GRINDWELL NORTON LTD, MUMBAI V. ACIT 9(3)(2), MUMBAI

ITA 4594/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7871 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 25-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Assessee Lawyers: VINIT MEHTA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201; 13; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI [ BEFORE S H RI MANOJ KUMAR AGGARWAL, HONBLE ACCOUNTANT MEMBER & MS. MADHUMITA ROY, HONBLE JUDICIAL MEMBER ] I.T.A. NO. 4594 / MUM / 2018 ASSESSMENT YEAR: 201 3 - 14 GRINDWELL NORTON LTD. ... ........ .. . .. .. .. ....................................................... .......... APPELLANT C/O. KALYANIWALLA & MISTRY LLP, ESPLANADE HOUSE, 2 ND FLOOR, 29, HAZARIMAL SOMANI MARG, FORT, MUMBAI 400 001. [PAN: AAACG 8725 B ] VS. ACIT 9(3)(2), MUMBAI . ...... .. . . .. RESPONDENT ROOM NO. 418, 4 TH FLOOR, AAYKAR BHAWAN, M.K. MARG, MUMBAI 400 020. APPEARANCES BY: SHRI AKRAM KHAN & SHRI VINIT MEHTA, CA APPEARED ON BEHALF OF THE ASSESSEE. SHRI N. PADMANABAN, SR. DR APPEARED ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 07 , 2020 DATE OF PRONOUNCING THE ORDER : JANUARY 9 , 2020 ORDER PER MS. MADHUMITA ROY, JM THE INSTANT APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.05 .2018 PASSED BY THE LD. CIT(A) 56 MUMBAI U/S 143(3) READ WITH SECTION 144C(1) OF T HE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) A RISING OUT OF THE ORDER DATED 02.12 .2016 PASSED BY THE ACIT - 9(3)(2), MUMBAI FOR A.Y. 2013 - 14 . 2. THE ASSESSEE HAS MAINLY CHALLENGED THE ORDERS PASSED BY THE AUTHORITIES BELOW REJECTING THE CONTENTION OF THE ASSESSEE THAT NO DISA LLOWANCES U/S 14A R.W.R 8D LIES IN RESPECT OF INVESTMENTS WHICH HAS NOT EARNED EXEMPT INCOME AND THE DISALLOWANCE OF EXPENDITURE UNDER RULE 8D( 2)(III) SHOULD BE RESTRICTED TO RS. 37,085/ - . THE FACTS OF THE CASE IS THIS THAT THE ASSESSEE DURING THE YEAR UND ER CONSIDERATION 2 I.T.A. NO. 4814/MUM /2018 ASSESSMENT YEAR: 2011 - 12 GRINDWELL NORTON LTD. EARNED DIVIDEND INCOME OF RS. 1,25,54,945/ - FROM VARIOUS MUTUAL FUNDS AND INTEREST ON TAX FREE BONDS OF RS. 6,09,026/ - . THE ASSESSEE IN THE RETURN OF INCOME SUO - MOTO DISALLOWED RS. 15,11,494/ - . THE ASSESSING OFFICER DISALLOWED THE FURTHER AMOUNT OF RS. 2,11,771/ - U/S 14A R.W.R. 8D. THE ASSESSEES CASE IS THIS THAT THE APPELLANTS OWN FUNDS IS MUCH MORE THAN ITS INVESTMENT WHICH CAN BE A TAX FREE INCOME AND ON THE BASIS OF PRESUMPTION THAT THE INVESTMENT OF THE ASSESSEE HAVE BEEN MADE OUT OF ITS OWN FUNDS, NO PART OF INTEREST CAN BE DISALLOWED. APART FROM THAT THE ASSESSEE HAS MADE OUT THE CASE THAT CERTAIN INVESTMENT HAVE ALSO BEEN MADE BY THE ASSESSEE ON WHICH NO DIVIDEND HAS BEEN RECEIVED AND THE SAME, THEREFORE, SHOULD BE EXCLUDED F OR THE PURPOSE OF COMPUTING AVERAGE INVESTMENT UNDER RULE 8D(2)(II) AND RULE 8D(2)(III). 3. AT THE TIME O F HEARING OF THE INSTANT APPEAL , THE L EARNED COUNSEL A PPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT ON THE IDENTICAL FACTS, THE HON'BLE TRIBUNAL HAS BEEN PLEASED TO PASS AN ORDER IN FAVOUR OF THE ASSESSEE WHEREBY AND WHERE UNDER THE LEARNED AO HAS BEEN DIRECTED TO MAKE DISALLOWANCE U/S 14A R.W.R. 8D(2)(III) ONLY IN RESPECT OF THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME. A COPY O F THE SAID ORDER PASSED BY THE COORDINATE B ENCH IN ASSESSEES OWN CASE IN ITA NO. 5479/MUM/2017 FOR A.Y. 2012 - 13 HAS ALSO BEEN SUBMITTED BEFORE US. ON THE OTHER HAND, THE LEARNED DR RELYING UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 3 I.T.A. NO. 4814/MUM /2018 ASSESSMENT YEAR: 2011 - 12 GRINDWELL NORTON LTD. 4. WE HAVE HEARD RESPECTIVE PARTIES AND ALSO PERUSED THE RELEVANT MATERIAL S AVAILABLE ON RECORD. I T APPEARS FROM THE RECORD THAT THE ASSESSEES TOTAL OWN FUNDS AS ON 3 1.03.2013 WAS OF RS. 521,22.61 LACS AND THE ASSESSEE HAS MADE INVE STMENT WHICH CAN EARN TAX FREE INCOME AS ON 31.03.2013 WAS TO THE TUNE OF RS. 30,84.44/ - . THE DETAILS OF SUCH INVESTMENT S HAS ALSO BEEN PROVIDED TO THE AUTHORITIES BELOW BY THE ASSESSEE WHICH HAS BEEN NOTED AT PAR AGRAPH 3 OF PAGE 8 OF THE ORDER PASSED BY T HE LD. CIT(A). 5. THE ASSESSEES CASE IS THIS THAT NO DISALLOWANCE U/S 14A IS CALLED FOR I N RELATION TO THOSE INVESTMENTS WHEREFROM NO EXEMPT INCOME HAVE EARNED. WE HAVE FURTHER P ERUSED THE ORDER PASSED BY THE COORDINATE B ENCH IN ITA NO. 5479/MUM/2017. W E FIND THAT RELYING UPON THE RATIO LAID DOWN IN THE JUDGEMENT PASSED BY THE SPECIAL BENCH OF THE HON'BLE TRIBUNAL I N THE CASE OF VIREET INVESTMENT, T HE COORDINATE BENCH HAS BEEN PLEASED TO DIRECT THE REVENUE TO MAKE DISALLOWANCE U/S 14A RULE 8D(2)(III) ONL Y IN RESPECT OF THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME. 6. THE CASE OF THE ASSESSEE , THAT THE INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN RECEIVED IT SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTING AVERAGE INVESTMENTS UNDER RULE 8D(2)(III) OF T HE ACT, IS, THEREFORE, SEEMS TO BE JUSTIFIED WHICH HAS ALREADY BEEN CONSIDERED BY THE C OORDINATE BENCH IN ASSESSEES CASE FOR A.Y. 2012 - 13. IN THAT VIEW OF THE MATTER RESPECTFULLY RELYING UPON THE SAME, WE DIRECT THE LD. AO 4 I.T.A. NO. 4814/MUM /2018 ASSESSMENT YEAR: 2011 - 12 GRINDWELL NORTON LTD. TO EXCLUDE THOSE INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN RECEIVED BY THE APPELLANT IN MAKING DISALLOWANCE U/S 14A RUL E 8D(2)(III). 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 JANUARY, 2020 . SD/ - SD/ - ( M ANOJ KUMAR AG G ARWAL ) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 /01/2020 BISWAJIT, SR. PS C OPY OF THE ORDER FORWARDED TO: 1. GRINDWELL NORTON LTD., MUMBAI. 2. ITO - 19(3)(4), MUMBAI. 3. CIT(A) - 4. CIT - , 5. CIT(DR), MUMBAI BENCHES, MUMBAI . TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES