HINDUSTAN COMPOSITES LTD, MUMBAI V. ITO 10(2)(1), MUMBAI

ITA 3535/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3940 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S GORADIA
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 3535/MUM/2012 ( ( ( ( ( / ASSESSMENT YEAR : 2009-2010 M/S. HINDUSTAN COMPOSITES LTD., B-11, PARAGON CONDOMINIUM, PANDURANG BUDHKAR MARG, WORLI, MUMBAI-400 013 THE ITO, 10(2)(1), AAYAKAR BHAVAN, MUMBAI ') % ./ *+ ./PAN/GIR NO. : AAACH 0973N ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI R.S. GORADIA -.), 0 / /RESPONDENT BY : SHRI ABHINAY KUMBHAR 0 12% / DATE OF HEARING :23.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT :23.07.2013 &5 / 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)-21, MUMBAI DT.2.3.2012 PERTAINING TO A.Y. 2 009-10. 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. ITA NO.3535/M/2012 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS D IVIDEND INCOME AT RS. 7,26,757/-, WHICH IT CLAIMED AS EXEMPT FROM TAX. TH E ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF EXPENSES ATTRIBUTABLE TO EXEMPT INCOME AS PER PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME-TAX RULES 1962. THE ASSESSEE FILED A DETAILED REPLY DT. 3.8 .2011 AND EXPLAINED THAT THE INVESTMENT AS ON 31.3.2009 AMOUNT TO RS. 643.33 LACS AS AGAINST WHICH THE SHAREHOLDERS FUND AGGREGATES TO RS. 2320 .15 LACS. IT WAS FURTHER EXPLAINED THAT CONSIDERING THE OWN FUNDS VI S--VIS INVESTMENT, IT CAN BE PRESUMED THAT NO INTEREST AND INTEREST BEARI NG FUNDS WERE INCURRED BY THE ASSESSEE COMPANY FOR MAKING INVESTMENT WHICH WOULD YIELD TAX FREE INCOME AND THEREFORE NO DISALLOWANCE CAN BE MA DE U/S. 14A R.W.RULE 8D OF THE ACT. 4. THE ASSESSEE RELIED UPON THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES AND POWER LTD. 313 ITR 340. THE AO REJECTED THE CONTENTION OF THE ASSESSE E THAT NO INTEREST AND OTHER EXPENSES HAVE BEEN INCURRED IN EARNING THE DI VIDEND. THE AO WAS OF THE FIRM BELIEF THAT EVEN IF ASSESSEES EXPLANAT ION IS ACCEPTED, IT WOULD NOT MAKE ANY DIFFERENCE SO FAR AS PROVISIONS OF SEC . 14A ARE CONCERNED. THEREAFTER, THE AO RELIED UPON CERTAIN JUDICIAL PRO NOUNCEMENT AS DISCUSSED BY HIM FROM PARA 5.6 ONWARDS AND WENT ON TO COMPUTE THE ATTRIBUTABLE EXPENSES FOR EARNING EXEMPT INCOME AT RS. 23,72,143/-. SINCE THE ASSESSEE ITSELF HAS DISALLOWED AMOUNT OF RS. 3,23,081/-, THE AO FINALLY COMPUTED THE DISALLOWANCE AT RS. 20,49,062/ -. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS SUBMISSION WHICH IT MADE BEFORE THE AO. THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE LD. CIT(A ) IN ASSESSEES OWN CASE FOR A.YRS 2006-07, 2007-08 & 2008-09. HOWEVER , THE LD. CIT(A) ITA NO.3535/M/2012 3 WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSES SEE AND CONFIRMED THE ADDITION MADE BY THE AO. 6. AGGRIEVED BY THIS FINDING, THE ASSESSEE IS BEFOR E US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. CO UNSEL ALSO FURNISHED THE COPIES OF THE ORDER OF THE LD. CIT(A) IN ASSESS EES OWN CASE FOR A.YRS 2006-07 TO 2008-09 AND SUBMITTED THAT IN ALL THESE YEARS, THE LD. CIT(A) HIMSELF HAS DELETED THE DISALLOWANCE MADE ON THIS ACCOUNT. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE AO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND FORCE IN THE SUB MISSIONS OF THE LD. COUNSEL THAT IN PRECEDING ASSESSMENT YEARS, THE LD. CIT(A) HAS DELETED SIMILAR DISALLOWANCE. HOWEVER, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE LD. CIT (A). THE LD. CIT(A) IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE DECISION TAKEN IN ASSESSEES OWN CASE IN PRECEDING ASSESSMENT YEARS BY THE FIRST APPELLATE AUTHORITY. GROUND NO. 1 WITH ALL ITS SUB-GROUNDS I S ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 2 RELATES TO ADJUSTMENT MADE TO BOOK PROFIT U/S. 115JB ON THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 11. AS WE HAVE RESTORED THE ISSUE RELATING TO THE D ISALLOWANCE U/S. 14A BACK TO THE FILES OF THE LD. CIT(A), THE CIT(A) IS DIRECTED TO DECIDE THIS ISSUE AFRESH AFTER DECIDING THE ISSUE RAISED VIDE GROUND NO. 1 OF THIS APPEAL. ITA NO.3535/M/2012 4 12. GROUND NO. 3 RELATES TO LEVY OF INTEREST U/S. 2 34C BASED ON SHORTFALL IN PAYMENT OF ADVANCE TAX AS COMPARED TO ASSESSED TAX. 13. IT IS THE SAY OF THE ASSESSEE THAT INTEREST U/S . 234C IS CHARGED ON RETURNED INCOME AND NOT ON ASSESSED INCOME. THIS I SSUE IS ALSO RESTORED TO THE FILE OF THE LD. CIT(A). THE LD. CIT(A) IS D IRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE PROVISIONS OF SEC. 234C OF THE ACT. THE LD. CIT(A) IS EXPECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE DISPOSING ALL THE GRIEVANCE OF THE A SSESSEE. ACCORDINGLY, GROUNDS NO. 2 & 3 ARE ALSO ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 23.07.2013 . &5 0 4( % 6 7&8 23.07.2013 4 0 9 SD/- SD/ (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 23/07/2013 . . ./ RJ , SR. PS ITA NO.3535/M/2012 5 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI