RADHA MADHAV INVESTMENTS LTD, MUMBAI V. DCIT 3(3), MUMBAI

ITA 3897/MUM/2012

• Counselvise Citation: 389719914 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D PRABHAKAR REDDY
• Assessee Lawyers: ARVIND DALAL; RAJESH CHAMARIA
• Keywords: Business expenditure; Earning of tax free income; Revised return
• Section: 14A; 115JB

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . . .. . . .. . !' !' !' !' , ! ! ! ! BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. /./. /. ITA NO.3897/MUM/2012, $ % $ % $ % $ %/ // / ASSESSMENT YEAR-2008-09 RADHA MADHAV INVESTMENT LTD. 11-A, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI- 400021 VS. DCIT 3(3) AAYAKAR BHAVAN, MUMBAI. PAN: AAACR4063M ( &' / // / APPELLANT ) ( ()&' / RESPONDENT ) $ *+ , ! $ *+ , ! $ *+ , ! $ *+ , ! / // / ASSESSEE BY : SHRI ARVIND DALAL & SHRI RAJESH CHAMARIA - , ! / REVENUE BY : SHRI D. PRABHAKAR REDDY $ - + $ - + $ - + $ - + / // / DATE OF HEARING : 15-10-2013 ./% - + / DATE OF PRONOUNCEMENT : 23-10-2013 $ $ $ $ , 1961 - - - - 254 ) )) ) 1 ( (( ( ! +2+ !3 ! +2+ !3 ! +2+ !3 ! +2+ !3 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 16.01.2012 OF THE CIT(A )-7,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LD. CIT (A) ERRED IN LAW AND FACTS IN ADJUDICATING GROUND NO. I ON THE BASIS OF SUBMISSIONS MADE ON GROUND NO. 2. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTR ARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 2.THE LD. CIT (A) ERRED IN LAW AND FACTS IN REPRODUCING SUBMIS SIONS MADE BY THE ASSESSEE ON GROUND NO.2,BUT NOT ADJUDICATING THE GROUND NO 2. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. WITHOUT PREJUDICE TO THE ABOVE 3.THE LD.CIT(A) I LD A.O. ERRED IN LAW AND FACTS IN UPHOLDI NG ADDITION OF RS.4,49,81, 339/- TO BOOK PROFITS U/S 115JB OF THE ACT BEING DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 4.THE LD. CIT(A) / LD A.O. ERRED IN LAW AND FACTS IN UPHO LDING DISALLOWANCE RS.4,49, 81,339/- U/S 14A OF THE ACT OUT OF EXPENSES INCLUDING WITH REFERENCE TO INVESTMENT OF R S. 384 CRORES IN PARTNERSHIP FIRM. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. (II) THE LD.CIT (A)/LD A.O. OUGHT TO HAVE HELD THAT PROVISIONS OF SECTION 14A OF THE ACT ARE NOT APPLICABLE TO INVESTMENTS MADE IN PARTNERSHIP FIRM AS INCOME THERE FRO M IS NOT EXEMPT. 5.WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) I LD A.O . OUGHT TO HAVE HELD THAT THERE IS NO EXPENSES INCURRED FOR EARNING THE INCOME FROM OR MAINTAIN THE INVESTMENTS AND HENCE DISALLOWANCE U/S 14 A IS WRONGLY DONE. 6.THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE GROUNDS OF APPEAL. ASSESSE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN RAW COTTON-BALES,GAUR-SEEDS,FINANCING AND INVESTING IN SHARES AND SECURITY FILED ITS RETURN O F INCOME ON 30.09.2008 DECLARING TOTAL INCOME OF RS.59,87,66,411/-.ON 27.03.2010 A REVISED RETURN OF INCOME,DECLARING TOTAL INCOME AT RS.60.85 CRORES,WAS FILED.ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT, ASSESSING TOTAL INCOME AT RS.60,85,11,410/- UNDER THE NORMAL PROVISIONS AND DETERMINING THE BOOK PROFIT AT 2 ITA NO. 3897/MUM/2012 RADHA MADHAV INVESTMENT LTD. RS.6,42,02,92,729/- U/S. 115JB OF THE ACT.WHILE FINALISING THE ASSESSMENT,HE ADDED RS.4,49,81, 399/- U/S.14A R.W.S.RULE 8D OF THE ACT. 2. ASSESSEE HAD FILED SIX GROUNDS OF APPEAL.BEFORE US, AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE DID NOT PRESS GROUNDS NO.1, 2, 4 AND 5.THE REFORE, SAME ARE DISMISSED AS NOT PRESSED. IT LEAVES US WITH ONLY ONE GROUND OF APPEAL (GOA NO .3) PERTAINING TO ADDITION OF RS. 4.49 CRORES, MADE U/S.14A OF THE ACT,TO THE BOOK PROFITS.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED DIVIDEND INCOME OF RS. 14.18 C RORES BEING EXEMPT U/S. 10(34) OF THE ACT.HE FURTHER FOUND THAT IT HAD ALSO SHARE OF PROFIT IN P ARTNERSHIP FIRM AT RS. 3.65 LACS WHICH WAS CLAIMED AS EXEMPT U/S. 10(29) OF THE ACT.WHILE FINALISING T HE ASSESSMENT AO DISALLOWED EXPENSES OF RS. 4.49 CRORES CALCULATING @ OF .5% OF THE AVERAGE INV ESTMENT OUT OF THE BUSINESS EXPENSES OF RS. 11.43 CRORES. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA HELD THAT RULE 8D WAS APPLICABLE IN THE CASE UNDER CONSIDERATION.HE REFERRED TO THE DECISION DELIVERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. LTD.(328ITR81).HE FOUND THAT ASSESSEE HAD DISALLOWED RS. 4.49 CRORES U/S. 14A OF THE ACT, AS PER RULE 8D WHILE THE RETURN OF INCOME, THAT AO HAD ADDED THE SAME AMOUNT FOR CALCULATING T HE BOOK PROFITS U/S. 115JB OF THE ACT.HE HELD THAT ADDITION MADE BY THE AO WAS JUSTIFIED AND DISM ISSED THE APPEAL FILED BY THE ASSESSEE. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR) OF THE ASSE SSEE RELIED UPON THE ORDERS OF GOETZE (INDIA) LTD.(32 SOT 101),BENGAL FINANCE AND INVESTM ENT PVT. LTD. (ITA NO. 5937/MUM/2012- 31.07.2012), RELIANCE CAPITAL LTD.(ITA NO. 3037/MUM /2008,2155/MUM/2008-15.02.2013), RELIANCE INDUSTRIAL INFRASTRUCTURE LTD.(ITA NO. 69- 70/MUM/2009- 5.4.2013) AND RELIANCE INDUSTR -IES LTD.(ITA NO. 4475/MUM/2007- 13.09.2013). DEPAR TMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDERS OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT ISSUE OF DISALLOWANCE U/S.14A OF THE ACT,WHILE CALCULATING B OOK PROFITS U/S. 115JB OF THE ACT,HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N THE CASES REFERRED ABOVE BY THE AR.WE FIND THAT FOLLOWING DECISIONS OF THE GOETZE INDIA LTD. ( SUPRA) K BENCH OF MUMBAI TRIBUNAL IN THE CASE OF RELIANCE INDUSTRIES LTD.(SUPRA) HAS HELD TH AT PRINCIPAL OF APPORTIONMENT AS PROVIDED U/S. 14A SHOULD NOT BE APPLIED WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. IN SO FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPEN SES U/S 14A OF THE ACT IS CONCERNED FOR EARNING EXEMPT INCOME OF RS. 345,69,24,696/-, WE ARE OF THE CONSIDERED VIEW THAT BY FOLLOWING THE ORDER OF LD. CIT(A) FOR THE PRECEDING ASSESSMENT YEAR I.E. ASSES SMENT YEAR 2002-03, IT WILL BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO 1 % OF THE EXEMPT I NCOME WHICH WORKS OUT TO RS. 3,45,69,250/-. HOWEVER, IN REGARD TO DISALLOWANCE U/S 14A FOR COMP UTING BOOK PROFIT U/S 115JB OF THE ACT, WE OBSERVE THAT SIMILAR ISSUE HAD COME UP BEFORE THE T RIBUNAL, MUMBAI BENCH IN THE CASE OF RELIANCE INDUSTRIAL INFRASTRUCTURE LTD V/S ADDL. CIT IN ITA NOS. 69 AND 70/MUM/2009 (AY-2005-06 AND 2006- 07) AND TRIBUNAL VIDE ORDER DATED 5.4.2013 AFTER FO LLOWING THE DECISION OF DELHI BENCH OF TRIBUNAL IN GOETZE (INDIA) LTD (32 SOT 101) (DEL) AND THE DECIS ION OF MUMBAI BENCH OF THE TRIBUNAL IN M/S BENGAL FINANCE AND INVESTMENT P. LTD. IN ITA NO. 56 20/MUM/2010, DATED 31.07.2012 HAS HELD THAT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, P ROVISIONS OF SECTION 14A CANNOT BE IMPORTED. THEREFORE, AMOUNT DISALLOWED U/S 14A OF THE ACT CAN NOT BE CONSIDERED WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. ACCORDINGLY, THE ISSUE WAS DECIDE D IN FAVOUR OF THE ASSESSEE. IN VIEW OF ABOVE GROUND NO.4 OF THE APPEAL TAKEN BY THE ASSESSEE IS ALLOWED IN PART BY RESTRICTING THE DISALLOWANCE TO RS. 3,45,69,250/- TOWARDS ADMINISTR ATIVE AND GENERAL EXPENSES U/S 14A OF THE ACT TOWARDS EARNING OF EXEMPT INCOME U/S 10(23G) OF THE ACT WHILE COMPUTING TOTAL TAXABLE INCOME UNDER THE3 NORMAL PROVISIONS OF ACT. HOWE3VER, NO DISALLO WANCE UNDER SECTION 14A BE CONSIDERED WHILE 3 ITA NO. 3897/MUM/2012 RADHA MADHAV INVESTMENT LTD. COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. CONSEQU ENTLY, GROUND NO.4 TAKEN BY THE DEPARTMENT IS REJECTED. FOLLOWING THE ABOVE GROUND NO.3 IS DECIDED IN FAVOU R OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. * 4 $ *+ - 5 - + 67. ORDER PRONOUNCED IN TH E OPEN COURT ON 23 RD OCTOBER,2013 . !3 - ./% ! 8 9$ 23 :; 5 , 2013 / - 2 < SD/- SD/- ( . .. . . / I.P.BANSAL ) ( !' !' !' !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! /ACCOUNTANT MEMBER / MUMBAI, 9$ /DATE: 23 .10. 2013 SK !3 - (+= >!=%+ !3 - (+= >!=%+ !3 - (+= >!=%+ !3 - (+= >!=%+/ COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ ? @ , 4. THE CONCERNED CIT/ ? @ 5. DR D BENCH, ITAT, MUMBAI / =A2 (+$ , . . . 6. GUARD FILE/ 2 B )=+ (+ )=+ (+ )=+ (+ )=+ (+ //TRUE COPY// !3$ / BY ORDER, C / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI