DCIT CEN CIR 29, MUMBAI V. K. RAHEJA CORP. P. LTD, MUMBAI

ITA 4099/MUM/2010

• Counselvise Citation: 409919914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 20-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MOURYA
• Keywords: Search and seizure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 4099/MUM./2010 (ASSESSMENT YEAR : 1999-2000 ) DATE OF HEARING: 16.6.2011 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-29, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S M/S. K. RAHEJA CORP. PVT. LTD. PLOT NO.C-30, G-BLOCK OPP. SIDBI BKC, BANDRA (W) MUMBAI 400 051 AAACB5232E .... RESPONDENT REVENUE BY : MR. P.C. MOURYA ASSESSEE BY : NONE O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY REVENUE, IS DIRECTED AGAIN ST THE IMPUGNED ORDER DATED 16 TH MARCH 2010, PASSED BY THE COMMISSIONER (APPEALS)-X XXX, MUMBAI, FOR ASSESSMENT YEAR 1999-2000. GROUNDS RAID ED BY THE REVENUE, READS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT DURING THE YEAR THE ASSESSEE HAD SUFFICIENT FUNDS FOR MAKING INVESTMENT S AND THE DISALLOWANCE OF EXPENDITURE IS NOT APPLICABLE. M/S. K. RAHEJA CORP. PVT. LTD. ITA NO. 4099/MUM./2010 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED NOT APPLYING THE PROVI SIONS OF SECTION 14A APPLICABLE TO THE FACTS OF THE CASE EVEN THOUGH THE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THE INVESTMENTS WERE MA DE FROM SURPLUS FUNDS. 2. WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE ISSUANCE OF NOTICE. THERE IS A PET ITION SEEKING ADJOURNMENT BY THE ASSESSEE. AS WE FIND NO GOOD REASON TO GRANT ADJUDI CATION, WE REJECT THE SAME AND PROCEED TO DISPOSE OFF THE REVENUES APPEAL EX-PART E, QUA THE RESPONDENT ASSESSEE ON MERITS AFTER HEARING THE LEARNED DEPARTMENTAL RE PRESENTATIVE. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE, MR. P.C. MOURYA. THE SOLE ISSUE IS THE DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). THE FIRST APPELLATE AUTHORITY, AT PARA-2.3, PAGE -3 OF HIS ORDER, HELD AS FOLLOWS:- 2.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS I NOTE, SIMILAR ISSUE CAME UP FOR DEC ISION BEFORE ME IN APPELLANTS APPEAL FOR THE ASSESSMENT YEAR 2006-07. IN MY APPELLATE ORDER DATED 8.12.2009 ON THIS APPEAL, IN TERMS OF MY DISC USSION IN PARA-2.3 OF THE ORDER, I HAVE ALLOWED THE APPELLANTS APPEAL ON THI S POINT FOR THE YEARS IN PARA-2.3 OF THE ORDER, I HAVE ALLOWED THE APPELLANT S APPEAL ON THIS POINT FOR THE YEARS IN WHICH THE APPELLANT HAD SURPLUS FUNDS AVAILABLE. I TOOK THIS DECISION GUIDED BY THE ORDER OF THE HONBLE ITAT IN APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2002-03. AS MAY BE NOTED IN THI S ORDER, THE HONBLE ITAT HAS, IN THE CONTEXT OF THE RATIO OF THE DECISI ON OF THE HONBLE SPECIAL BENCH, ITAT, MUMBAI, IN THE CASE OF ITO V/S DAGA CA PITAL MANAGEMENT PVT. LTD., HELD THAT THE RATIO LAID DOWN IN THIS DECISIO N WILL COME INTO FORCE ONLY IF THE BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPO SE OF MAKING INVESTMENTS INCOME FROM WHICH IS EXEMPT. TESTED ON THIS, AS PER THE DETAILS SUBMITTED BY THE APPELLANT, I FIND THAT FOR THE PRESENT YEAR UND ER CONSIDERATION, THE APPELLANT HAD INCREASE OF ` 50,91,88,603 IN NON-INTEREST FREE FUNDS AS AGAINST INCREASE OF ` 14,44,77,697 IN INVESTMENT IN SHARES. ACCORDINGLY, IN TERMS OF MY DISCUSSION IN PARA-2.3 OF MY ORDER DATED 8.12.20 09, FOR THE ASSESSMENT YEAR 2006-07 AND RESPECTFULLY FOLLOWING THE DECISIO N DATED 19.11.2008 OF THE HONBLE ITAT, IN APPELLANTS CASE FOR THE ASSESSMEN T YEAR 2002-03, I FIND THAT SURPLUS FUNDS BEING AVAILABLE, THERE IS NO CASE FOR THE DISALLOWANCE OF THE INTEREST. ACCORDINGLY, THE INTEREST IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 4. LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT THE INFIRMITY IN THE CONCLUSION DRAWN BY THE FIRST APPELLATE AUTHORITY. THE INCREASE IN NON-INTEREST BEARING FUNDS WAS ` 50,91,00,000 AND WHEREAS, THE INVESTMENT IN SHARES INCREASED M/S. K. RAHEJA CORP. PVT. LTD. ITA NO. 4099/MUM./2010 3 BY ` 14,44,00,000. THUS, IT CANNOT BE SAID THAT ANY INT EREST BEARING FUNDS WERE DIVERTED FOR INVESTMENT IN SHARES. THE TRIBUNAL, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03, HAD HELD THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN ITO V/S DAGA CAPITAL MANAGEMENT PVT. LTD. (2008) 11 9 TTJ (MUM.) (SB) 289 , IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN AN Y EVENT, THE SAID MUMBAI SPECIAL BENCH DECISION IN DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA), WAS REVERSED BY THE HON'BLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.). FURTHER, THE HON'BLE BOMBAY HIGH COURT IN CIT V/S RELIANCE UTILITIES & POWER LTD. (2009) 3 13 ITR 340 (BOM.), HAS LAID DOWN THAT IF THERE ARE INTEREST FREE FUNDS AS WELL AS IN TEREST BEARING FUNDS, A PRESUMPTION COULD ARISE THAT THE INVESTMENTS WOULD HAVE BEEN MA DE OUT OF INTEREST FREE FUNDS. AS IN THIS CASE, THE INTEREST FREE FUNDS ARE FAR IN EXCESS OF THE INVESTMENTS, WE UPHOLD THE ORDER OF THE COMMISSIONER (APPEALS) THAT NO AMOUNT OF EXPENDITURE BY WAY OF INTEREST IS DISALLOWABLE UNDER SECTION 14A O F THE ACT. CONSEQUENTLY, THESE GROUNDS ARE DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2011 SD/- D. MANMOHAN VICE PRESIDENT SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH JUNE 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, A BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI