ESSEL INFRAPROJECTS LTD, MUMBAI V. DCIT CIR 7(3)(1), MUMBAI

ITA 3665/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0932 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & AMARJIT SINGH (JM) I.T.(TP) A. NO. 3665 /MUM/20 1 6 (ASSESSMENT YEAR 20 09 - 10 ) ESSEL INFRAPROJECTS LIMITED 135, CONTINENTAL BUILDING DR.ANNIE BESANT ROAD, WORLI MUMBAI - 400 018. PAN : AAACP6095M VS . DCIT, CIRCLE 7(3)(1) ROOM NO. 12 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY DR.K. SHIVRAM, SHRI ADITYA R. AJGAONKAR & SHRI SHASHANK DUNDU DEPARTMENT BY S HRI V. JENARDHANAN DAT E OF HEARING 10 . 01 . 201 8 DATE OF PRONOUNCEMENT 10 . 0 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.2.2016 PASSED BY THE LEARNED CIT(A) - 56, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROJECT CONSULTANCY SERVICES AND INFRASTRUCTURE ACTIVITIES. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED DIVIDEND INCOME OF ` 149.07 LAKHS AND CLAIMED THE SAME AS EXEMPT. HOWEVER, THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S. 14A OF THE ACT. WHEN QUESTIONED, THE ASSESSEE SUBMITTED THAT IT DID NOT INCUR A NY EXPENDITURE FOR EARNING EXEMPT INCOME. THE ASSESSING OFFICER DID NOT AGREE WITH THE ASSESSEE AND ACCORDINGLY COMPUTED THE DISALLOWANCE AS PER PR OVISIONS OF RULE 8D, WHICH WORKED OUT TO ` 766.91 LAKHS. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL. ESSEL INFRAPROJECTS LIMITED 2 3. LEARNED AR SUBMITTED THAT THE OWN FUND S & INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WERE MORE THAN THE VALUE OF INVESTMENT S AND HENCE NO DISALLOWANCE UNDER RULE 8D(2) (II) OUT OF INTEREST EXPENDITURE IS CALLED FOR. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BROUGHT FORWARD MOST OF THE INVESTMENT S IN THE PRECEDING YEAR AND FURTHER HE ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM TWO COMPANIES AND ONE MUTUAL FUND. HE FURTHER SUBMITTED THAT IT HAS MADE MAJOR INVESTMEN TS IN ITS SUBSIDIARY COMPANIES. ACCORDINGLY, HE SUBMITTED THAT THE DISALLOWANCE OUT OF ADMINISTRATIVE EX PENDITURE SHOULD NOT HAVE BEEN COMPUTED AS PER RULE 8 D (2)(III) OF THE I.T. RU LES. 4. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER PASSED BY THE LEARNED CIT(A). 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED FROM THE FINANCIAL STATEMENT S THAT THE OWN FUNDS AVAILABLE WITH THE ASSESSEE WAS ` 276.02 CRORES AND ` 233.64 CRORES RESPECTIVELY AS ON 31.3.2009 AND 31.3.200 8 . THE V ALUE OF INVESTMENT S A VAILABLE WITH THE ASSESSEE STOOD AT ` 226.54 CRORES AND ` 198.10 CRORES AS ON 31.3.2009 AND 31.3.2008 RESPECTIVELY. ADMITTEDLY, THE INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE IS MORE THAN THE VALUE OF INVESTMENTS AND HENCE, AS PER DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (366 ITR 505) , NO DISALLOWANCE IS CALLED FOR FROM OUT OF INTEREST EXPENDITURE. WE NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED A SUM OF ` 664.08 LAKHS OUT OF INTEREST EXPENDITURE AND , IN VIEW OF THE FOREGOING DISCUSSIONS, THE SAME IS LIABLE TO BE DELETED . ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF ` 664.08 LAKHS MADE UND ER RULE 8D(2)(II) OUT OF INTEREST EXPENDITURE. 6. WITH REGARD TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES, WE NOTICED THAT THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION HAS RECEIVED DIVIDEND INCOME ONLY FROM TWO COMPANIES AND ONE MUTUAL FUND. W E FURTHER NOTICED ESSEL INFRAPROJECTS LIMITED 3 THAT THE ASSESSEE HAS BROUGHT FORWARD MOST OF THE INVESTMENT S FROM PRECEDING YEAR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE FRESH INVESTMENT S IN ONE OF ITS SUBSIDIARY COMPANY AND ALSO LIQUIDATED TWO MUTUAL FUNDS. UNDER T HESE SET OF FACTS, WE ARE OF THE VIEW THAT IT MAY NOT BE PROPER TO APPLY PROVISIONS OF RULE 8D(2)(III) OF THE I.T. RULES TO THE FACTS OF THE PRESENT CASE. WE NOTICED THA T THE TRIBUNAL HAS SUSTAINED A DISALLOWANCE TO THE EXTENT OF 10% OF THE DIVIDEND INCOME U/S. 14A OF THE I.T. RULES IN A.Y. 2007 - 08. CONSIDERING THE NATURE AND VOLUME OF TRANSACTIONS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 5% OF THE DIVIDEND INCOME WOULD MEET THE REQUIREMENT S OF SECTION 14A OF THE I.T. ACT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE DISALLOWANCE U/S. 14A OF THE ACT TO THE EXTENT OF 5% OF THE DIVIDEND INCOME DECLARED BY THE ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY THE A SSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 10 . 0 1 .201 8 . SD/ - SD/ - (AMRAJIT SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 0 1 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS I TAT, MUMBAI