ITO 10(2)(1), MUMBAI V. JPA SOLUTIONS P.LTD, MUMBAI

ITA 4640/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3306 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 29-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-08-2015
• Court: TRIBUNAL
• Department Lawyers: MAHUA SARKAR
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.4640/MUM/2015 ASSESSMENT YEAR:2011-12 INCOME TAX OFFICER-10(2)(1), ROOM NO.408, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020 / VS. M/S JPA SOLUTIONS PVT. LTD. 102, MAN GOUSE, S.V. ROAD, VILE PARLE (WEST), MUMBAI-400056 / REVENUE / ASSESSEE P.A. NO . AABCJ7151K $ % & / REVENUE BY MS. MAHUA SARKAR -DR $ % & / ASSESSEE BY NONE / DATE OF HEARING 29/08/2016 & / DATE OF ORDER: 01/09/2016 & / O R D E R THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 27/05/2015 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, ALLOWING RELIEF TO THE ASSESSEE IGNORING TH E DECISION IN THE CASE OF CIT VS GODREJ & BOYCE MFG. (2010) ITA NO.4640/MUM/2015 M/S JPA SOLUTIONS PVT. LTD. 2 328 ITR 81(BOM.) WITH RESPECT TO APPLICATION OF RUL E-8D OF THE RULES WITH RESPECT TO DISALLOWANCE U/S 14A OF T HE ACT AND FURTHER IGNORING THE DECISION IN CHEM INVEST VS INCOME TAX OFFICER 317 ITR 86 (TRIB.) (SB). 2. DURING HEARING, THE LD. DR, MS. MAHUA SARKAR, ADVANCED ARGUMENTS, WHICH IS IDENTICAL TO THE GROUN D RAISED BY DEFENDING THE ADDITION MADE BY THE ASSESS ING OFFICER. IT WAS ALSO CONTENDED THAT WHILE GRANTING RELIEF TO THE ASSESSEE, THE FIRST APPELLATE AUTHORITY IGNO RED THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. LTD. AND THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF CHEM INVEST V/S INCOME TAX OFFICER (SUPRA) 2.1. ON THE OTHER HAND, NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF ISSUANCE OF REGISTERED AD NOTI CE ISSUED ON 02/08/2016. THE ASSESSEE NEITHER PRESENT ED ITSELF NOR MOVED ADJOURNMENT PETITION. IT SEEMS THA T THE ASSESSEE IS NOT INTERESTED TO PURSUE THE APPEAL, FI LED BY THE REVENUE, THEREFORE, I HAVE NO OPTION BUT TO PRO CEED EX- PARTE, QUA THE ASSESSEE, AND TEND TO DISPOSE OF THI S APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 2.2. I HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE F ACTS, IN BRIEF, ARE THAT THE ASSESSEE DECLARED NIL INCOME IN ITS RETURN FILED ON 29/09/2011, WHICH WAS ASSESSED AT T OTAL INCOME OF RS.61,50,750/-. WHILE MAKING SUCH ITA NO.4640/MUM/2015 M/S JPA SOLUTIONS PVT. LTD. 3 DISALLOWANCE, IT WAS NOTICED FROM THE PROFIT & LOSS ACCOUNT THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.17,30,718/-. THE ASSESSING OFFICER ASKED THE ASS ESSEE AS TO WHY THE EXPENSES ATTRIBUTABLE TO EARN EXEMPT INCOME SHOULD NOT BE DISALLOWED U/S 14A R.W.R. 8D O F THE RULES. THE LD. ASSESSING OFFICER WAS OF THE VIEW TH AT NO DIVIDEND INCOME CAN BE EARNED WITHOUT EXPENSES/MANAGEMENT AND THUS PLACING RELIANCE UPON THE DECISION IN THE CASE OF GODREJ & BOYCE MFG. LTD . (SUPRA), THE DISALLOWANCE WAS WORKED OUT AT RS.75,68,079/-. IT IS NOTED THAT THE ASSESSEE HAD CLAIMED INTEREST EXPENSES AMOUNTING TO RS.1,38,88,127/- AND THERE WAS NET INTEREST RECEIPT OF RS.10,07,013/- AN D THUS, NO INTEREST EXPENSES WAS CHARGED TO PROFIT & LOSS A CCOUNT. THE ASSESSEE COMPANY IS IN THE BUSINESS OF ADVANCIN G LOANS AND THUS INTEREST INCOME AND EXPENSES IS ITS NORMAL BUSINESS ACTIVITY. WHILE MAKING THE DISALLOWANCE, T HE LD. ASSESSING OFFICER CONSIDERED INTEREST EXPENSES OF RS.1,54,67,806/- FOR COMPUTING DISALLOWANCE UNDER R ULE- 8D(2)(II) OF THE RULES. IN MY VIEW, THE PROVISION O F RULE- 8D(2)(II) IS NOT ATTRACTED AS THERE WAS NO NET INTE REST PAYMENT DURING THE YEAR. IT IS ALSO NOTED THAT THE WHOLE BASIS OF MAKING THE DISALLOWANCE BY THE ASSESSING O FFICER IS THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE IN ITS COMPUTATION OF INCOME. HOWEVER, IT IS NOTED THAT TH E ASSESSEE HAS MADE SUO-MOTO DISALLOWANCE OF RS.6,20,347/- IN ITS RETURN OF INCOME, BEING 0.5% O F THE ITA NO.4640/MUM/2015 M/S JPA SOLUTIONS PVT. LTD. 4 AVERAGE VALUE OF ITS INVESTMENT. THE ASSESSING OFFI CER CONSIDERED THE SAME AMOUNT WHILE COMPUTING THE DISALLOWANCE UNDER RULE-8D(20(III) AND MADE ADDITIO N TO THE BUSINESS INCOME OF THE ASSESSEE BY RS.6,20,347/ -. I AM OF THE VIEW THAT THE SATISFACTION OF THE ASSESSI NG OFFICER AS TO THE INCORRECT CLAIM MADE BY THE ASSES SEE IN THIS REGARD IS SINE QUA NON FOR INVOKING THE APPLIC ABILITY OF RULE-8D. SUCH SATISFACTION CAN BE REACHED AND RECOR DED ONLY WHEN THE CLAIM OF THE ASSESSEE IS VERIFIED. IT IS NOTED THAT THE LD. ASSESSING OFFICER NEITHER RECORDED TH E SATISFACTION NOR CONSIDERED THE SUO-MOTO DISALLOWAN CE MADE BY THE ASSESSEE IN ITS COMPUTATION OF INCOME W ITH REGARD TO EARNING EXEMPT INCOME U/S 14A OF THE ACT. THE RATIO LAID DOWN IN MAXOPP INVESTMENT LTD. & ORS. VS CIT (2011) 347 ITR 272 (DEL.) SUPPORTS MY VIEW. FURTHER THE RATIO LAID DOWN IN FOLLOWING CASES CAN BE RELIED UP ON:- CIT V. HERO MANAGEMENT SERVICE LTD. [2014J 360 IT R 68 (DEL.)(HC) KODAK INDIA PVT. LTD. V. ACIT[2013] 155 TTJ 697 ( MUM.)(TRIB.) JK INVESTORS (BOMBAY) LIMITED (MUM.) (TRIB.) (WWW .ITATONLINE.ORG) AUCHTEL PRODUCTS LIMITED V. ACIT[2012J 52 SOT 39 (MUM.) (TRIB.) PRIYA EXHIBITORS PVT. LTD. V. ACIT [2012] 54 SOT 356 (DEL.) (TRIB.) DCIT V. REI AGRO LTD. (KOL.)(TRIB.) ACIT V. IQBAL M. CHAGLA (MUM.) (TRIB.) I FIND THAT THE DISALLOWANCE WAS MECHANICALLY MADE BY THE ASSESSING OFFICER BECAUSE AS PER THE PROVISIONS OF SECTION 14A, THE ASSESSING OFFICER IS EXPECTED TO RE-COMPUT E THE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT ONLY IN A SITUATION WHERE HE IS NOT SATISFIED WITH THE CORREC TNESS OF ITA NO.4640/MUM/2015 M/S JPA SOLUTIONS PVT. LTD. 5 THE ACCOUNTS/CLAIM OF THE ASSESSEE. MY VIEW FIND S UPPORT FROM THE DECISION IN CIT VS HERO CYCLES LTD. 323 IT R 158 (P & H), RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM.), DCIT VS JINDAL PHOTO LTD. (DEL. TRIB.) AND SHIVA INDUSTRIES & HOLDINGS LTD. VS ACIT (2011) 59 DTR 18 2. THE HON'BLE JURISDICTIONAL HIGH COURT IN RELIANCE U TILITIES & POWER LTD. CATEGORICALLY HELD THAT IF INTEREST FR EE FUNDS ARE AVAILABLE WITH THE ASSESSEE, WHICH ARE SUFFICIE NT TO MEET THE INVESTMENT AND AT THE SAME TIME ASSESSEE R AISED A LOAN, IT CAN BE PRESUMED THAT THE INVESTMENT WAS MADE FROM THE AVAILABLE INTEREST FREE FUNDS. SINCE, THE ASSESSEE WAS HAVING SUFFICIENT FUNDS FOR MAKING THE INVESTME NT AND HAD MADE REASONABLE SUO-MOTO DISALLOWANCE, CONSIDERING THE TOTALITY OF FACTS, IN MY VIEW, NO F URTHER DISALLOWANCE WAS REQUIRED TO BE MADE. IN PARA 1.3. 5 OF THE IMPUGNED ORDER, THERE IS UNCONTROVERTED FINDING BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT TH E ASSESSEE PROVED THE SUFFICIENCY OF OWN FUNDS FOR MA KING THE INVESTMENT, THUS, THE DECISION IN CIT VS HDFC B ANK LTD. (2014) 366 ITR 505 (BOM.), CIT VS TORENT POWER LTD. (2014) 363 ITR 474 (GUJ.), DIT VS BNP PARIAS SA (20 13) 214 TAXMAN 548 (BOM.) SUPPORTS THE CASE OF THE ASSE SSEE. CONSIDERING THE TOTALITY OF FACTS, FACTUAL FINDING RECORDED BY THE FIRST APPELLATE AUTHORITY AND IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE AND IN THE LIGHT OF FOREGOING DISCUSSION AND THE JUDICI AL PRONOUNCEMENT, I FIND NO INFIRMITY IN THE CONCLUSIO N OF ITA NO.4640/MUM/2015 M/S JPA SOLUTIONS PVT. LTD. 6 THE LD. COMMISSIONER OF INCOME TAX (APPEAL). IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN T HE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 29/08/2015. SD/- (JOGINDE R SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 01/09/2016 F{X~{T? P.S / ! &($)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,-' , ) '#$' / , / DR, ITAT, MUMBAI 6. -01$ / GUARD FILE. &( / BY ORDER, (+#' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI