M/S. MORARJEE TEXTILES LTD, MUMBAI V. THE ACIT 6(3),

ITA 4708/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7891 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 15-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: M D INAMDAR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVA N, JM ITA NO.4708/MUM/2008 : ASST.YEAR 2004-2005 M/S.MORARJEE TEXTILES LIMITED PENINSULA SPENTA, 2 ND FLOOR MATHURADAS MILL COMPOUND SENAPATI BAPAT MAGR, LOWER PAREL MUMBAI 400 013. PAN : AAACM2725R. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 6(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.D.INAMDAR RESPONDENT BY : SHRI SANJIV DUTT O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 19.05.2008 IN RELATION TO ASSESSMENT YEAR 2004-2005 . 2. FIRST GROUND IS AGAINST THE CONFIRMATION OF ADDI TION U/S.14A OF THE ACT. THE A.O. COMPUTED THE DISALLOWANCE U/S.14A AT RS.67,13, 642. THE LD. CIT(A) UPHELD THE DISALLOWANCE AS MADE BY THE AO. THE LEARNED A.R . CONTENDED THAT NO INTEREST WAS DISALLOWABLE AS INVESTMENT IN SHARES WAS FINANC ED OUT OF INTEREST FREE FUNDS. IN ORDER TO SUPPORT THIS CONTENTION, HE RELIED ON CERT AIN DOCUMENTS BEFORE US. IT WAS CLAIMED THAT THE BENCH MAY DIRECT THE ASSESSING OFF ICER NOT TO MAKE ANY DISALLOWANCE OF INTEREST. ON THE OTHER HAND, THE L D. DR STATED THAT SUCH CONTENTION OF THE ASSESSEE HAD ALREADY BEEN REJECTED BY THE AO . 3. WE ARE NOT CONVINCED WITH THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AT THIS JUNCTURE THAT THE DIRECTION MAY BE GIVEN FOR N OT COMPUTING DISALLOWANCE ON ACCOUNT OF INTEREST U/S 14A FOR THE OBVIOUS REASON THAT FROM A FEW DOCUMENTS PLACED ON RECORD IT IS NOT PRACTICAL TO SAY WHETHER INTEREST BEARING FUNDS WERE OR ITA NO.4708/MUM/2008 M/S.MORARJEE TEXTILES LIMITED. 2 WERE NOT UTILIZED FOR MAKING INVESTMENT OF SHARES. THIS IS THE EXERCISE WHICH HAS TO BE DONE BY THE ASSESSING OFFICER BY CONSIDERING BOO KS OF ACCOUNT AND OTHER RELEVANT EVIDENCE. FURTHER THE QUESTION OF MAKING DISALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE RECENT JUDGMENT DATED 12.08.2010 OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. VS. DCIT (2010) 328 ITR 81 (BOM) HOLDING THAT THE PROVISIONS OF SECTION 14A ARE APPLICABLE IN CIRCUMSTANCES AS ARE PREVAILING PRESE NTLY AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME `REASONABLE BASIS AND NOT RULE 8D. UNDER SUCH CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE, IF ANY, AS PER THE AFORE-NOTED JUDGMENT, AFTER ALLOWING A REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 4. GROUND NO.2 IS AGAINST THE CONFIRMATION OF ADDIT ION OF RS.2,62,93,739 IN RESPECT OF UNUTILIZED MODVAT CREDIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SECTION 145A WAS INSERTED BY THE FINANCE (N O.2) ACT, 1998 WITH EFFECT FROM 1.4.1999. IT PROVIDES THAT THE VALUATION OF PU RCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOM E CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE AND FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS ETC. PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AS ON THE DATE OF VALUATION. ACCORDING TO THE PRESCRIPTION OF THIS SECTION, WHICH IS APPLICAB LE TO THE YEAR UNDER CONSIDERATION, THE AMOUNT OF TAX, DUTY, CESS ETC. IS LIABLE TO BE INCLUDED IN THE VALUE OF PURCHASES, SALES, OPENING AND CLOSING STOCK. IT IS NOT APPROPR IATE TO INCLUDE THE CLOSING MODVAT IN THE FIGURE OF CLOSING STOCK WITHOUT MODIFYING T HE FIGURES OF PURCHASES, SALES AND OPENING STOCK. THE HONBLE JURISDICTIONAL HIGH COUR T IN CIT VS. MAHALAXMI GLASS WORKS PVT. LTD. [(2009) 318 ITR 116 (BOM.)] AND THE HONBLE DELHI HIGH COURT IN ITA NO.4708/MUM/2008 M/S.MORARJEE TEXTILES LIMITED. 3 CIT VS. MAHAVIR ALLUMINIUM [(2008) 297 ITR 77 (DEL. )] HAVE HELD TO THIS EXTENT. AS THE AUTHORITIES BELOW HAVE NOT ADJUSTED OTHER FI GURES WITH THE AMOUNT OF TAX, DUTY, CESS ETC., WE SET ASIDE THE IMPUGNED ORDER AN D RESTORE THE MATTER TO THE FILE OF A.O. FOR DECIDING IT AFRESH IN ACCORDANCE WITH THE AFORE-NOTED JUDGEMENTS AND THE PROVISIONS OF SECTION 145A. 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2011 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 25 TH MARCH, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XXIX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.