ASST CIT CEN CIR4 36, MUMBAI V. IRB INFRASTRUCTURE DEVELOPERS LTD ( FORMELRY KNOWN AS M/S. DVJ LEASING & FINANCE P.LTD), MUMBAI

ITA 4395/MUM/2012

• Counselvise Citation: 439519914 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 13-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 4395 / / 2012 A.Y. 2007-2008 ITA NO. : 4395/MUM/2012 (ASSESSMENT YEAR: 2007-2008) ACIT - 22(3), 3 RD FLOOR, TOWER NO. 6, VASHI RLY STATION COMPLEX, VASHI, NAVI MUMBAI VS M/S IRB INFRASTRUCTURE DEVELOPERS LTD., (FORMERLY KNOWN AS M/S DVJ LEASING & FINANCE PVT LTD), IRB COMPLEX, CHANDIVALI FARM, ANDHERI (E), MUMBAI -400 072 PAN: AMZPS 2908 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI O.P. SINGH RESPONDENT BY : NONE /DATE OF HEARING : 13-11-2013 / DATE OF PRONOUNCEMENT : 22-11-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE DEPARTMENT AGAINST THE ORDER O F CIT(A) 17, MUMBAI, DATED 13.04.2012, WHEREIN, THE FOLLOWING GROUN DS HAVE BEEN TAKEN: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN LAW IN HOLDING THAT PROVISIONS OF RULE 8D FOR THE PURPOSE OF DISALLOWANCE OF EXPENSES UNDER SECTION 14A IS NOT APPLICAB LE FOR THIS YEAR AS THESE PROVISIONS ARE NOT RETROSPECTIVE IN NATURE AND HENCE CANNOT BE APPLIED TO ASSESSMENT YEAR PRIOR TO ASSESSMENT YEAR 2008-09 IN VIE W OF DECISION OF BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MAN UFACTURING PRIVATE LIMITED 328 ITR 81 IGNORING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE BOMBAY HIGH COURT AND HAS FILED SPCIAL LEAVE PETITION BEFORE SUPREME COURT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT RULE 8D CANNOT BE AP PLIED IN AY 2007-08, WITHOUT APPRECIATING THE FACT THAT AO HAS HELD THIS ME THOD AS REASONABLE FOR APPLYING IN ASSESSEES CASE FOR AY 2007-08. M/S IRB INFRASTRUCTURE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S DVJ LEASING & FINANCE PVT LTD) ITA 4395/MUM/2012 2 2. THE SOLITARY ISSUE PERTAINS TO THE DISALLOWANCE UNDER SECTION 14A, RESTRICTED BY THE CIT(A) AT RS. 11,59,234/-, AGAINS T THE DISALLOWANCE COMPUTED BY THE AO AT RS. 1,33,00,000/-. 3. AT THE TIME OF HEARING, THE CASE WAS CALLED FOR, BUT NEITHER ANY BODY ATTENDED THE CASE, NOR THERE WAS ANY PRAYER FOR ADJ OURNMENT. AS THERE WAS NO ATTENDANCE ON BEHALF OF THE ASSESSEE, WE PROPOSE TO PROCEED EX PARTE . 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN T HE BUSINESS OF INVESTMENTS, LEASING, ROAD MAINTENANCE AND TOLL COL LECTION. IN THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THERE WERE INVESTM ENTS TO THE TUNE OF RS. 268.25 CRORES, ON WHICH, THE ASSESSEE EARNED DIVIDE ND INCOME OF RS. 9.37 CRORES, WHICH WAS CLAIMED AS EXEMPT. THE AO, THEREF ORE, ASKED THE ASSESSEE, AS TO WHY DISALLOWANCE UNDER SECTION 14A NOT BE COM PUTED IN ACCORDANCE WITH RULE 8D, AS PER THE RATIO LAID DOWN BY THE SPE CIAL BENCH OF THE ITAT IN THE CASE OF ITO VS DAGA CAPITAL MANAGEMENT (P) LTD. , REPORTED IN 117 ITD 169 (MUM-SB). HE, THEREFORE, WENT ON TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A, IN ACCORDANCE WITH RULE 8D AND ADDED B ACK RS. 1,33,00,000/-. 5. THE ASSESSEE, BEING AGGRIEVED BY THE DECISION AP PROACHED THE CIT(A), BEFORE WHOM, THE ASSESSEE, REITERATED ITS SUBMISSIO NS MADE BEFORE THE AO AND FURTHER SUBMITTED THAT RULE 8D, AS PRESCRIBED, WOULD BE APPLICABLE FROM ASSESSMENT YEAR 2008-09 AND ONWARDS. SINCE, THE IMP UGNED ASSESSMENT YEAR IS 2007-08, RULE 8D WOULD NOT BE APPLICABLE. 6. THE ASSESSEE, IN CONTINUATION OF ITS SUBMISSIONS BEFORE THE CIT(A), SUBMITTED THE BIFURCATION OF EXPENSES, AS UNDER: PARTICULARS AMOUNT (RS) PERCENTAGE EXEMPT INCOME 93,769,082 47% INCOME OTHER THAN EXEMPT INCOME 107,766,042 53% TOTAL 201,535,124 OFFICE & ADMINISTRATIVE EXPENSES AMOUNT (RS) DISALLOWED/CONSIDERED SEPARATELY DONATIONS AMORTISATION OF SHARE ISSUE EXPENSES AMORTISATION OF DEBENTURE ISSUE EXPENSES PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS 750,000 3,784,562 2,003,595 811,839 SUBTOTAL 7,349,996 M/S IRB INFRASTRUCTURE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S DVJ LEASING & FINANCE PVT LTD) ITA 4395/MUM/2012 3 SUBTOTAL OF OTHER EXPENSES DETAILED BELOW TOTAL AS PER BOOKS 6,217,744 13,567,740 PARTICULARS COMMON EXP. AMOUNT (RS) PROPORTIONATE DISALLOWANCE RATES AND TAXES NO 57,960 - MEMBERSHIP AND SUBSCRIPTION FEES NO 10,000 - BOOKS & PERIODICALS NO 12,500 - CONFERENCE EXPENSES NO 450,000 - LEGAL AND PROFESSIONAL EXPENSES PART 92,552 26,388 AUDITORS REMUNERATION (INCLUDING SERVICE TAX) YES 1,346,880 626,668 DIRECTOR SITTING FEES YES 197,742 ADVERTISEMENT EXPENSES NO 425,000 - INSURANCE YES 2,692,941 4,249 PRINTING AND STATIONARY YES 9,133 84,544 TENDER FEES NO 181,708 - SALARY NO 467,000 162,846 BANK CHARGES YES 350,000 56,410 MISCELLANEOUS EXPENSES YES 121,240 831 387 6217,745 1,159,234 TOTAL DISALLOWANCE UND ER SECTION 14A 1,159 ,234 7. THE ASSESSEE, ACCORDINGLY WORKED OUT THE DISALLOWANC E, LINKED TOWARDS TAX FREE INCOME OF RS. 11,59,234/-. 8. THIS AMOUNT, AS SUBMITTED BY THE ASSESSEE, BEFORE THE CIT(A), WAS FOUND TO BE REASONABLE BY THE CIT(A). HE, THEREFORE, RE STRICTED THE DISALLOWANCE TO RS. 11,59,234/-, AS AGAINST RS. 1,33,00,000/-, COMPUTED BY THE AO. 9. AGAINST THIS ORDER, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 10. BEFORE US, THE DR, PLACED RELIANCE ON THE ORDER OF THE AO. HOWEVER, HE ACCEPTED THE CURRENT LEGAL POSITION, AS LAID DO WN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYC E MFG. CO. LTD. VS DCIT, REPORTED IN 328 ITR 81, WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE IS TO BE COMPUTED UNDER RULE 8D FROM ASSESSM ENT YEAR 2008-09 AND ONWARDS AND THAT SOME REASONABLE DISALLOWAN CE SHOULD BE MADE. M/S IRB INFRASTRUCTURE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S DVJ LEASING & FINANCE PVT LTD) ITA 4395/MUM/2012 4 11. WE HAVE HEARD THE ARGUMENTS OF THE DR AND HAVE P ERUSED THE ORDERS OF THE REVENUE AUTHORITIES. IN REGARD TO THE FINANCIAL EXPENS ES, IT IS FOUND FROM THE SUBMISSIONS OF THE ASSESSEE, AS INCORPORA TED IN THE IMPUGNED ORDER OF THE CIT(A), THAT THE ASSESSEE HAS PAID INTEREST TO THE TUNE OF RS. 55,36,341/- OUT OF WHICH RS. 53,94,940/- WAS PAID ON DEBENTURES AND THE BALANCE OF RS. 1,41,401/- WAS PAID T OWARDS UNSECURED LOANS. THIS CLEARLY SHOWS THAT NO INTEREST WAS AT ALL ATTRIBUTABLE TOWARDS ANY LOAN TAKEN FOR THE PURPOSES OF INVESTMENT . 12. WE ALSO FIND THAT THE ASSESSEE HAD ITSELF, BIFURCATED TH E EXPENSES, WHICH COULD BE ATTRIBUTED TOWARDS THE DISALLOWAN CE, AS PER THE CHART SUBMITTED BEFORE THE CIT(A). IT IS, THEREFORE, C LEAR FROM THE ORDERS OF THE REVENUE AUTHORITIES THAT THERE IS REALLY N O INFIRMITY IN THE COMPUTATION OF AMOUNT TO BE DISALLOWED UNDER SECTION 14A AND ALSO, NO NEXUS WHICH COULD BE DRAWN TO LINK ADMINISTRATIVE EXPEN SES TO THE EARNING OF DIVIDEND. BESIDES THIS, THE FINANCIAL EXPENSES ARE ALSO NOT GETTING LINKED TO THE EARNING OF DIVIDEND, THEREFORE, DISALLOWA NCE AS COMPUTED BY THE ASSESSEE AND ACCEPTED BY THE CIT(A) TO BE REASO NABLE, SEEMS TO BE FAIR. WE, THEREFORE, SUSTAIN THE ORDER OF THE C IT(A) AND REJECT THE GROUNDS RAISED BY THE DEPARTMENT. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 22 ND NOVEMBER, 2013 / COPY TO:- M/S IRB INFRASTRUCTURE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S DVJ LEASING & FINANCE PVT LTD) ITA 4395/MUM/2012 5 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! !' ( ) - 17 MUMBAI / THE CIT (A)-17, MUMBAI. 4) ! !' 8, MUMBAI / THE CIT -8, MUMBAI, 5) $%& ' ! , ! ' , ()* / THE D.R. I BENCH, MUMBAI. 6) &+ , COPY TO GUARD FILE. !-./ / BY ORDER / / TRUE COPY / / [ 0 / 1 )2 ! ' , ()* DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *451 . . * CHAVAN, SR. PS