KIRAN OMPRAKASH GOENKA, MUMBAI V. ACIT CEN CIR 14, MUMBAI

ITA 4947/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3723 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 28-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAVDR
• Keywords: 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.4947/MUM/2015 ASSESSMENT YEAR: 2011-12 MRS. KIRAN OMPRAKASH GOENKA, 317/318, PARVATI INDUSTRIAL ESTATE, SUNMILL COMPOUND, LOWER PAREL (W), MUMBAI-400013 / VS. ACIT, CENTRAL CIRCLE-2(4), [ ERSTWHILE CENTRAL CIRCLE- 14], 8 TH FLOOR, PRATISHTHA BHAVAN, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO . ABIPG3140L $ % & / ASSESSEE BY SHRI HIRO RAI $ % & / REVENUE BY SHRI VISHWAS JADHAV-DR / DATE OF HEARING 09/03/2016 & / DATE OF ORDER: 11/03/2016 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 06/08/2015 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTA INS TO ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 2 CONFIRMING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF RS.2,00,287/- MADE U/S 14A OF THE INCOME TAX ACT, 1 961 (HEREINAFTER THE ACT) READ WITH RULE 8D OF THE RULE S. 2. DURING HEARING, AT THE OUTSET, SHRI HIRO RAI, L D. COUNSEL FOR THE ASSESSEE CLAIMED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 07/12/2015, ITA NO.5566/MUM/2012 (ASSESSMENT YEAR 2008-09). THE LD. COUNSEL ALSO FURNISHED PHOTOCOPY OF THE AFORESAID ORDER. THIS FACTUAL MATRIX WAS NOT CONTRO VERTED BY SHRI VISHWAS JADHAV, LD. DR. 2.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL DATED 07/12/2012 FOR READY REFERENCE AND ANALYSIS:- 7. IN A.Y. 2008-09 ASSESSEE HAS RAISED FOLLOWING G ROUNDS: 1. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE A DDITION MADE BY LD. A.C.I.T. ON ACCOUNT OF DISALLOWANCE OF RS.13,97,843/- U/S.14A R.W.RULE 8D. 2. THE LD. CIT (APPEALS) ERRED IN HOLDING THAT EXPE NSES ATTRIBUTED TOWARDS EARNING EXEMPT INCOME EVEN WHEN THERE WERE NO NEXUS. 3. THE LD. CIT(APPEALS) ERRED IN CONSIDERING THE FA CTS THAT THE MAJOR INVESTMENTS WERE MADE FOR ACQUIRING STRAT EGIC BUSINESS STAKE. ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 3 7.1 THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF A PPEAL IS WITH REGARD TO CONFIRMING THE ADDITION BY CIT(A) OF RS.13,97,843/- U/S.14A R.W.RULE 8D BY HOLDING THAT THE EXPENSES RELATED TO EXEMPT INCOME BY IGNORING THE F ACT THAT THE MAJOR INVESTMENT WERE OF STRATEGIC NATURE. 8. THE FACTS OF THE CASE ARE THAT THE ASSESSEES PR INCIPAL BUSINESS WAS TO MAKE INVESTMENT IN SHARE AND SECURI TIES BY BUYING AND SELLING OF SHARES AND TO EARN PROFIT. DU RING THE YEAR, ASSESSEE RECEIVED RS.3,86,424/- AS DIVIDEND W HICH WAS CLAIMED EXEMPT. THE LD. A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAD NOT MADE ANY DISALLOWANCE AND THEREFORE, THE PROVISIONS OF SECTION 14A WERE ATTRACTED. THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT PROVISION OF SECTION 14A R.W.RULE 8D WERE APPLICABLE FROM 08-09 ONWARDS, HOWEVER, THE SAME WE RE NOT APPLICABLE IN CASE OF STRATEGIC INVESTMENTS AS MADE BY THE ASSESSEE IN THE GROUP COMPANIES. HOWEVER, WITHOUT PREJUDICE, THIS CLAIM OF THE ASSESSEE, THE ASSESSEE FILED A WORKING OF DISALLOWANCE U/S.14A R.W.RULE 8D. THE LD . A.O. OBSERVED THAT THE ASSESSEE, WITHOUT PREJUDICE TO CL AIM, HAS COMPUTED THE DISALLOWANCE U/S.14A R.W.RULE8D AT RS.13,97,843/- WHICH IS FOUND IN ACCORDANCE WITH TH E ACT U/S.14A R.W.RULE8D AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 9. LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSE SSEE ON THE GROUND THAT SHE HAS RECEIVED DIVIDEND INCOME OF RS.3,86,424/- DURING THE YEAR AND ALSO INVESTMENT I N SOME ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 4 COMPANIES MUTUAL FUND AND THEREFORE, BY FOLLOWING THE DECISION IN THE CASE OF DAGA CAPITAL MANAGEMENT LTD . ITA NO. 8057/MUM/2003 (SB). 10. THE LD. A.R. SUBMITTED BEFORE US THAT DISALLOWA NCE U/S.14A WAS NOT APPLICABLE AS ASSESSEE INVESTED IN THE GROUP COMPANIES FROM STRATEGIC POINT OF VIEW AND DREW OUR ATTENTION TO THE DECISION PASSED IN ITA NO.1752 TO 1754/MUM/2013 A.Y. 08-09 TO 10-11 IN THE CASE OF GR OUP COMPANY OF THE ASSESSEE WHEREIN THE SAME HAS BEEN D ECIDED THAT NO DISALLOWANCE IS REQUIRED TO BE MADE IN CASE OF STRATEGIC INVESTMENT MADE IN GROUP CONCERN. THE LD. COUNSEL ALSO CITED A NUMBER OF OTHER DECISIONS IN T HE CASE OF ASST. CIT VS. M/S. SMART CHIP LTD. IN ITA NO.1923/MUM/2012, 65 SOT 86, GARWARE WALL ROPES LTD . VS. ACIT & M/S. J. M. FINANCIAL LTD. VS. ACIT IN IT A NO. 4521/MUM/2012. LD. D.R. RELIED ON THE ORDERS OF AUT HORITIES BELOW. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE BALANCE SHEET FILED BY THE A.R. FOR THE INSTANT FINANCIAL YEAR AT PAGE NO. 4 TO 10 THAT ASSESSEE HAS MADE HUGE INVESTMENT IN ITS GROUP COMP ANIES WHICH ARE STRATEGIC IN NATURE. WE ALSO FIND THAT A SIMILAR ISSUE HAS BEEN DECIDED IN ITA NO.1752 TO 1754/MUM/2 013 A.Y. 08-09 TO 10-11 IN THE CASE OF M/S. TWINKLE ENV IRO TECH LTD. VS. DCIT, WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE IS REQUIRED TO BE MADE IN THE CASE OF ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 5 INVESTMENT WHICH ARE OF STRATEGIC NATURE. THE PARA 10 & 11 OF THE SAID ORDER IS REPRODUCED BELOW: 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS COMPUTED DISALLOWANCE AS PER RULE 8D BY TREATING EN TIRE INVESTMENT MADE BY THE ASSESSEE WITHOUT EXCLUDING STRATEGIC IN VESTMENT MADE IN THE GROUP COMPANIES, IT WAS CONTENDED BY ID. AR THA T THE INVESTMENT WAS MADE AS STRATEGIC INVESTMENT FOR THE PURPOSE OF BUSINESS ONLY, THEREFORE, THE INVESTMENT MADE IN THE GROUP CONCERN S WHICH IS RS.11.30 CRORES IN THE A.Y.2009-10, RS.26.44 CRORES FOR A.Y.2008-09 AND RS.11.30 CRORES IN A.Y.2010-11, RESPECTIVELY, M AY BE EXCLUDED. LD AR ALSO SUBMITTED THAT THE TRIBUNAL IS TAKING CONSI STENT VIEW TO THE EFFECT THAT INVESTMENT MADE FOR STRATEGIC PURPOSE I N THE GROUP CONCERNS ARE NOT MEANT FOR EARNING DIVIDEND INCOME, THEREFORE, THE SAME ARE REQUIRED TO EXCLUDED FROM TOTAL INVESTMENT WHILE COMPUTING DISALLOWANCE U/S.14A. RELIANCE WAS ALSO PLACED ON T HE FOLLOWING DECISIONS:- I) M/S SMART CHIP LTD. (ITA NOS.1923, 5196, 5367/MUM/2 012, ORDER DATED 28-11-2014); II) GARWARE WALL ROPES LTD., ITA NOS.5408,4957/MUM/2012 , 65 SOT 86); III) M/S JM FINANCIAL LIMITED (ITA NO.4521/MUM/2012 , ORDER DATED 26- 3-2014); 11. WE HAVE GONE THROUGH THE ORDERS OF THE -AUTHORI TIES BELOW AND FOUND THAT AS PER THE AUDITED BALANCESHEET, THE ASS ESSEE HAS MADE SUBSTANTIAL INVESTMENT IN GROUP CONCERN AS A STRATE GIC INVESTMENT. AS PER THE DECISION OF COORDINATE BENCH, STRATEGIC INV ESTMENT ARE REQUIRED TO BE EXCLUDED FROM TOTAL INVESTMENT WHILE WORKING OUT DISALLOWANCE UNDER RULE 8D. THE PRECISE OBSERVATION OF THE TRIBUNAL IN CASE OF M/S SMART CHIP LTD. (SUPRA) WAS AS UNDER :- ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 6 '6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREF ULLY PERUSED THE RECORD, GONE THROUGH THE ORDERS OF AUTHORITIES BELO W AND THE JUDICIAL PRONOUNCEMENT REFERRED BY THE LOWER AUTHORITIES AS WELL AS ID. REPRESENTATIVES OF BOTH THE PARTIES DURING THE COUR SE OF HEARING BEFORE US. FROM THE RECORD WE FOUND THAT THE ASSESS EE HAS MADE INVESTMENT IN GROUP COMPANY WHICH WAS 100% SUBSIDIA RY OF THE ASSESSEE. THE INVESTMENT WAS MADE AS STRATEGIC INVE STMENT FOR THE PURPOSE OF BUSINESS WHEREIN THE SOLE INTENTION WAS TO CARRYOUT THE BUSINESS PURPOSE OF THE ASSESSEE COMPANY. WITH REGA RD TO THE DISALLOWANCE OF INTEREST, THE ID. CIT(A) HAS RECORD ED THE CATEGORICAL FINDINGS TO THE EFFECT THAT THE INVESTMENT WAS MADE BY THE ASSESSEE FROM ITS OWN FUND AND NOT FROM ANY BORROWED FUNDS. BY REFEREEING ANNEXURE 'A FILED BY THE ASSESSEE, THE ID. CIT(A), OBSERVED THAT AFTER VERIFYING THE BANK STATEMENT AS PLACED ON RECORD, T HE ENTIRE FUND WAS SO INVESTED WAS OUT OF THE ASSESSEE'S OWN FUND. THE RELIANCE WAS PLACED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. RELIANCE UTILITIES AN D POWER LTD:. [2009] 178 TAXMAN 135 (BOM.) TO THE EFFECT THAT THE PRESUMPTION FOR INVESTMENT WILL BE THAT THE ASSESSEE COMPANY HA S MADE THE INVESTMENT OUT OF ITS OWN FUND RATHER THAN BORROWED FUND. FINDINGS SO RECORDED BY THE ID. CIT(A) WAS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY SUBSTANTIAL EVIDENCE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ID. CIT(A) IN DELETING THE DISALLOW ANCE OF RS.33,90,461/-MADE BY THE AO ON ACCOUNT OF INTEREST EXPENDITURE BY APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT R .W.R.8D OF THE RULES.' IN VIEW OF THE ABOVE, GROUND TAKEN BY THE ASSESSEE IN ALL THE YEARS FOR COMPUTING DISALLOWANCE UNDER RULE 3D IS RESTORED BA CK TO THE FILE OF AO WITH A DIRECTION TO RECOMPUTE THE SAME BY EXCLUD ING STRATEGIC INVESTMENT MADE .IN THE GROUP CONCERNS WHICH IS RS. 11.30 CRORES IN THE A.Y.2009-10, RS.26.44 CRORES FOR A.Y.2008-09 AN D RS.11.30 CRORES IN A.Y.2010-11, RESPECTIVELY. WE DIRECT ACCORDINGLY . ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 7 THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE AB OVE DECISION AND WE THEREFORE RESPECTFULLY FOLLOWING THE ORDER PASSED B Y THE CO-ORDINATE BENCH IN THE SAID ITA, RESTORE BACK TO THE FILE OF A.O. THE ISSUE OF DISALLOWANCE U/S.14A R.W.RULE8D OF THE ACT WITH THE DIRECTION TO RE- COMPUTE THE SAME BY EXCLUDING STRATEGIC INVESTMENT MADE IN THE GROUP CONCERN AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE A.O. IS DIRECTED ACCORDINGLY. THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.5567 & 5568/MUM/2012 FOR A.Y. 2009-10 & 2010 -11 12. THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICA L TO ONE AS DECIDED BY US IN ITA NO.5566/MUM/2012 FOR A.Y. 2008 -09 AND THEREFORE, FACTS BEING SAME, OUR DECISION IN TH E ITA NO.5566/MUM/2012 SHALL APPLY TO THESE APPEALS, AS W ELL. ACCORDINGLY, THE ISSUE IS RESTORED BACK TO THE FILE OF A.O. WITH THE DIRECTION TO RE-COMPUTE THE DISALLOWANCE U /S.14A R.W.RULE8D OF THE ACT WITH THE DIRECTION TO RE-COMP UTE THE SAME BY EXCLUDING STRATEGIC INVESTMENT MADE IN THE GROUP CONCERN AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE A.O. IS DIRECTED ACCORDINGLY. THESE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. 2.2. CONSIDERING THE TOTALITY OF FACTS AND THE CONCLUSION DRAWN IN THE ORDER OF THE TRIBUNAL, WHER EIN, VARIOUS CASE LAWS INCLUDING THE DECISION FROM HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS REL IANCE UTILITIES AND POWER LTD. (2009) 178 TAXMAN 135 (BOM .) WERE CONSIDERED AND FINALLY THE ISSUE WAS RESTORED BACK TO ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 8 THE FILE OF LD. ASSESSING OFFICER WITH A DIRECTION TO RE- COMPUTE THE DISALLOWANCE U/S 14A R.W.R. 8D WITH A DIRECTION TO RE-COMPUTE THE SAME BY EXCLUDING STRAT EGIC INVESTMENT MADE IN THE GROUP CONCERN AFTER ALLOWING A REASONABLE OPPORTUNITY TO THE ASSESSEE. ON THE SAME REASONING AND DIRECTION, WE ALLOW THIS APPEAL FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 09/03/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 11/03/2016 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI ITA NO.4947/MUM/2015 MRS. KIRAN OMPRAKASH GOENKA 9 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI