DCIT CIR 4(3)(2), MUMBAI V. WELLKNOWN SYNHETICS P. LTD, MUMBAI

ITA 5009/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4831 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CH ARUN KUMAR SINGH LD
• Assessee Lawyers: RISHABH SHAH LD
• Keywords: Earning of tax free income
• Section: 11; 143(3); 14A; 115JB

Judgement Text

ITA 5009/MUM/2017 WELLKNOWN SYNTHETICS PVT.LTD. ASSESSMENT YEAR: 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5009/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(3)(2) ROOM NO..649, 6 TH FLOOR AAYKAR BHAVAN M.K.ROAD, MUMBAI-400 020 / VS. WELLKNOWN SYNTHETICS PRIVATE LIMITED 145C, 4 TH FLOOR, SANGAM DR. VIEGAS STREET, KALBADEVI MUMBAI-400 002 ./ ./PAN/GIR NO. AAACW-2898-M ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : RISHABH SHAH - LD. AR REVENUE BY : CH. ARUN KUMAR SINGH - LD.DR !' / DATE OF HEARING : 07/02/2019 !' / DATE OF PRONOUNCEMENT : 14/02/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-9, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-9/CIR.4/139/2016-17 DATED 29/05/2017 ON FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - ITA 5009/MUM/2017 WELLKNOWN SYNTHETICS PVT.LTD. ASSESSMENT YEAR: 2013-14 2 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING AND ADDITION TO NORMAL INCOME U/S 14A READ WITH RULE 8D(2)(III) OF RS.2,72,815/- TO RS.75,000/- AFTER RELYING ON THE H ONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CHEMIVEST LTD. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING AN ADDITION BOOK PROFIT U/S 11 5JB U/S 14A READ WITH RULE 8D(2)(III) OF RS.2,72,815/- TO RS.75,000/- 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS.2,55,66,539/- T O THE BOOK PROFIT U/S 115JB ON ACCOUNT OF PREMIUM ON PREFERENCE SHARE REDEMPTION R ESERVE. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS.3,243/- & RS.3, 20,530/- TO THE BOOK PROFIT U/S 115JB ON ACCOUNT OF UNDISCLOSED INCOME AS PER 26AS AND INTEREST ON I.T. REFUND RESPECTIVELY. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN MANUFACTURING OF YARN WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 23/03/2016 BY LD. ASSISTANT COMMISSIONER OF INCOME TAX-4(3)(2), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.156.41 LACS UN DER NORMAL PROVISIONS AFTER CERTAIN ADDITIONS AS AGAINST RETUR NED INCOME OF RS.150.44 LACS E-FILED BY THE ASSESSEE ON 28/09/201 3. THE BOOK PROFITS FOR THE PURPOSE OF SECTION 115JB WERE DETERMINED AT RS.301.56 LACS AS AGAINST RS.39.93 LACS OFFERED BY THE ASSESSEE. CERT AIN ADDITIONS ADJUSTMENTS MADE BY LD. AO BUT DELETED BY FIRST APP ELLATE AUTHORITY IS THE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. THE SE COULD BE ENUMERATED IN THE SUCCEEDING PARAGRAPHS. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED CERTAIN EXEMPT INCOME OF RS.0.75 LACS AGAINS T INVESTMENT, WHICH CALLED FOR DISALLOWANCE U/S 14A. THE ASSESSEE HAD NOT OFFERED ANY SUO-MOTO DISALLOWANCE AGAINST THE SAME, HOWEVER, DURING ASS ESSMENT PROCEEDINGS FURNISHED WORKING OF DISALLOWANCE AS PE R RULE 8D FOR RS.2.72 LACS. THE SAME WAS ACCEPTED AND ADDED TO TH E INCOME OF THE ITA 5009/MUM/2017 WELLKNOWN SYNTHETICS PVT.LTD. ASSESSMENT YEAR: 2013-14 3 ASSESSEE WHILE COMPUTING INCOME UNDER NORMAL PROVIS IONS AS WELL AS U/S 115JB. 2.3 THE SECOND ADJUSTMENTS STEM FROM THE FACT THAT THE ASSESSEE, WHILE COMPUTING BOOK PROFITS U/S 115JB, REDUCED A SUM OF RS.255.66 LACS AS PROVISIONS FOR PREFERENCE SHARES REDEMPTION RESERVE FROM THE NET PROFIT REFLECTED IN THE FINANCIAL STATEMENTS. T HE DEDUCTION OF THESE PROVISIONS, IN THE OPINION OF LD. AO, BEING UNASCER TAINED LIABILITY COULD NOT BE ALLOWED TO THE ASSESSEE. IT WAS ALSO NOTED T HAT SIMILAR ADJUSTMENT WAS MADE DURING AYS 2011-12 & 2012-13. THEREFORE, T HE DEDUCTION OF THE SAME WAS DENIED U/S 115JB. 2.4 ANOTHER ADDITION FOR RS.3,243/- WAS ON ACCOUNT OF MISMATCH IN FORM 26AS. THE LAST ADDITION OF RS.3,20,530/- REPRESENT INTERE ST ON INCOME TAX REFUND. THESE WERE ADDED WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK P ROFITS U/S 115JB. 3.1 AGGRIEVED, THE ASSESSEE AGITATED THE ADDITIONS WITH PARTIAL SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 29/05/2017. THE LD. CIT(A), AFTER CONSIDERING THE FACT THAT ASS ESSEES OWN FUNDS FAR EXCEEDED THE INVESTMENTS HELD THAT INTEREST DISALLO WANCE U/R 8D(2)(II) WAS NOT WARRANTED. THE EXPENSE DISALLOWANCE U/R 8D( 2)(III) WAS RESTRICTED TO EXEMPT INCOME OF RS.0.75 LACS EARNED BY THE ASSESSEE. ACCORDINGLY, LD. AO WAS DIRECTED TO RESTRICT THE DI SALLOWANCE TO RS.0.75 LACS WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS AS WELL AS UNDER U/S 115JB. AGGRIEVED THE REVENUE IS IN FURTHER APPE AL BEFORE US. 3.2 AFTER DUE CONSIDERATION OF RIVAL SUBMISSIONS, T HE UNDISPUTED POSITION THAT EMERGES IS THAT ASSESSEES OWN FUNDS FAR EXCEEDS THE INVESTMENTS MADE BY THE ASSESSEE AND LD. FIRST APPE LLATE AUTHORITY HAS ITA 5009/MUM/2017 WELLKNOWN SYNTHETICS PVT.LTD. ASSESSMENT YEAR: 2013-14 4 RESTRICTED THE EXPENSE DISALLOWANCE U/R 8D(2)(III) TO RS.0.75 LACS, BEING EXEMPT INCOME EARNED BY THE ASSESSEE. NO INFIRMITY COULD BE FOUND IN THE SAME SINCE THE DISALLOWANCE IS IN LINE WITH THE SETTLED LEGAL POSITION THAT EXPENSE DISALLOWANCE WAS NOT TO EXCEED THE EXE MPT INCOME EARNED BY THE ASSESSEE. THE SAID PROPOSITION IS WELL IN LI NE WITH THE DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA RENDERED IN PCIT VS. STATE BANK OF PATIALA [99 TAXMANN.COM 285] AGAINST WHICH SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS BEEN DISMISSED ON 08/11/20 18 [99 TAXAMANN.COM 286]. ACCORDINGLY, GROUND NUMBERS 1 & 2 OF THE APPEAL STANDS DISMISSED. 4. SO FAR AS THE DEDUCTION OF RS.255.66 LACS U/S 11 5JB REPRESENTING PREFERENCE SHARES REDEMPTION RESERVE IS CONCERNED, FIRST APPELLATE AUTHORITY HAS ALLOWED ASSESSEES CLAIM RELYING UPON THE DECISION OF THIS TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR AY 201 0-11. THE LD. AR HAS PLACED ON RECORD DECISION OF THIS TRIBUNAL IN A SSESSEES OWN CASE FOR AY 2011-12, ITA NO. 3124/MUM/2017 DATED 06/09/2 018 WHICH HAS ALLOWED ASSESSEES CLAIM BY FOLLOWING THE TRIBUNAL S ORDER FOR AY 2010- 11. NOTHING ON RECORD SUGGEST THAT THE AFORESAID RU LINGS ARE NOT APPLICABLE TO THE FACTS OF THE IMPUGNED AY ALSO. TH EREFORE, CONSIDERING THE TRIBUNALS DECISION IN ASSESSEES OWN CASE FOR AY 2010-11 & 2011- 12, WE DISMISS THIS GROUND OF APPEAL. 5. THE LAST OF TWO ADDITIONS OF RS.3,243/- AND RS.3 ,20,530/-AS MADE BY LD. AO FOR THE PURPOSE OF COMPUTATION OF BOOK PROFITS U/S 115JB, HAS BEEN DELETED BY FIRST APPELLATE AUTHORITY ON THE GR OUND THAT NO SUCH ADJUSTMENT COULD BE MADE EXCEPT AS PROVIDED IN EXPLANATION 2 TO SECTION 115JB(2) . THE STRENGTH HAS BEEN DRAWN FROM THE DECISION OF ITA 5009/MUM/2017 WELLKNOWN SYNTHETICS PVT.LTD. ASSESSMENT YEAR: 2013-14 5 HONBLE APEX COURT RENDERED IN APOLLO TYRES LTD. VS. CIT [255 ITR 273]. THE REVENUE IS UNABLE TO CONTROVERT THE SAME, IN AN Y MANNER THEREFORE, NO INFIRMITY COULD BE FOUND IN AFORESAID CONCLUSION S. RESULTANTLY, GROUND NO. 4 STANDS DISMISSED. 6. FINALLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2019. SD/- SD/- (PAWAN SINGH) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % MUMBAI; DATED :14.02.2019 SR. PS THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. $$% ( ) / THE CIT(A) 4. $$% / CIT CONCERNED 5. & ''() , $) , / DR, ITAT, MUMBAI 6. ' +,- / GUARD FILE % % / BY ORDER, / % (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.