BACHHRAJ & COMPANY P.LTD, MUMBAI V. ITO 3(1)(2), MUMBAI

ITA 3791/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3158 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2012
• Court: TRIBUNAL
• Department Lawyers: S RAVICHANDRAN
• Assessee Lawyers: ARAVIND SONDE; PARTH ACHWAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.3791/M/2012 (AY: 2008 - 2009) ./I.T.A. NO.2555/M/2014 (AY: 2010 - 2011) BACHHRAJ FACTORIES PRIVATE LIMITED, BAJAJ BHAVAN, 226, NARIMAN POINT, MUMBAI 400 021. / VS. ITO - 3(1)(2), MUMBAI. ./ PAN : AAACB4654N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ARAVIND SONDE & PARTH ACHWAL / RESPONDENT BY : SHRI S. RAVICHANDRAN / DATE OF HEARING : 24.08 .2016 / DATE OF PRONOUNCEMENT : 24 .08.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 5, MUMBAI INVOLVING THE ASSESSMENT YEARS 2008 - 2009 AND 2010 - 2011. SINCE, THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICAL, THEREFORE, F OR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OFF IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. 2. THE CORE ISSUE INVOLVED IN THESE APPEALS RELATES TO THE APPLICATION OF THE PROVISIONS OF SECTION 14A READ WITH RULE 8D(2)(III) OF THE IT RULES, 1962 (THE RULES). WHILE QUANTIFYING THE DISALLOWANCE UNDER THE SAID CLAUSE (III) OF RULE 8D(2) OF THE RULES, THE ASSESSING OFFICER CONSIDERED THE AVERAGE INVESTMENT OF RS. 25.67 CRS (REOUNDED OFF) FOR THE AY 2008 - 2009. SIMILARLY, AVERAGE I NVESTMENT CONSIDERED FOR THE AY 2010 - 2011 IS RS. 30.25 CRS (ROUNDED OFF). AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY IN BOTH THE YEARS. 2 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE CIT (A) PARTLY ALLOWED THE APPEALS OF THE ASSESSEE IN BOTH THE YEAR AND CONFIRMED THE DISALLOWANCE MADE U/S 14 READ WITH RULE 8D(2)(III) OF THE RULES. AGAIN AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS I N APPEAL BEFORE THE TRIBUNAL FOR BOTH THE AYS 2008 - 09 AND 2010 - 11. 4 . BEFORE US, FOR THE FIRST TIME, LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE SAID AVERAGE INVESTMENT COMPUTED IN BOTH THE YEARS REQUIRES DOWN WARD REVISION IN VIEW OF THE CO ORDINATE BENCH DECISION IN THE CASE OF GARWARE WALL ROPES LTD VS. ADDL. CIT [2014] 65 SOT 86 (MUMBAI - TRIB.); DECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S. JM FINANCIAL LIMITED VS. ADDL. CIT IN ITA NO.4521/MUM/2012 (AY 2009 - 2010), DATED 26.3.2014 AND MAN Y OTHER CASES QUA THE STRATEGIC INVESTMENTS ARE BECOME PART OF THE INVESTMENTS OF THE ASSESSEE. RELYING ON VARIOUS DECISIONS, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF THE AO FOR RECOMPUTING THE DISALLOWANCE UNDER THE CLAUSE (III) OF RULE 8D(2) OF THE RULES QUA THE AVERAGE INVESTMENT STRICTLY FOLLOWING THE CITED DECISIONS ON THE ISSUE UNDER CONSIDERATION. 5 . ON HEARING BOTH THE PARTIES AND ALSO ON PERUSING THE ORDERS OF THE TRIBUNAL IN THE CASE OF GARWARE WALL ROPES LTD (SUPRA) AND M/S. JM FINANCIAL LIMITED (SUPRA), WE FIND THAT IT IS A SETTLED POSITION OF THE ISSUE THAT THE STRATEGIC INVESTMENTS ARE BASICALLY INVESTED NOT FOR EARNING DIVIDEND INCOME AND T H E R E F O R E A R E REQUIRED TO BE ADJUSTED WHILE WORKING OUT THE AV ERAGE INVESTMENTS BEFORE APPLYING 0.5% AS PER THE CLAUSE (III) OF RULE 8D(2) OF THE RULES. ACCORDINGLY, WE REMAND THIS COMMON ISSUE RAISED IN BOTH THE AYS UNDER CONSIDERATION TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND DECISION IN THE MATTER. AO IS DIRECTED TO GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE BEFORE FINALIZING THE RECOMPUTATION UNDER THE SAID CLAUSE (III). WE ORDER ACCORDINGLY. THUS, ALL THE GROUNDS RAISED IN BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 6 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3 ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. S D / - S D / - (AMIT SHUKLA) (D. KARUN AKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 24.08.2016 . . ./ OKK , 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. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI