DCIT 14(1)(2), MUMBAI V. CRESCENT ORGANICS P. LTD, MUMBAI

ITA 4341/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7849 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 13-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE S/SHRI G S PANNU, AM, & SAKTIJIT DEY, JM ITA NO. 4341/MUM/2015 ASSESSMENT YEAR 2011-12 DCIT 14(1)(2) MUMBAI VS. CRESCENT ORGANICS P LTD, WINDSOR, CST ROAD KALINA, SANTACRUZ (E), MUMBAI 400 98 PAN : AAACC1690D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAURABH KUMAR RAI (DR) RESPONDENT BY : SHRI PIYUSH CHHAJED DATE OF HEARING : 23 .0 3 .201 7 DATE OF PRONOUNCEMENT : 31 .03.2017 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DATED 22.04.2015 OF LEARNED CIT(A)-22, MUMBAI FOR THE A.Y . 2011-12. 2. GROUND NO.1 IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S. 14A READ WITH RULE 8D. BRIEFLY, THE FACTS ARE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSIGNMENT AGENTS, INDENTING AGENT AND TRADING IN CHEMICALS. FOR THE YEAR UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2011, DECLARING TOTAL INCOME OF RS. 16,62,71,737/-. IN THE COURSE OF ASSESSMENT P ROCEEDINGS THE AO NOTICED THAT IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HA S EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO RS.16,02,157/-. HE CALLED UPON THE ASSESSEE ITA NO.4341/MUM/2015 CRESCENT ORGANICS P LTD 2 TO FURNISH THE WORKING OF DISALLOWANCE U/S. 14A REA D WITH RULE 8D. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT NO DISALLOWAN CE U/S. 14A IS REQUIRED TO BE MADE AS THE ASSESSEE HAS NOT INCURRED ANY EXPEND ITURE FOR EARNING EXEMPT INCOME. HOWEVER, THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO COMPUTE DISALLOWANCE U/S. 14A BY APPLYING RULE 8D AND ULTIMATELY QUANTIFIED THE DISALLOWANCE AT RS .36,52,252/-, WHICH COMPRISED OF INTEREST EXPENDITURE OF RS.29,20,473/- UNDER RULE 8D(2)(II) AND ADMINISTRATIVE EXPENDITURE OF RS.7,33,107/- UNDER R ULE 8D(2)(III). THE ASSESSEE CHALLENGED THE DISALLOWANCE BY PREFERRING APPEAL BEFORE THE CIT(A). 3. THE CIT(A) FOLLOWING HIS PREDECESSORS ORDER IN THE ASSESSEES OWN CASE FOR A.Y. 2010-11, DELETED THE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II), WHEREAS HE DIRECTED THE AO TO COMPUTE TH E DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) AF TER EXCLUDING INVESTMENTS IN SHARES IN FOREIGN COMPANIES, WHICH DO NOT GIVE R ISE TO EXEMPT INCOME. BEING AGGRIEVED OF THE AFORESAID ORDER OF THE LEARN ED CIT(A) DEPARTMENT IS BEFORE US. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD. AS SEEN FROM THE IMPUGNED ORD ER OF THE CIT(A), HE DELETED THE DISALLOWANCE OF INTEREST EXPENDITURE RE LYING UPON THE ORDER OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR A.Y 2010 -11, WHEREIN, IT WAS HELD THAT SINCE THE ASSESSEE HAD SUFFICIENT INTEREST FRE E SURPLUS FUNDS TO MAKE ITA NO.4341/MUM/2015 CRESCENT ORGANICS P LTD 3 INVESTMENT, DISALLOWANCE OF INTEREST EXPENDITURE CA NNOT BE MADE. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT THERE IS NO CHANGE IN THE MATERIAL FACTS IN THE IMPUGNED ASSESSMENT YEAR AS THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE SURPLUS FUND AVAILABLE WITH IT TO TAKE CARE OF THE EXEMPT INCOME YIELDING INVESTMENT. THAT BEING THE CASE, THE CIT(A) WAS JU STIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTERES T EXPENDITURE UNDER RULE 8D(2)(II). THIS GROUND IS DISMISSED. 5. IN GROUND NO.2, THE DEPARTMENT HAS CHALLENGED DE LETION OF ADDITION OF CLUB EXPENSES. BRIEFLY, THE FACTS ARE DURING THE AS SESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.22,26,012/- TOWARDS EXPENDITURE INCURRED AT CLUBS. ALLEGING THA T THE ASSESSEE FAILED TO ESTABLISH WITH SUPPORTING EVIDENCE THAT CLUB MEMBER SHIP HAS RESULTED IN PROMOTION OF ITS BUSINESS AND BEING OF THE OPINION, SUCH EXPENDITURE WAS NOT FOR THE PURPOSE OF ASSESSEES BUSINESS, ADDED BACK THE AMOUNT TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF THE DISALLOWAN CE ASSESSEE CHALLENGED THE SAME BEFORE THE CIT(A). THE LEARNED CIT(A) NOT ICING THAT SUCH EXPENDITURE WAS ALLOWED BY HIM IN ASSESSEES OWN CA SE FOR A.Y. 2010-11 AS WELL AS EARLIER ASSESSMENT YEARS, ALLOWED ASSESSEE S CLAIM BY DELETING THE ADDITION MADE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD. THE LEARNED COUNSEL APPEARING FOR BOTH THE PARTIES HAVE ITA NO.4341/MUM/2015 CRESCENT ORGANICS P LTD 4 AGREED BEFORE US THAT THIS ISSUE STANDS COVERED NOT ONLY BY THE DECISION OF THE CIT(A) IN A.Y. 2010-11 BUT ALSO BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS 2004-05 AND 2005-06. ON A PERUSAL OF THE ORDER OF THE ITAT IN ASSESSEES IN ITA 365 & 366/MU M/2009 DATED 28.02.2011, WE HAVE NOTED THAT SIMILAR EXPENDITURE CLAIMED BY THE ASSESSEE WAS ALLOWED. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. 7. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN CO URT ON 31.03.2017 SD/- SD/- (G S PANNU) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI; DATED : 31 ST MARCH, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A),MUMBAI. 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI