The ACIT, Circle-1(2), Trivandrum, Trivndrum V. M/s.Muthoot Bankers, Trivandrum

ITA 39/COCH/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8276 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 09-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: R SRINIVASAN
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 12 /COCH/201 8 : ASST.YEAR 2008 - 2009 ITA NO. 13 /COCH/201 8 : ASST.YEAR 2009 - 2010 ITA NO. 14 /COCH/201 8 : ASST.YEAR 2010 - 2011 ITA NO. 15 /COCH/201 8 : ASST.YEAR 2011 - 2012 ITA NO. 16 /COCH/201 8 : ASST.YEAR 2012 - 2013 ITA NO. 17 /COCH/201 8 : ASST.YEAR 2013 - 2014 M/S.M U THOOT BANKERS PUNNEN ROAD TRIVANDRUM PAN : AAEFM0671P . VS. THE ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2) TRIVANDRUM. (APPELLANT) (RESPONDENT) ITA NO. 38 /COCH/201 8 : ASST.YEAR 2008 - 2009 ITA NO. 39 /COCH/201 8 : ASST.YEAR 2009 - 2010 ITA NO. 40 /COCH/201 8 : ASST.YEAR 2012 - 2013 ITA NO. 41 /COCH/201 8 : ASST.YEAR 2013 - 2014 THE ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2) TRIVANDRUM. VS. M/S.MUTHOOT BANKERS (TRIVANDRUM) MUTHOOT CENTRE, PUNNEN ROAD, TRIVANDRUM 695 034. ( APPLICANT ) (RESPONDENT) REVENUE BY : SMT.A.S.BINDHU, SR.DR ASSESSEE BY : SRI.R.SRINIVASAN, CA DATE OF HEARING : 2 6 .09.2018 DATE OF PRONOUNCEMENT : 03.10 .2018 O R D E R PER GEORGE GEORGE K., JM THESE ARE SIX APPEAL S AT THE INSTANCE OF THE ASSESSEE AND FOUR APPEALS AT THE INSTANCE OF THE REVENUE. ALL THE APPEALS ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE ITA NO. 12 / COCH /201 7 & ORS . M/S.MUTHOOT BANKERS . 2 COMMISSIONER OF INCOME - TAX (APPEALS) , DATED 15.12.2017 . THE RELEVANT ASSESSMENT YEAR S ARE 2008 - 2009 TO 2013 - 2014 . THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THE TIME OF HEARING, PLACED A LETTER DATED 13.08.2018, REQUESTING PERMISSION TO WITHDRAW THE APPEALS FILED BY TH E REVENUE. HENCE, THE DEPARTMENTS APPEALS ARE DISMISSED AS WITHDRAWN. WE SHALL NOW ADJUDICATE THE ASSESSEES APPEAL. 2. C OMMON ISSUE IS RAISED IN ASSESSEES APPEALS . THE SOLITARY ISSUE THAT IS RAISED IN THESE APPEALS IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING PART OF THE ADDITION MADE U/S 14A OF THE I.T.ACT R.W.R.8D OF THE I.T. RULES. 3 . BRIEF FACTS OF THE CASE ARE AS FOLLOWS: - THE ASSESSEE IS A FIRM. THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2008 - 2009 TO 2013 - 2014 WERE COMPLETED BY DISALLOWING EXPENDITURE INCURRED BY INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T.ACT R.W.R. 8D OF THE I.T.RULES. THE ASSESSING OFFICER INVOKED RULE 8D(2)(II) AS WELL AS RULE 8D(2)(III) OF THE I .T.RULES FOR MAKING THE DISALLOWANCES. 4 . AGGRIEVED BY THE ASSESSMENT ORDERS COMPLETED FOR THE ASSESSMENT YEARS 2008 - 2009 TO 2013 - 2014, THE ASSESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A ) PASSED A CONSOLIDATED ORDER CONFIRMING THE DISALLOWANCE MADE U/S 14A OF THE I.T.ACT R.W. RULE 8D(2). THE CIT(A), HOWEVER, RESTRICTED THE DISALLOWANCE TO THE EXEMPTED INCOME EARNED DURING THE RELEVANT ASSESSMENT YEARS. ITA NO. 12 / COCH /201 7 & ORS . M/S.MUTHOOT BANKERS . 3 5 . AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT PAPER BOOKS FOR EACH OF THE ASSESSMENT YEARS ENCLOSING THE FINANCIAL STATEMENT OF THE ASSESSEE AND THE ASSOCIATED CONCERN M/S.MUTH OO T CHITTY FUND. THE LEARNED COUNSEL SUBM ITTED THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS . IT WAS CONTENDED THAT INTEREST FREE FUNDS WERE UTILIZED FOR INVESTMENTS GIVING RISE TO EXEMPTED INCOME. THE LEARNED DEPARTMENTAL REPRESENTATIVE PRESENT SUPPORTED THE ASSESSMENT ORDER AND THE CIT(A)S O RDER. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAD MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T.ACT R.W. RULES 8D(2)(II) AND RULES 8D(2)(III) OF THE I.T.RULES. THE DISALLO WANCE MADE BY INVOKING RULE 8D(2 ) (III) OF THE I.T.RULES IS FOR ADMINISTRATIVE AND COMMON EXPENSES WHEN THE ASSESSEE DERIVES EXEMPTED INCOME. IN THE INSTANT CASE, IN EACH OF THE ASSESSMENT YEARS HUGE INVESTMENTS ARE MADE WHICH IS GIVEN RISE TO EXEMPTED DIV IDEND INCOME. INVESTMENT DECISIONS ARE VERY COMPLEX AND STRATEGIC AND OBVIOUSLY THEY WOULD HAVE INCURRED ADMINISTRATIVE EXPENSES SUCH AS SALARY, WAGES, GENERAL EXPENSES, STATIONARY ETC. THEREFORE, IT CANNOT BE SAID NO EXPENDITURE WAS INCURRED FOR MAKING TH E SAID INVESTMENTS. HENCE, WE CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 14A OF THE I.T.ACT R.W. RULES 8D(2)(III) OF THE I.T.RULES . ITA NO. 12 / COCH /201 7 & ORS . M/S.MUTHOOT BANKERS . 4 6.1 INSOFAR AS THE DISALLOWANCE OF IN DIRECT INTEREST EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T.ACT R.W. RULES 8D(2)(II) OF THE I.T.RULES, IS CONCERNED, THE CONTENTION OF THE ASSESSEE IS THAT IT IS HAVING INTEREST FREE FUNDS IN THE FORM OF RESERVES AND ADVANCES FROM ASSOCIATE CONCERN AND NO PART OF THE INTERES T BEARING FUNDS WERE DIVERTED FOR MAKING INVESTMENTS WHICH HAD YIELD EXEMPTED INCOME. HOWEVER, THIS PARTICULAR CONTENTION OF THE ASSESSEE WAS NOT DEMONSTRATED NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE CIT(A). ADMITTEDLY, INTEREST ON BORROWED FUND S USED FOR BUSINESS PURPOSES CANNOT BE COMPUTED FOR DISALLOWANCE U/S 14A OF THE I.T.ACT R.W. RULE 8D(2)(II) OF THE I.T.RULES. IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT INTEREST WAS INCURRED ON BORROWINGS ARE USED FOR THE SPECIFIC BUSINESS PURPOSE AND NO N - INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INVESTMENTS WHICH HAS GIVEN RISE TO EXEMPTED INCOME. THE ASSESSEE TO PROVE THAT IT IS HAVING ITS OWN FUNDS TO MAKE INVESTMENT WHICH HAD YIELDED EXEMPTED INCOME, NECESSARILY HAS TO FURNISH THE CASH FLOW STATEMENT. THE CASH FLOW STATEMENT WOULD DISCLOSE AS ON THE DATE OF MAKING INVESTMENTS, WHICH HAD GIVEN RISE TO THE EXE MPTED INCOME, THAT THE ASSESSEE HAD INTEREST FREE FUNDS AVAILABLE WITH IT. IN THE INTEREST OF JUSTICE AND EQUITY, WE DEED IT FIT TO REMAND THE CASE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE . T HE ASSESSEE SHALL PROVE ITS CASE THAT IT IS HAVING INTEREST FREE FUNDS FOR MAKING INVESTMENTS, BY ITA NO. 12 / COCH /201 7 & ORS . M/S.MUTHOOT BANKERS . 5 FURNISHING CASH FLOW STATEMENT FOR THE RESPECTIVE ASSESSMENT YEARS. IT IS ORD E RED ACCORDINGLY. 7 . IN THE RESULT (I) THE AP PEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES ; (II) THE APPEALS FILED BY THE REVENUE ARE DISMISSED AS WITHDRAWN . ORDER PRONOUNCED ON THIS 03 RD DAY OF OCTOBER , 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 03 RD OCTOBER , 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A) TRIVANDRUM. 4. THE CIT TRIVANDRUM. 5. DR, ITAT, COCHIN 6 . GUARD FILE.