PURVAG COMMODITIES & DERIVATIVES P.LTD, MUMBAI V. ITO 8(2)(4), MUMBAI

ITA 4298/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1884 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 16-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2014
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Assessee Lawyers: N KHANDELWAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 4298 /MUM/ 2014 (ASSESSMENT YEAR 20 1 0 - 11 ) M/S. PURVAG COMMODITIES & DERIVATIVES P. LTD. 301 - 308, BHAGWATI HOUSE PLOT A/19 VEERA DESAI ROAD ANDHERI WEST MUMBAI - 400 058. VS. ITO 8(2)(4) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACS5626H ASSESSEE BY SHRI N. KHANDELWAL DEPARTMENT BY SHRI C.W. ANGOLKAR DATE OF HEARING 3 .1 1 . 201 6 DATE OF PRONOU NCEMENT 18 . 11 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.4.2014 PASSED BY THE LEARNED CIT(A) - 17, MUMBAI AND IT RELATES TO A.Y. 2010 - 11. 2. THE ASSESSEE IS AGGRIEVED BY THE DECIS ION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A OF THE I.T. ACT. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A MEMBER OF VARIOUS COMMODITIES EXCHANGE S AND TRADES IN COMMODITIES ON ITS OWN ACCOUNT AND ALSO ON BEHALF OF ITS CLIENTS. THE ASSESSEE HAS ALSO MA DE INVESTMENT S IN EQUIT Y AND PREFERENCE S HARES . DURING THE YEAR UNDER CONSIDERATION , ASSESSEE RECEIVED DIVIDEND INCOME OF ` 28.56 LAKHS AND CLAIMED THE SAME AS EXEMPT. IT DISALLO WED A SUM OF ` 5,70,403/ - U/S. 14A OF THE I.T. 2 ACT. THE ASSESSING OFFICER, HOWEVER, COMPUTED THE DISALLOWANCE AS PER RULE 8D OF THE I.T. RULES AS UNDER: - A) DISALLOWANCE OF INDIRECT INTEREST : ` 5,13,960/ - EXPENDITURE B) DISALLOWANCE OF EXPENSES AT 0.5% AV ERAGE VALUE OF INVESTMENT : ` 21,93,745/ - TO TAL : ` 27,07,706/ - THE LEARNED CIT(A) CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. WITH REGARD TO THE DISALLOWANCE OF INTEREST, LEARNED AR SUBMITTED THAT THE OWN FUNDS AVAILABLE WITH THE ASSESSEE AS ON 31.3.2010 WAS ` 51.51 CRORES AND INVESTMENTS MADE AS ON THAT DATE WAS ` 43.87 CRORES. LEARNED AR FURTHER SUBMITTE D THAT THE OPENING BALANCE OF OWN FUND S AVAILABLE WITH THE ASSESSEE WAS ` 49.70 CRORES. ACCORDINGLY, H E SUBMITTED THAT NO DISALLOWANCE OUT OF INTEREST IS REQUIRED TO BE MADE AS PER THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (366 ITR 505) , SINCE OWN FUNDS AVAILABLE WITH THE ASSESSEE IS IN EXCESS OF VALUE OF INVESTMENTS . WITH REGARD TO THE DISALLOWANCE OF EXPENDITURE, LEARNED AR INVITED OUR ATTENTION TO THE SCHEDULE OF INVESTMENTS AND SUBMITTED THAT THE ASSESSEE HAS BROUGHT FORWARD THE ENTIRE AMOUNT OF INVESTMENT S FROM T HE PRECEDING YEAR AND NO NEW INVESTMENT HAS BEEN M ADE DURING THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE INVESTMENT INCLUDES PREFERENCE SHARES OF ` 30 CRORES AND THE REMAINING INVESTMENTS HAVE BEEN MADE IN THE COMPANIES UNDER THE SAME MANAGEMENT. HE SUBMITTED THAT THE STRATEGIC INVESTMENT S ARE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S. 14A OF THE ACT AND FURTHER PREFERENCE S HARES ARE NOT CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENTS . ACCORDINGLY HE SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSEE UNDER SECTION 14A OF THE ACT IS REASONABLE AND TAX AUTHORITIES ARE NOT JUSTIFIED IN ENHANCING THE SAME. 3 5. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT PROVE THAT OWN FUNDS HAVE BEEN MADE USED FOR MAKING INVESTMENTS. 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE DISALLOWANCE OF INTEREST EXPENDITURE, SINCE THE OWN FUNDS AVAILABLE WITH THE ASSESSEE IS IN EXC ESS OF THE VALUE OF INVESTMENTS AND HEN CE NO DISALLOWANCE OUT OF INTEREST EXPENDITURE IS CALLED FOR IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF HDFC BANK LTD. (SUPRA) . S INCE NO NEW INVESTMENTS HAVE BEEN MADE DURING THE UNDER THE YEAR UNDER CONSIDERATION AND THE ENTIRE VALUE OF INVESTMENTS HAVE BEEN BROUGHT FORWARD FROM THE PRECEDING YEAR , WE ARE OF THE VIEW THAT THE DISALLOWANCE OF ` 5,70,403/ - MADE BY THE ASSESSEE UNDER RULE 8D(2)(III) IS QUITE REASONABLE AND SATISFIE S THE REQUIREMENT OF SECTION 14A OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION U/S. 14A OF THE ACT TO THE AMOUNT DISALLOWED BY THE ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 18 .1 1 .2016 SD/ - SD/ - (PAWAN SINGH) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 18 / 1 1 / 20 1 6 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) PS ITAT, MUMBAI