VISA HOLDINGS PVT. LTD. (NOW AMALGAMATED WITH LUCID COLLOIDS LTD.), MUMBAI V. ACIT - 5(3), MUMBAI

ITA 5081/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8135 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C OMI NINGSHEN
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA N O. 5081/MUM/2016 ( ASSESSMENT YEAR : 2008 09 ) M/S. VISA HOLDINGS PVT. LTD., (NOW AMALGAMATED WITH LUCID COLLOIDS LTD.,) 401A, NAVBHARAT ESTATES, ZAKARIA BUNDER ROAD, SEWREE (W) MUMBAI 400 015 PAN: AAACV1446Q . APPELLANT V/S ACIT 5(3), AAYAKARBHAVAN M.K.ROAD, MUMBAI 400 020 . RESPONDENT APPELLANT BY : SHR I MADHUR AGARWAL & SHRI HITESH TRIVEDI RESPONDENT BY : S HRI C. OMI NINGSHEN DATE OF HEARING 11/12/2017 DATE OF ORDER 15.12.2017 O R D E R PER SAKTIJIT DEY, J.M. 1. CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14/09/2010 OF LD. COMMI SSIONER OF INCOME TAX APPEALS 9 , MUMBAI FOR THE A.Y.2007 08. 2 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., 2. IN GROUND NO.1, ASSESSEE HAS CHALLENGED EXCESS DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION.14A OF THE INCOME TAX ACT R.W.R.8D AND SUSTAINED BY THE C OMMISSIONER (A PPEALS ). 3. BRIEFLY THE FACTS ARE , THE ASSESSEE A DOMESTIC COMPANY IS ENGAGED IN TRADING OF COMMODITIES AS WELL AS FREIGHT BROKING .F OR THE ASSESSMENT YEAR UNDER DISPUTE A SSESSEE FILED ITS RETURN OF INCOME ON 29/08/2008 DECLARING NIL INCOME. DURING THE ASSESSMENT PROCE EDING THE ASSESSING OFFICER NOTICED THAT IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO RS .58,00,838/ . ACCORDINGLY , THE ASSESSING OFFICER BEING OF THE VIEW THAT PART OF THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT IS ATTRIBUTABLE TO EARNING OF EXEMPT INCOME APPORTIONED AN AMOUNT OF RS .8,19,095/ AND MADE DISALLOWANCE OF THE SAID AMOUNT UNDER SECTION.14A OF TH E ACT R.W.R. 8D OF THE RULES. ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY AND BEING UNSUCCESSFUL THERE, AGITATED THE ISSUE BEFORE THE TRIBUNAL. THE TRIBUNAL WHILE DECIDING THE ISSUE IN ITA NO.6239/MUM/2011 DATED 10/08/2012 BEI NG OF THE VIEW THAT THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE REGARDING INCURRING OF EXPENDITURE FOR EARNING EXEMPT INCOME WITHOUT RECORDING SATISFACTION RESTORED THE ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO PASS A S PEAKIN G 3 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., ORDER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND SPECIFICALLY WITH REGARD TO APPLICABILITY OF PROVISIONS OF RULE 8D (II) AND (III). AFTER THE ISSUE WAS RESTORED BACK BY THE TRIBUNAL , THE ASSESSING OFFICER ISSUED A NOTICE CALLING UPON THE ASSESSEE TO JUSTIFY ITS CLAIM OF DISALLOWANCE MADE UNDER SECTION.14A. 4. IN RESPONSE , THE ASSESSEE SUBMITTED ITS REPLY BEFORE THE ASSESSING OFFICER ON 23/08/2013 EXPLAINING IN DETAIL THE BASIS OF DISALLOWANCE MADE BY IT UNDER SECTION.14A R.W.R.8D AMOUNTING TO RS .3,0 6,961/ . HOWEVER, THE ASSESSING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE PROCEEDED TO QUANTIFY THE DISALLOWANCE UNDER SECTION.14A R.W. R .8D AT RS .8,62,978/ . THOUGH , THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY, HOW EVER, IT DID NOT MEET WITH ANY SUCCESS. 5. THE LD. A UTHORIZED R EPRESENTATIVE SUBMITTED , IN THE ORIGINAL ASSESSMENT ORDER, THE ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE UNDER SECTION.14A HAD NOT RECORDED SATISFACTION WITH REGARD TO CORRECTNESS OF ASSESSEES CLAIM. FOR THAT REASON ALONE, THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL RESTORED THE ISSUE BACK TO THE ASSESSING OFFICER WITH A SPECIFIC DIRECTION TO C ONSIDER ASSESSEES EXPLANATIONS/ SUBMISSIONS AND EXPRESS WITH REASONS WHY THE 4 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., COMPUTATION M ADE BY THE ASSESSEE IS NOT FACTUALLY AND LEGALLY CORRECT? HE SUBMITTED , IN THE FRESH ASSESSMENT, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE WITHOUT RECORDING ANY SATISFACTION REGARDING THE CORRECTNESS OF THE QUANTIFICATION OF DISALLOWANCE MADE BY THE ASSESSEE UNDER SECTION.14A R.W.R. 8D. 6 . HE SUBMITTED , THE ASSESSING OFFICER DID NOT CARRY OUT THE DIRECTIONS OF THE TRIBUNAL, HENCE, THE DISALLOWANCE MADE BY HIM SHOULD BE DELETED. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSION S , THE LD. A UTHORIZED R EPRESENTATIVE SUBMITTED , OUT OF TOTAL DIVIDEND INCOME OF RS .58,00,838/ , DIVIDEND OF RS .55,71,002/ WAS EARNED FROM ITS GR OUP COMPANY LUCID C OLLOIDS LTD., AND T HE BALANCE DIVIDEND OF RS .2,39,839/ WAS EARNED FROM 13 OTHER COMPAN IES . H E SUBMITTED , THE INVESTMENT MADE IN THE GROUP ENTITY BEING A STRATEGIC INVESTMENT SHOULD NOT BE CONSIDERED FOR MAKING DISALLOWANCE U/S.14A. FURT HER, IT WAS SUBMITTED , IN THE RELEVANT PREVIOUS YEAR, THOUGH , THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE OF RS .5,34,837/ , HOWEVER, IT HAS OFFERED INTEREST INCOME FROM FIXED DEPOSITS AMOUNTING TO RS .16,19,347/ AND AFTER NETTING OF F OF INTEREST EXPENDI TURE AGAINST INTEREST INCOME, THERE IS NO INTEREST EXPENDITURE REMAINING TO BE DISALLOWED. IN SUPPORT OF HIS CONTENTION THAT INTEREST EXPENDITURE HAS 5 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., TO BE NE T TED OFF AGAINST INTEREST INCOME HE RELIED UPON THE DECISION O F GUJARAT HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S NIRMA CREDIT & CAPITAL (P) LTD., ( 2017 ) 85 TAXMANN.COM 72. 6. THE LEARNED D EPARTMENTAL R EPRESENTATIVE SUBMITTED , THE ASSESSING OFFICER HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE HAS RECOR DED SATISFACTION WITH REGARD TO UNACCEPTABILITY OF ASSESSEES CLAIM, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION. HE SUBMITTED , AFTER INTRODUCTION OF RULE 8D, THE ASSESSING OFFICER HAS TO COMPUTE THE DISALLOWA NCE IN TERMS OF THE SAID RULE AND THE ASSESSING OFFICER HAVING DONE SO, NO FAULT CAN BE FOUND WITH HIS COMPUTATION. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE FIRST ISSUE WHICH REQUIRES TO BE ADDRESSED IS , WHETHER THE ASSES SING OFFICER HAS COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL IN ITA.NO.629/MUM/2011 DATED 10/08/2012. NOTABLY , THE TRIBUNAL WHILE DISPOSING THE APPEAL OF THE ASSESSEE HAVING FOUND THAT THE ASSESSING OFFICER BEFORE MAKING DISALLOWANCE UNDER SECTION.14A R.W .R. 8D HAS NOT RECORDED HIS SATISFACTION WITH REGARD TO CORRECTNESS OF ASSESSEES CLAIM OF EXPENDITURE RELATABLE TO EARNING OF EXEMPT INCOME HAS RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. WHILE DOING SO, THE TRIBUNAL HAS RECORDED T HAT THE ASSESSING OFFICER HAS NOT 6 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., ASSIGNED ANY REASONS WHY THE COMPUTATION OF DISALLOWANCE UNDER SECTION.14A MADE BY THE ASSESSEE WAS FACTUALLY AND LEGALLY INCORRECT. THE TRIBUNAL ALSO OBSERVED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED ASSESSEES SUBMI SSIONS WITH REGARD TO INTEREST EXPENDITURE. THEREFORE, THE TRIBUNAL SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO EXAMINE ASSESSEES SUBMISSIONS WITH REGARD TO DISALLOWANCE TO BE MADE UNDER RULE 8D(II) AND (III). IT IS EVIDENT , DURING THE FRESH ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED A DETAILED EXPLANATION ON 23/08/2013 WHEREIN HE HAS QUANTIFIED THE DISALLOWANCE UNDER SECTION.14A AT RS .3,06,961/ COMPRISING OF D IRECT EXPENDITURE UNDER RULE 8D (2)( I ) AND ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2) (III). THE ASSESSEE HAS ALSO PROVIDED THE REASONING FOR MAKING SUCH DISALLOWANCE. ON PERUSAL OF THE IMPUGNED ASSESSMENT ORDER IT IS EVIDENT THAT THE ASSESSING OFFICER EXCEPT MAKING SOME GENERAL OBSERVATION S HAS NOT RECORDED ANY SATISFACTION TO DEMONSTRATE THAT THE CLAIM OF THE ASSESSEE IS LEGALLY AND FACTUALLY IN CORRECT. FURTHER, THOUGH , THE ASSESSING OFFICER HAS ACCEPTED THAT THE ASSESSEE WAS HAVING COMMON POOL OF FUND, STILL HE HAS PROCEEDED TO MAKE DISALLOWANCE OF INTEREST EXPENDITURE UNDER R ULE 8D(2)(II) AMOUNTING TO RS .3,63,714/ . FURTHER , ASSESSEES CLA IM WITH REGARD TO INCURRING OF A DMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) HAS NOT AT ALL BEEN 7 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., DEALT WITH BY THE ASSESSING OFFICER. THUS, IT IS VERY MUCH CLEAR, THE ASSESSING OFFICER HAS NOT AT ALL COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL WHILE REPEATING THE DISALLOWANCE MADE BY HIM EARLIER. 9. UNFORTUNATELY, LEARNED FIRST APPELLATE AUTHORITY HAS FAILED TO TAKE COGNIZANCE OF THE AFORESAID ASPECT AND HAS SUSTAINED THE ADDITION. FURTHE R , THE ASSESSEE S CLAIM THAT AFTER NETTING OF F OF INTEREST EXPENDITURE AGAINST INTEREST INCOME THERE IS NO INTEREST EXPENDITURE REMAINS TO BE DISALLOWED HAS NOT AT ALL BEEN CONSIDERED. 10. WE ALSO FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT MAJOR PA RT OF THE INVESTMENT GIVING RISE TO DIVIDEND INCOME IS IN THE NATURE OF STRATEGIC INVESTMENT, THEREFORE, HAS TO BE EXCLUDED FROM THE PURVIEW OF RULE 8D . THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE ASSE SSING OFFICER HAVING NOT COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL BY RECORDING VALID SATISFACTION WITH REGARD TO CORRECTNESS OF ASSESSEES CLAIM OF DISALLOWANCE UNDER SECTION.14A R.W.R. 8D , T HE DISALLOWANCE MADE BY HIM CANNOT BE SUSTAINED. ACCORDINGLY , WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS . 3,06,961/ AS COMPUTED BY THE ASSESSEE. GROUND RAISED IS ALLOWED. 8 ITA NO.5081/MUM/2016 M/S. VISA HOLDINGS PVT. LTD., 11. IN GROUND NO.2, ASSESSEE HAS CHALLENGED THE INITIATION OF PENALTY PROCEEDING UNDER SECTION.271(1)(C) OF THE ACT. IN O UR VIEW, AT TH IS STAGE, THE GROUND RAISED BY THE ASSESSEE IS PREMATURE, HENCE, DOES NOT REQUIRE ADJUDICATION. 12. GROUND NO.3,4,& 5 BEING OF GENERAL NATURE DO NOT REQUIRE SPECIFIC ADJUDICATION 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.12.2017 SD/ - SD/ - SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 15.12.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI