PURVAG S SHAH, MUMBAI V. ACIT 21(1), MUMBAI

ITA 4542/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3873 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 02-07-2014
• Court: TRIBUNAL
• Assessee Lawyers: NEELKANT KHANDELW AL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NOS 4542& 4543/MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER ) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 4542/MUM/2014 (ASSESSMENT YEAR :2010-11) SHRI PURVAG S SHAH 60-B, DOLAT, EAST WEST ROAD NO.2 JVPD, VILE PARLE (W) MUMBAI 400 049 VS ACIT 21(1), MUMBAI PAN :AALPS8654H (APPELLANT) (RESPONDENT) I.T.A. NO. 4543/MUM/2014 (ASSESSMENT YEAR :2010-11) SHRI SHAILESH D SHAH 60-B, DOLAT, EAST WEST ROAD NO.2 JVPD, VILE PARLE (W) MUMBAI 400 049 VS ACIT 21(1), MUMBAI PAN :AALPS8654H (APPELLANT) (RESPONDENT) ASSESSEES BY SHRI NEELKANT KHANDELWAL REVENUE BY SHRI MUKESH JAIN DATE OF HEARING : 26-04-2016 DATE OF PRONOUNCEMENT : 27-04-2016 O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER) THESE APPEALS INVOLVE IDENTICAL ISSUE AND PERTAIN TO THE CONNECTED ASSESSEES, AND THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NOS 4542& 4543/MUM/2011 2. FIRST WE TAKE UP THE APPEAL IN THE CASE OF SHRI PURVAG S SHAH IN ITA 4542/MUM/2014, THE ASSESSEE FILED THIS APPEAL ON TH E FOLLOWING GROUNDS: 1. COMMISSIONER OFC.I.T. (A) ERRED IN CONFIRMING FU RTHER ADDITION MADE BY ASSESSING OFFICER ULS.L4A OF RS 4,42,074/ WITHOUT CONSIDERING FACT THAT INTEREST EXPENSES IS RELATED TO BUSINESS ACTIVITY O F APPELLANT AND THERE IS NO BORROWING MADE FOR INVESTMENT. 2. COMMISSIONER OF C.I.T.. (A) ERRED IN CONFIRMING APPLICATION OF RULE 80 (2)(III) BEING 0.5% OF AVERAGE INVESTMENT BY IGNORING FACT T HAT ALL INVESTMENTS ARE IN GROUP COMPANIES FOR MAINTAINING CONTROL OF GROUP AN D INVESTMENT WAS OUT OF MADE MAINLY OUT OF INTEREST FREE FUND AND APPELLANT NEED NOT INCUR ANY ADMINISTRATIVE EXPENSES TO EARN EXEMPT INCOME. 3. THE APPELLANT PLEAD BEFORE HONOURABLE ITA T TO D IRECT THE ASSESSING OFFICER TO: - (I) TO ALLOW THE CLAIM OF THE APPELLANT THAT THE GR OUP INVESTMENT SHOULD NOT BE CONSIDERED WHILE APPLYING RULE 80 (2)(III). (II) TO DIRECT AO TO RECALCULATE DISALLOWANCE. 3. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY THE LD.COUNSEL THAT DISALLOWANCE U/S 14A WAS MADE ONLY U/S 8D(2)(II) & (III) AND NO DISALLOWANCE WAS MADE UNDER CLAUSE (I) OF RULE 8D. IT WAS SUBMI TTED THAT OWN FUNDS OF THE ASSESSEE WERE MORE THAN THE AMOUNT OF INVESTMENT MA DE IN THE TAX FREE SECURITIES AND THE INVESTMENT MADE WAS MOSTLY MADE IN THE STRATEGIC COMPANIES, THEREFORE, NO DISALLOWANCE WAS CALLED FO R. 4. PER CONTRA, LD.DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT REQUISITE FACTS ARE NOT AVAILABLE BE FORE US TO VERIFY THE ARGUMENTS MADE BY THE LD.COUNSEL. 3 ITA NOS 4542& 4543/MUM/2011 5. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES AS WELL AS SUBMISSIONS MADE BY BOTH THE PARTIES BEFORE US. IT IS NOTED THAT PERUSAL OF THE BALANCE-SHEET SHOWS THAT AMOUNT OF SHARE CAPITAL AN D UNSECURED LOAN PUT TOGETHER ARE MORE THAN THE AMOUNT OF INVESTMENTS. IT IS SUBMITTED BY THE LD.COUNSEL THAT UNSECURED LOANS ARE INTEREST FREE L OANS AS NO INTEREST HAS BEEN PAID ON THOSE LOANS. BUT NOTHING WAS PRODUCED BEFO RE US TO SHOW THAT UNSECURED LOANS ARE NOT INTEREST BEARING LOANS. SI MILARLY WITH REGARD TO ARGUMENT OF THE LD.COUNSEL THAT INVESTMENT WAS MADE SUBSTANTIALLY IN THE COMPANIES FOR STRATEGIC REASONS AS THE INVESTEE COM PANIES WERE GROUP COMPANIES; IT IS NOTED THAT THIS PLEADING HAS NOT B EEN EXAMINED AT THE LOWER LEVEL AND REQUISITE FACTS ARE NOT AVAILABLE BEFORE US TO EXAMINE THE VERACITY OF THE SUBMISSIONS MADE BEFORE US. UNDER THESE CIRCUM STANCES WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE SHALL FILE REQUISITE DETAILS AND EVIDENCES SO AS TO ENABLE THE ASSESSING OFFICER TO ASCERTAIN THE CORRECT FACTS AND EXAMINE ALL THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OFFICER SHALL GIVE ADEQUAT E OPPORTUNITY OF HEARING TO THE ASSESSEE AND SHALL OBJECTIVELY EXAMINE ALL THE CONTENTIONS OF THE ASSESSEE AS WELL AS DETAILS AND EVIDENCES FILED BY THE ASSES SEE, THAT MAY BE FILED BY THE ASSESSEE. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES. THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED FOR STATIS TICAL PURPOSE. 5. NOW WE SHALL TAKE UP THE APPEAL IN THE CASE OF S HAILESH D SHAH IN ITA NO.4543/MUM/2014. THE ASSESSEE HAS FILED APPAL ON THE FOLLOWING GROUNDS: I. COMMISSIONER OF C.L.T. (A) ERRED IN CONFIRMING FURTHER ADDITION MADE BY ASSESSING OFFICER U/S.14A OF RS 10,10,3861 WITHOUT CONSIDERI NG FACT THAT INTEREST EXPENSES IS RELATED TO BUSINESS ACTIVITY OF APPELLANT AND THERE IS NO BORROWING MADE FOR INVESTMENT. 4 ITA NOS 4542& 4543/MUM/2011 2. COMMISSIONER OF C.L.T. (A) ERRED IN CONFIRMING A PPLICATION OF RULE 80(2)(II) OF SECTION 14A, WITHOUT CONSIDERING THE FACT THAT NET WORTH OF APPELLANT IS MORE THAN I INVESTMENTS AND NO NEW INVESTMENT ARE MADE BY APPEL LANT BY BORROWING. 3. COMMISSIONER OF C.L.T. (A) ERRED IN CONFIRMING A PPLICATION OF RULE 80 (2)(III) BEING 0.5% OF AVERAGE INVESTMENT BY IGNORING FACT THAT AL L INVESTMENTS ARE IN GROUP COMPANIES FOR MAINTAINING CONTROL OF GROUP AND INVE STMENT WAS OUT OF OWN NET WORTH AND APPELLANT NEED NOT INCUR ANY ADMINISTRATI VE EXPENSES TO EARN EXEMPT INCOME. 4. THE APPELLANT PLEAD BEFORE HONOURABLE ITA T TO D IRECT THE ASSESSING OFFICER TO: - (I) TO ALLOW THE CLAIM OF THE APPELLANT THAT THE GR OUP INVESTMENT SHOULD NOT BE CONSIDERED WHILE APPLYING RULE 80 (2)(III). (II)TO RESTRICT DISALLOWANCE AS PER RETURN OF INCOM E FILED BY THE APPELLANT. 6. THE ISSUES INVOLVED AND ARGUMENTS MADE BY THE LD .COUNSEL IN THIS APPEAL ARE IDENTICAL TO THE APPEAL IN THE CASE OF SHRI PUR VAG S SHAH. UNDER THESE CIRCUMSTANCES WE FIND IT APPROPRIATE TO SEND ISSUES INVOLVED IN THIS APPEAL ALSO BACK TO THE FILE OF THE ASSESSING OFFICER WITH SIMI LAR DIRECTIONS AS WERE GIVEN IN THE CASE OF PURVAG S SHAH. 7. AS A RESULT, THE APPEALS MAY BE TREATED AS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF H EARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 27 TH APRIL, 2016 PK/- 5 ITA NOS 4542& 4543/MUM/2011 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , C BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES