NOW MERGED WITH ANDROMEDA INVESTMENT & FINANCE PRIVATE LIMITED), MAHINDRA TOWERS, DR. G.M. BHOSALE MARG, P.K. KURNE CHOWK, WORLI, MUMBAI 400 018. PAN : AAACC2210M VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 6(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -20. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI AJIT KUMAR SINHA O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07.01.2010 PASSED BY THE LD. CIT(A) FOR THE A .Y. 2006-07. 2. AT THE TIME OF HEARING, NONE ATTENDED ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNMENT DESPITE THE F ACT THAT NOTICE OF THE DATE OF HEARING WAS DULY SENT TO THE ASSESSEE THROU GH REGD. A/D. IT WAS, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL EX PART E QUA THE ASSESSEE ON MERITS AFTER HEARING THE LD. D.R. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF INVESTMENTS. IT HAS DURI NG THE PERIOD UNDER CONSIDERATION ENGAGED IN LENDING AND BORROWING OF F INANCES. THE A.O. ITA 3509/MUM/2010 M/S CORBEL ESTATES & INVESTMENTS PRIVATE LIMITED. 2 OBSERVED THAT THE COMPANY HAS INVESTED ITS FUNDS IN PURCHASES OF SHARES. THE ENTIRE INCOME OF THE COMPANY FLOWS FRO M INVESTMENTS MADE BY THE COMPANY AND THE INTEREST/BROKERAGE INCOME. T HE A.O. FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAS ITS OWN FUND S OF ` 3469.48 LACS AND IT HAS BORROWED FUNDS AMOUNTING TO ` 3640 LACS. THUS, THE TOTAL FUNDS OF THE COMPANY WERE ` 7109.48 LACS. OUT OF THESE, THE ASSESSEE COMPANY HAS ADVANCED A SUM OF ` 2462 LACS TO VARIOUS COMPANIES. THE ASSESSEE COMPANY HAS PAID INTEREST AMOUNTING TO ` 267.61 LACS DURING THE YEAR. ON GOING THROUGH THE STATEMENT OF COMPUT ATION OF INCOME, THE A.O. OBSERVED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME AMOUNTING TO ` 633.49 LACS, WHICH HAS BEEN CLAIMED AS EXEMPT ON O NE HAND AND IT HAS BEEN INCURRING INTEREST COST ON ITS BORROWINGS WHICH ARE CLAIMED IN THE PROFIT AND LOSS ACCOUNT RESULTING IN HEAVY LOSS ES, WHICH ARE THEN CARRIED FORWARD. THEREFORE, THE ASSESSEE COMPANY WA S REQUIRED TO FURNISH AN EXPLANATION AS TO WHY THE INTEREST EXPENSES SHOU LD NOT BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE I.T . ACT, 1961. THE A.R. OF THE ASSESSEE COMPANY VIDE LETTER DATED 23.12.2008 S TATED THAT INTEREST PAID ON LOAN IS ALLOWABLE DEDUCTION U/S 36(1)(III) OF THE I.T. ACT AND FURTHER ARGUED THAT INTEREST EXPENSES INCURRED BY T HE COMPANY IS NOT IN RELATION TO THE INCOME CLAIMED AS EXEMPT AND HENCE SHOULD NOT BE DISALLOWED UNDER SECTION 14A. THE A.R. OF THE ASSE SSEE COMPANY ALSO RELIED ON CERTAIN DECISIONS. HOWEVER, THE A.O. DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. THE A.O. WORKED OUT N ET DISALLOWANCE U/S 14A READ WITH RULE 8D AMOUNTING TO ` 37.35 LACS AS PER THE WORKING GIVEN AT PAGE 5-6 OF THE ASSESSMENT ORDER AND ADDED TO THE INCOME OF THE ASSESSEE AND THEREBY DETERMINED THE NET LOSS AMOUNT ING TO ` 37.35 LACS AS AGAINST ` 108.48 LACS RETURNED BY THE ASSESSEE, VIDE ORDER D ATED 29.12.2008 PASSED U/S 143(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION IN THE CASE OF ITO VS. DAGA CAPITAL AND ITA 3509/MUM/2010 M/S CORBEL ESTATES & INVESTMENTS PRIVATE LIMITED. 3 MANAGEMENT CO. P. LTD. 117 ITD 169 (MUM) [SB] UPHEL D THE DISALLOWANCE MADE BY THE A.O. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE UNDER RULE 8D TO T HE TUNE OF ` 224.36 LAKHS INSTEAD OF ` 188.95 LAKHS AS CALCULATED BY THE ASSESSEE. 5. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THA T THIS ISSUE STANDS COVERED BY THE JUDGMENT OF HON'BLE JURISDICTIONAL H IGH COURT IN GODREJ & BOYCE MFG. CO. LTD., VS. DCIT, THEREFORE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND MERIT IN PLEA OF THE LD. D.R. THAT THE ISSUE STANDS COVERED BY THE RECENT JU DGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO . LTD. VS. DCIT IN INCOME TAX APPEAL NO.626 OF 2010 AND WRIT PETITION NO.758 OF 2010 DATED 12.8.2010 SINCE REPORTED IN (2010) 328 ITR 8 1 (BOM.) WHEREIN THEIR LORDSHIPS AFTER CONSIDERING THE DECISION OF T HE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. (117 ITD 169 (MUM)(SB) , WHILE HOLDING THAT THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONALLY VALID HAVE HELD VIDE PLACITUM 88( VI) APPEARING AT PAGE 138 OF THE ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTIO N (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OF FICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HA S BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT ITA 3509/MUM/2010 M/S CORBEL ESTATES & INVESTMENTS PRIVATE LIMITED. 4 FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET AS IDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE HON'BLE JURISDICTION AL HIGH COURT IN THE ABOVE CITED CASE AFTER PROVIDING REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE AND ACCORDINGLY THE GROUND TAKEN BY TH E ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20.04.2011 SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 20.04.2011 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 12, MUMBA I 4. COMMISSIONER OF INCOME TAX, CITY 6, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 3509/MUM/2010 M/S CORBEL ESTATES & INVESTMENTS PRIVATE LIMITED. 5 1 DRAFT DICTATED ON 18.4.2011 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 18.4.2011 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHIC H FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS