SHILPA R. SHAH, MUMBAI V. ACIT 21(2), MUMBAI

ITA 4493/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1045 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Opportunity of being heard
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4493/MUM/2014 ASSESSMENT YEAR: 2010-11 SMT. SHILPA R. SHAH, VS. ACIT-21(2) 60-B, DOKLAT, EAST WEST ROAD NO.2, PRATYAKSHAKA R BHAVAN, JVPD, VILE PARLE (W), BANDRA KURLA COMPLEX, MUMBAI 400 049 BANDRA, MUMBAI AAQPSO181A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV KHANDELWAL, AR REVENUE BY: SHRI B.S. BIST, DR DATE OF HEARING : 14/0 2/2017 DATE OF PRONOUNCEMENT: 24/04/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 32, MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- 1. COMMISSIONER OF I.T. (A) ERRED IN CONFIRMING FURTHE R ADDITION MADE BY ASSESSING OFFICER U/S.14A OF RS1,37,030/- WITHOUT C ONSIDERING FACT THAT INTEREST EXPENSES IS RELATED TO BUSINESS ACTIVITY O F APPELLANT AND THERE IS NO BORROWING MADE FOR INVESTMENT. 2. COMMISSIONER OF I.T. (A) ERRED IN CONFIRMING APPLIC ATION OF RULE 8D(2)(11) OF SECTION 14A, WITHOUT CONSIDERING THE F ACT THAT NET WORTH OF ITA NO. 4493/MUM/2014 2 APPELLANT IS MORE THAN INVESTMENTS AND NO NEW INVES TMENT ARE MADE BY APPELLANT DURING THE YEAR BY BORROWING. 3. COMMISSIONER OF I.T. (A) ERRED IN CONFIRMING APPLIC ATION OF RULE 8D (2)(III) BEING 0.5% OF AVERAGE INVESTMENT BY IGNORING FACT THAT ALL INVESTMENTS ARE IN GROUP COMPANIES FOR MAINTAINING CONTROL OF GROUP AND INVESTMENT WAS OUT OF OWN NET WORTH AND A PPELLANT NEED NOT INCUR ANY ADMINISTRATIVE EXPENSES TO EARN EXEMPT IN COME. 3. THE ASSESSEE HAS EARNED A DIVIDEND INCOME OF RS. 2,000/- ON SHARES AND CLAIMED IT AS EXEMPT U/S 10(34) OF THE ACT. THE ASSESSING OFFICER (AO) CALCULATED THE DISALLOWANCE U/S 14A R.W.R. 8D OF TH E INCOME TAX RULES 1962 AND DISALLOWED RS.1,37,030/-. THE ASSESSEE PREFERRE D AN APPEAL AGAINST THE ORDER OF THE AO BEFORE THE LD. CIT(A). THE LD. CIT( A) AGREED WITH THE CALCULATION OF DISALLOWANCE MADE BY THE A.O. U/S 14 A R.W.R. 8D AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIE D ON THE ORDER OF THE ITAT B BENCH MUMBAI IN THE CASE OF SMT. NIRUPMA P. SHAH VS. ACIT (ITA NO.4544/MUM/2014). ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH THE ORDER OF THE TRIBUNAL IN THE CASE OF SMT. NIRUPAMA P. SHAH (SUPRA) RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN THAT CASE THE TRIBUNAL HAS FOLLOWED THE ORDER IN THE CASE OF SHRI HARENDRA D. SHAH (ITA NO. 4367/MUM/2014) WHEREIN, THE FOLLOWING IS HELD: 7. THE ASSESSEE HAS FURNISHED THE STATEMENT OF INV ESTMENT MADE IN SHARES OF VARIOUS COMPANIES. WE NOTICE THAT THE TOT AL INVESTMENT HELD IN SHARES BY THE ASSESSEE IS RS.6.23 CRORES, OUT OF WHICH, TH E INVESTMENT MADE IN GROUP COMPANIES STAND AT RS.6.21 CRORES. THUS, WE NOTICE THAT THE ASSESSEE HAS MADE INVESTMENT OF RS. 2 LAKHS ONLY IN OTHER COMPANIES. HENCE, THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE THAT 99.35% OF INVESTMEN T HAVE BEEN MADE IN THE GROUP COMPANIES AS STRATEGIC INVESTMENT TO RETAIN C ONTROL OVER THESE COMPANIES. FURTHER, WE NOTICE THAT THE ASSESSEE IS HAVING ITS OWN FUNDS OF ABOUT 4.27 CRORES AS ON AT THE YEAREND AS AGAINST THE TOTAL INVESTMEN T OF RS.6.23 CRORES IN SHARES. HENCE, THE INVESTMENT OF RS. 2.00 LAKHS MADE IN OTH ER COMPANIES IS SUFFICIENTLY ITA NO. 4493/MUM/2014 3 COVERED BY THE OWN FUNDS. FURTHER, THE ASSESSEE EAR NED DIVIDEND INCOME OF RS.2000/- ONLY DURING THE YEAR UNDER CONSIDERATION. HENCE, BY FOLLOWING VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE THE DISALLOWA NCE OUT OF INTEREST EXPENDITURE IS NOT CALLED FOR. 8. UNDER THESE SET OF FACTS AND ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE U/S 14A SHOULD BE RESTRICTED TO THE DIVIDEND INCOME OF RS.2000/-. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO RS.2000/-. 5.1. FACTS BEING SIMILAR, WE FOLLOW THE ABOVE ORDE R OF THE TRIBUNAL AND SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO VERIFY THE DETAILS AS MENTIONED AT PARA 5 HERE- IN-ABOVE AND PASS AN ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS AS MENTIONED AT PARA 5 HERE-IN-ABOVE. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2017 SD/- SD/- (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI: DATED: 24/04/2017 RAHUL, SR. P.S. 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