ASIAN HOSPITALS & HEALTHCARE P.LTD, MUMBAI V. ITO WD 5(1)(1), MUMBAI

ITA 4590/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100820 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 14A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN ,AM AND LALIT KUMAR, JM ./ I.T.A. NO .4590 / MUM/20 14 ( / ASSESSMENT YEAR : 20 10 - 11 ) ASIA N HOSPITALS AND HEALTHCA R E PVT LTD., 302, DOCTOR HOUSE, 14, PEDDAR ROAD, MUMBAI - 400026 / VS. INCOME TAX OFFICER, 5 ( 1 )( 1 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./ PAN/GIR NO. : AAFCA5335E / APPELLANT BY SHRI D D ANJARIA / RSPONDENT BY SHRI AIRIJU JAIK A RAN / DATE OF HEARING : 17 .8 . 201 5 / DATE OF PRONOUNCEMENT: 1 7 . 8. 201 5 / O R D E R PER B.R.BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 23. 4 .2014 PASSED BY THE LD. CIT(A) - 9 , MUMBAI CONFIRMING THE DISALLOWANCE OF RS.9,78,616/ - MADE BY THE ASSESSING OFFICER UNDER SECT ION 14A OF THE ACT FOR ASSESSMENT YEAR 20 10 - 11 . 2 . WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF SETTING UP, MAINTAINING AND MANAGING HOSPITALS IN INDIA AND ABROAD. THE ASSESSEE COMPANY IS A HOLDING COMPANY AND IT HAS MADE INVESTMENTS IN THREE OF ITS SUBSIDIARIES. THE AO NOTICED THAT THE ASSESSEE HAD MADE INVESTMENTS IN EQUITY SHARES BUT DID NOT MAKE ANY ITA NO. 4590 / MUM/20 14 2 DISALLOWANCE UNDER SECTION 14A OF THE ACT . ACCORDINGLY, AFTER ISSUING NOTICE TO THE ASSESSEE, THE AO DISALLOW ED EXPENSES AS PER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 AT THE RATE OF 0.5% OF AVERAGE VALUE OF INVESTMENT S . HOWEVER, SINCE THE DISALLOWANCE AMOUNT WORKED OUT BY THE AO AT RS.11,71,420/ - EXCEEDED THE ACTUAL AMOUNT OF ADMINISTRATIVE EXPENSES, THE AO RESTRICTED THE ADDITION TO THE ACTUAL AMOUNT OF ADMINISTRATIVE EXPENSES AT RS.9,78,616/ - . THE LD. CIT(A) CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3 . DURING THE COURSE OF HEARING, THE LD. AR SUBMITTED THAT THE ASSES SEE HAS RECEIVED DIVIDEND INCOME OF RS.324 / - ONLY AND INVESTMENT HAVE BEEN MAINLY MADE IN THE SUBSIDIARIES COMPANIES. HE SUBMITTED THAT THE INVESTMENTS MADE IN THE SUBSIDIARY COMPANIES ARE IN THE NATURE OF STRATEGIC INVESTMENT S AND THE INTENTION WAS NOT TO EARN DIVIDEND. ACCORDINGLY HE SUBMITTED THAT SUCH STRATEGIC INVESTMENTS WOULD NOT ATTRACT THE DISALLOWANCE U/S 14A OF THE ACT . THE LD. COUNSEL FURTHER SUBMITTED THAT THE MAJOR PART OF ITS INVESTMENT WAS MADE IN THE PRECEDING YEAR AND HENCE, THERE IS NO J USTIFICATION IN MAKING DISALLOWANCE OF THE ENTIRE AMOUNT OF ADMINISTRATIVE EXPENSES . 4 . ON THE CONTRARY, THE LD. DR STRONGLY SUPPORTED THE ORDERS PASSED BY TAX AUTHORITIES. 5 . WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. A PERUSAL OF THE FINA NCIAL STATEMENT FILED BY THE ASSESSEE WOULD SHOW THAT THE ASSESSEE HAD HELD SHARES IN ITS SUBSIDIARY COMPANIES TO THE EXTENT OF RS.22.89 CRORES AS AT THE BEGINNING OF THE YEAR AND THE SAME HAS GONE UP TO RS.23.95 CRORES AS AT THE END OF THE YEAR. THE ASSE SSEE HAS MAINLY INVESTED IN THE FOLLOWING THREE SUBSIDIARIES COMPANIES: ITA NO. 4590 / MUM/20 14 3 A) ASIAN HEART INSTITUTE AND RESEARCH CENTRE PVT.LTD; B) ASIAN DENTAL INSTITUTE PVT.LTD; AND C) ASIAN ORTHOPAEDIC INSTITUTE PVT LTD. THUS, DURING THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAS MADE ADDITIONAL INVESTMENT OF RS.1.06 CRORES OVER . FURTHER , A PERUSAL OF PROFIT AND LOSS ACCOUNT WOULD SHOW THAT THE ASSESSEE HAS INCURRED ADMINISTRATIVE EXPENSES ONLY TO THE EXTENT OF RS.9,78,616/ - , OUT OF WHICH MAJOR EXPENSE S HAVE BEEN INCUR RED ON THE FOLLOWING HEADS: A ) BUSINESS PROMOTION EXPENSES - RS.3,77,663/ - ; B ) PROFESSIONAL CHARGES - RS.3,12,827/ - ; AND C) TRAVELLING EXPENSES - RS.2,04,433/ - ALL THE THREE TYPES OF EXPENSES COULD NOT BE SAID TO HAVE BEEN INCURRE D TOWARDS THE INVESTMENT ACTIVITY. BARRING THESE EXPENSES, WE NOTICE THAT THE INDIRECT EXPENSES ATTRIBUTABLE TO INVESTMENT S MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE VERY LESS. H ENCE , IN THE FACTS AND CIRCUMSTANCES OF THE CA S E, WE ARE OF THE VIEW THAT IT MAY NOT BE PROPER TO APPLY THE PROVISIONS OF RULE 8D. HOWEVER, AT THE SAME TIME, A PORTION OF EXPENSES SHOULD BE ALLOCATED IN RESPECT OF INVESTMENTS ACTIVITY UNDERTAKEN DURING THE YEAR AND ALSO THE TRADING ACTIVITY CARRIED ON BY THE AS SESSEE. H ENCE , ON CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THIS ISSUE WOULD MEET ENDS OF JUSTICE IF THE DISALLOWANCE U/S 14A RESTRICTED TO RS.5 , 000/ - . WE ORDER ACCORDINGLY. IN VIEW OF T HE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A OF THE A CT TO RS.5 , 000/ - ( RUPEES FIVE THOUSAND). ITA NO. 4590 / MUM/20 14 4 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . PRONOUNCED ACCORDINGLY ON 1 7 TH AUGUST 2015. 1 7 TH AUGUST, 2015 SD SD ( LALIT KUMAR) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 1 7 TH AUG , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED T O : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI