KOTAK GINNING & PRESSING INDUSTRIES LTD, MUMBAI V. ACIT 1(2), MUMBAI

ITA 4205/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93320 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Assessee Lawyers: A N SHAH
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.4205/M/2014 (AY:2009 - 2010 ) KOTAK GINNING & PRESSING INDUSTRIES LTD., 240, NAVSARI BUILDING, DR. D.N. ROAD, FORT, MUMBAI - 01. / VS. ACIT - 1(2), ROOM NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAACK1744N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A.N. SHAH / RESPONDENT BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 09.7.2015 / DATE OF PRONOUNCEMENT :29 .7.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 10.6.2014 IS AGAINST THE ORDER OF THE CIT (A) - 2, MUMBAI DATED 25.2.2014 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT IN RESPECT OF INVESTMENTS MADE BY THE COMPANY OUT OF ITS OWNED FUNDS AND EVEN THOUGH THERE WERE NO BORROWINGS MADE FOR THE PURPOSE OF MAKING OR HOLDING INVESTMENTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THAT RULE 8D WAS APPLICABLE BY IGNORING THE ESSENTIAL CONDITIONS OF DISALLOWANCE THAT THERE WAS AN EXPENDITURE INCURRED AND DEDUCTION WAS CLAIMED THOUGH THERE WA S NO SUCH CLAIM MADE BY YOUR APPELLANT FOR DEDUCTION OF EXPENDITURE WHICH COULD BE ATTRIBUTED TO EXEMPT INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN NOT GIVING ANY DECISION, THOUGH ACADEMICALLY AS TO WHET HER DISALLOWANCE U/S 14A IS APPLICABLE WHILE COMPUTING TAX LIABILITY UNDER PROVISIONS OF MAT AS PER PROVISIONS OF SECTION 115JB OF THE ACT. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GINNING & PRESSI NG OF COTTON, TRADING IN YARN, COTTON ETC. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME AT RS. NIL. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN THE ASSESSMENT, AO INVOKED THE PROVISIONS OF 2 SECTION 14A R.W. RULE 8D OF INCOME TAX RULES, 1962 AND DISALLOWED A SUM OF RS. 2,42,798/ - , WHICH INCLUDES THE INDIRECT EXPENDITURE OF RS. 2,13,841/ - . AFTER CONSIDERING THE SUO MOTO DISALLOWANCE OF THE ASSESSEE AMOUNTING TO RS. 20,267/ - , AO RESTRICTED THE ADDITION TO RS. 2,22,531/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) FOUND THAT OUT OF TOTAL INVESTMENT OF RS. 57,7 5,900/ - , ASSESSEE INVESTED R S. 40,75,900/ - IN THE OVERSEAS SUBSIDIARIES, WHOSE INCOME IS TAXABLE AND EXCLUDED THE SAID INCOME IN THE FOREIGN SUBSIDIARIES BEFORE APPLYING THE PROVISIONS OF RULE 8D(2)(II) OF THE I.T. RULES AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. IN HIS ORDER, C IT (A) DID NOT ANALYZE THE APPLICABILITY OF THE BINDING JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD 313 ITR 340 (BOM.) AND ALSO THE BALANCE OF INVESTMENT OF RS. 17 LAKHS. AGGRIEVED AND NOT SATISFIED WI TH THE SAID DECISION OF THE CIT (A), ASSESSEE IN FURTHER APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE HAS ADEQUATE INTEREST FREE FUNDS TO ACCOUNT FOR THE SAID RS. 17 LAKHS (RS. 57,75,900 RS. 40,75,900/ - ). FOR THIS PURPOSES, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THE NEED FOR REMANDING THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND APPLYING THE CITED JUDGMENT OF THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (SUPRA) RELATING TO PRINCIPLE OF PRESUMPTION IN FAVOUR OF THE ASSESSEE. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES, I FIND THE REQUEST OF THE LD COUNSEL FOR REMANDING THE ISSUE IS FAIR AND REASONABLE AND ACCORDINGLY, I REMAND THIS PART OF THE GROUND TO THE FILE OF THE AO FOR FRESH ADJUDICATION FO R WANT OF FACTS ON THE ISSUE OF AVAILABILITY OF EXCESS INTEREST FREE FUNDS TO ACCOUNT FOR THE SAID RS. 17 LAKHS OF INVESTMENT. 7. REGARDING THE ISSUE RAISED IN GROUND NO.3, IN MY OPINION, THE SAME SAME CONSEQUENTIAL AS THE QUANTUM OF DISALLOWANCE U/S 14A IS REQUIRED TO BE FIRST DECIDED 3 AS DISCUSSED BY ME IN DEALING WITH THE GROUND NO.1 AND 2 OF THE APPEAL. ACCORDINGLY, TH IS GROUND IS DISMISSED PREMATURE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER M UMBAI ; 29 .7 .2015 . . ./ 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