GODREJ INDUSTRIES LTD, MUMBAI V. DCIT RG 10(2), MUMBAI

ITA 424/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2097 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 23-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AWNNGSHI GIMSON
• Assessee Lawyers: F V IRANI
• Section: 14A; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER / I .T.A. NO . 424/MUM/2012 ( / ASSESSMENT YEAR : 2008 - 09 M/S. GODREJ INDUSTRIES LTD., C/O KALYANIWALLA & MISTRY, KALPATARU HERITAGE, 127, M.G. ROAD, MUMBAI - 400 001 / VS. THE DCIT, RANGE 10(2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAACG 2953R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI F.V. IRANI / RESPONDENT BY: SHRI AWNNGSHI GIMSON / DATE OF HEARING : 23 .0 9 .2015 / DATE OF PRONOUNCEMENT : 07. 10. 2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 21 , MUMBAI D ATED 25.10.2011 PERTAINING TO ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE HAS RAISED 9 SUBSTANTIVE GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT GRIEVANCE RAISED VIDE GROUND NO. 1 TO 5 RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT FACTS IN ISSUES ARE ALREADY DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2006 - ITA. NO. 424/M/2012 2 07 AND 2007 - 08 IN SO FAR AS THE FACTS RELATE TO THE INVESTMENTS OUT OF OWN FUNDS. IN RESPECT OF GROUND NO. 6 TO 9, THE LD . COUNSEL SUBMITTED A CHART EXPLAINING HOW THE ISSUES ARE COVERED AGAINST THE ASSESSEE/IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006 - 07 AND 2007 - 08. 3. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED T O THE SUBMISSIONS MADE BY THE LD. COUNSEL. 4. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN A.YRS 2006 - 07 AND 2007 - 08 IN ITA NO S. 1900, 1614/M/2011 AND 4621 AND 3136/M/2011 ORDER DATED 5.9.2014. 5. GROUND NO. 1 & 2 OF THE PRESENT APPEAL READ AS UNDER: 1. THE LD. CIT(A) ERRED IN HOLDING THAT INTEREST EXPENDITURE ON BORROWINGS UTILIZED FOR THE PURPOSES OF THE BUSINESS ACTIVITIE S OF THE APPELLANT WAS NOT ALLOWABLE UNDER SECTION 36(1)(III) OF THE ACT, AND IN DISALLOWING INTEREST EXPENDITURE U/S. 14A OF THE ACT AGGREGATING TO RS. 84,76,000 AS ATTRIBUTABLE TO BORROWINGS PURPORTEDLY UTILIZED FOR ACQUIRING INVESTMENTS, YIELDING EXEMPT DIVIDEND INCOME, DURING THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE UNWARRANTED AND ARBITRARY DISALLOWANCE BE DELETED. 2. WITHOUT PREJUDICE TO THE APPELLANTS CONTEN TION THAT NO INTEREST IS ALLOCABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME AND IN ANY VIEW OF THE MATTER, THE APPELLANT SUBMITS THAT THE DISALLOWANCE COMPUTED AT RS. 84,76,000/ - IS ARBITRARY AND GROSSLY EXCESSIVE AND THE SAME REQUIRES TO BE REDUCED SUBSTA NTIALLY. ITA. NO. 424/M/2012 3 6. THE OBSERVATIONS OF THE LD. CIT(A) AT PAGE - 8 OF HIS ORDER NEED TO BE MENTIONED HERE AND THEY READ AS UNDER: IN APPEAL ORDER OF A.Y. 2006 - 07, THE UNDERSIGNED HELD THAT NO INTEREST EXPENDITURE WAS ATTRIBUTABLE TO OPENING BALANCE OF INVESTMEN T BUT INTEREST EXPENSE OF RS. 50 LACS WAS HELD TO BE ATTRIBUTABLE TO THE FRESH INVESTMENT AT RS. 9.39 CRORE MADE IN A.Y. 2006 - 07. IN APPEAL ORDER OF A.Y. 2007 - 08, THE UNDERSIGNED HELD THAT INTEREST EXPENDITURE OF RS. 1.06 CRORE WAS ATTRIBUTABLE TO THE FRESH INVESTMENT MADE IN A.Y 2006 - 07 & 2007 - 08. 3.3.(F) IN VIEW OF DISCUSSION MADE IN PARA 3.3(E) ABOVE, THE INTEREST EXPENDITURE IS REQUIRED TO BE WORKED OUT ON INVESTMENT WHICH ARE APPEARING IN OPENING BALANCE BUT ONLY ON THOSE INVESTMENTS WHICH WERE PURCHASED IN A.Y. 2006 - 07 & 2007 - 08. 7. THE TRIBUNAL AT PAGE - 3 OF ITS ORDER QUA PARA - 5 HAS GIVEN THE FOLLOWING FINDINGS. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND THE INVESTMENT VIS - - VIS BORROWED FUNDS AND OWN FUNDS, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS. 50 LACS. THE ASSESSEE HAS ALSO AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) VIDE GROUND NO. 1 & 2 OF ITS APPEAL. WE FIND THAT THE TOTAL INVESTMENT MADE DURING THE YEAR WERE AT RS. 9.39 CRORES. WE ALSO FIND T HAT THE ASSESSEE HAD PROFIT ON SALE OF INVESTMENT AT RS. 21.55 CRORES, NET PROFIT DURING THE YEAR AT RS. 48.15 LACS AND FUNDS AVAILABLE ON ACCOUNT OF SALE OF INVESTMENT DURING THE YEAR AT RS. 38.31 CRORES. IN OUR CONSIDERED OPINION, THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVESTMENT OF RS. 9.39 CRORES. AS OWN FUNDS ARE FOUND TO BE FAR IN EXCESS OF THE INVESTMENT, WE DO NOT FIND ANY REASON FOR MAKING THE DISALLOWANCE AT RS. 50 LACS. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A ) AND DIRECT THE A.O. TO DELETE THE ADDITIONS SUSTAINED BY THE LD. CIT(A). GROUND NO. 4 TO 5 OF REVENUES APPEAL ARE ACCORDINGLY DISMISSED AND GROUND NO. 1 & 2 OF ASSESSEES APPEAL ARE ALLOWED. 8. GROUND NO. 3 & 4 READ AS UNDER: ITA. NO. 424/M/2012 4 3. THE LD. CIT(A) ERRED IN DISALLOWING EXPENDITURE U/S. 14A OF THE ACT AGGREGATING TO RS. 2,83,87,000/ - TOWARDS THE EARNING OF DIVIDEND INCOME BY PLACING RELIANCE ON CLAUSE 2(III) OF RULE 8D OF THE I.T. RULES, 1962. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE UNWARRANTED AND ARBITRARY DISALLOWANCE BE DELETED. 4. WITHOUT PREJUDICE TO THE APPELLANTS CONTENTION THAT NO EXPENDITURE IS ALLOCABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME AND IN ANY EVENT, THE APPELLANT SUBMITS THAT THE DIS ALLOWANCE COMPUTED AT RS. 2,83,87,000/ - IS ARBITRARY AND GROSSLY EXCESSIVE AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY. 9. THE LD. CIT(A) HAS COMPUTED THE DISALLOWANCE WHICH IS AT PAGE - 11 OF HIS ORDER AT PARA - 3.3(J). THE ASSESSEE HAS ALSO GIVEN A WORKING SHEET. IT IS THE SAY OF THE LD. COUNSEL THAT THERE IS AN ARITHMETICAL ERROR IN THE CALCULATIONS MADE BY THE LD. CIT(A) WHICH NEED TO BE RECOMPUTED. IN SUPPORT OF HIS CLAIM, THE LD. COUNSEL FURNISHED A FRESH WORKING TO SHOW THE DISCREPANCY. 10. GROUND NO. 5 IS DIRECTLY RELATED TO THE GRIEVANCE RAISED VIDE GROUND NO. 1 & 2 HEREINABOVE. 11. HAVING SAID ALL THAT IN THE LIGHT OF THE DECISION OF THE TRIBUNAL GIVEN IN EARLIER ASSESSMENT YEARS AND THE RELEVANT PORTION AS EXHIBITED HEREINABOVE, THE ASSESSEE RAISED A NEW PLEA DURING THIS YEAR AND CLAIMED THAT THE INVESTMENTS MADE IN THE COMPANIES ARE STRATEGIC INVESTMENTS WHICH HAVE BEEN MADE FOR BUSINESS PURPOSES AND THEREFORE SHOULD NOT BE CONSIDERED WHEN COMPUTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D(2)(II) AND 8D(2)(III) OF THE ACT. IN SUPPORT, THE LD. COUNSEL RELIED UPON VARIOUS DECISIONS OF THE TRIBUNAL AND THE HONBLE HIGH COURTS. ITA. NO. 424/M/2012 5 12. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL, THE CLAIM OF STRATEGIC INVESTMENTS MADE BY THE ASSESSEE NEED VERIFICATION. WE, THEREFORE, RESTORE THE ENTIRE ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE INVESTMENTS ARE MADE FOR STRATEGIC PURPOSES AND DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE FINDINGS GIVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS AND ALSO KEEPING IN MIND THAT IF INVESTMENTS ARE FOUND TO BE OF STRATEGIC IN NATURE THEN TO DECIDE THE I SSUE AS PER THE DECISION OF THE TRIBUNAL GIVEN IN THE CASE OF J.M. FINANCIAL LTD. IN ITA NO. 4521/M/2010 READ WITH M/S. GARWARE WALL ROPES LTD. IN ITA NO. 5408/M/2012. THE ASSESSEE MAY FURNISH ANY OTHER RELATED DECISION IN SUPPORT OF ITS CLAIM. WITH TH E ABOVE DIRECTIONS, GROUND NO. 1 TO 5 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 13. GROUND NO. 6 RELATES TO THE DISALLOWANCE OF RS. 1,16,125/ - BEING THE AMORTIZATION OF PREMIUM PAID FOR LEASEHOLD LAND. 14. THIS ISSUE HAS BEEN CONSIDERED AND DECIDED IN ASSESSEES OWN CASE FOR A.Y. 2006 - 07 IN ITA NOS. 1900 & 1614/M/2011 AND IN A.Y. 2007 - 08 IN ITA NOS. 4621 & 3136/M/2011. 14.1. THE ISSUE FIND PLACE AT PARA - 15 ON PAGE - 5 OF TRIBUNALS ORDER WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2005 - 06 IN ITA NO. 1090/M/2009 AND DISMISSED THE APPEAL OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH, DISALLOWANCE OF RS. 1,16,125/ - IS UPHELD. GROUND NO. 6 IS ACCORDINGLY DISMISSED. ITA. NO. 424/M/2012 6 15. GROUND NO. 7 RELATES TO THE ADDITION ON ACCOUNT OF UNUTILIZED CENVAT CREDIT OF RS. 7,90,65,760/ - . 15.1. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE TRIBUNAL VIDE ITS ORDER DATED 28.8.2014 IN ITA NO. 4621 AND 3136/M/2011. THE ISSUE FIND PLACE AT PARA - 26 AND 27 ON PAGE - 7 T RIBUNALS ORDER WHEREIN THE TRIBUNAL HAS OBSERVED THE DIRECTIONS GIVEN TO THE AO TO RECAST THE ACCOUNTS OF THE ASSESSEE BY CONSIDERING THE ELEMENT OF EXCISE DUTY AND OTHER TAXES IN OPENING STOCK, PURCHASES, SALES AND INVENTORY HAS TO BE DECIDED AS PER THE FINDINGS GIVEN IN A.Y. 2006 - 07. RESPECTFULLY FOLLOWING THE DIRECTIONS GIVEN BY THE CO - ORDINATE BENCH, WE DIRECT ACCORDINGLY. GROUND NO. 7 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 16. GROUND NO. 8 RELATES TO THE VALUE TO BE ADOPTED WITH REGARD TO THE OPENING WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS. 16.1. THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITS ORDER DATED 28.8.2 014 IN ITA NOS. 1900 & 1614/M/2011 FOR A.Y. 2006 - 07 AND ITA NOS. 4621 & 3136/M/2011 FOR A.Y. 2007 - 08. THE ISSUE FINDS PLACE AT PARA - 17 ON PAGE - 5 OF THE ORDER OF THE TRIBUNAL AND AT PARA - 35 ON PAGE - 9 OF THE ORDER OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAS FO LLOWED THE DECISION OF THE CO - ORDINATE BENCH IN ITA NO. 1090/M/09 FOR A.Y. 2005 - 06 AND DISMISSED THE GRIEVANCE OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH, GROUND NO. 8 IS DISMISSED. 17. GROUND NO. 9 RELATES TO THE DISA LLOWANCE MADE BY THE AO ON ACCOUNT OF THE PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS WHILE COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT. ITA. NO. 424/M/2012 7 17.1. THIS ISSUE IS NOW DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE IN VIEW OF THE RETROSPECT IVE AMENDMENT BY THE FINANCE ACT NO.2 OF 2009 WITH EFFECT FROM 1.4.2001, NOW THAT THIS ISSUE IS COVERED BY THE AMENDMENT AGAINST THE ASSESSEE. GROUND NO. 9 IS ACCORDINGLY DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER , 2015 SD/ - SD/ - ( SANJAY GARG ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 7 TH OCTOBER , 2015 . . ./ RJ , 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI