DCIT CIR 7(1), MUMBAI V. PIRAMAL SUNTECK REALITY P.LTD, MUMBAI

ITA 5169/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88449 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 18-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER ITA NO.5169/MUM/2013 (A.Y. 2010-11) THE DCIT, CIR.7(1), ROOM NO.622, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 (APPELLANT ) VS. M/S. PIRAMAL SUNTECK REALITY PVT. LTD. 4 TH FLOOR, PIRAMAL TOWER, ANNEXE, GK MARG, LOWER PAREL, MUMBAI 400 013 PAN: AAECP 4731G (RESPONDENT) APPELLANT BY : SHRI PREMANAND J. RESPONDENT BY : SHRI RA KESH JOSHI DATE OF HEARING : 24/02/2015 DATE OF PRONOUNCEMENT : 24 /02/2015 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-13, MUMBAI DATED 22/05/2013 FOR ASSES SMENT YEAR 2010-11. THE GROUNDS OF APPEAL READ AS UNDER: (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW, IN RESTRICTING THE DISALLOWANCE OF RS.24,30,072/- TO RS.5.00 LACS UNDE R SECTION 14A R.W.R. 8D, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. (II) THE LEARNED CIT(A) HAS ERRED ON FACT AND IN LA W, IN RESTRICTING THE DISALLOWANCE OF RS.24,30,072/- TO RS.5 LACS UNDER SECTION 14A R.W.R. 8D, ITA NO.5169/MUM/2013 (A.Y. 2010-11) 2 IGNORING THE FACT THAT DISALLOWANCE UNDER SECTION 1 4A AS PER RULE 8D IS JUSTIFIED AND ALSO RULE 8D IS TO BE APPLIED FOR COM PUTATION OF DISALLOWANCE UNDER SECTION 14A AS PER RULE 8D IS JUSTIFIED AND A LSO RULE 8D IS TO BE APPLIED FOR COMPUTATION OF DISALLOWANCE UNDER SECTION 14A F ROM A.Y 2008-09 ONWARDS AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE. 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E MADE FOLLOWING INVESTMENT IN SUBSIDIARY COMPANIES, THE DETAILS OF WHICH IS PLACED AT PAGE 14 OF THE PAPER BOOK. S.NO. DATE OF INVESTMENT INVESTMENT IN SHARES AMOUNT (RS. DATE OF RECEIPT SOURCE OF INVESTMENT AMOUNT (IN RS.) 1. 27.10.2009 STARLIGHT SYSTEMS PVT. LTD. 771,600,000 27.10.2009 ALPEX INTERNATIONAL LTD. 771,600,000 2. 1. 19/11/2009 2.12.10.2009 3.12.10.2009 TOPZONE MERCANTILE CO.PVT. LTD. 1.25.09.2009 2.7,00,00,000 3.8,00,00,000 1. 25.09.2009 2. 09.10-2009 3. 09.10-2009 4. 09.10.2009 5. 09.10.2009 1. VISHWAS FINVEST PVT. LTD. 2. ALPEX INTERNATIONAL LTD. 3. SUNTECK REALTY LTD. 4. SUNTEK REALTY LTD. 5. SUNTECK REALTY LTD. 1. 3,75,000 2. 7,30,00,000 3. 4,00,00,000 4. 3,50,00,000 5. 55,00,000 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E RECEIVED DIVIDEND INCOME OF RS.1,625/-, WHICH WAS CLAIMED AS EXEMPT UNDER SE CTION 10(35) OF THE INCOME TAX ACT, 1961 (THE ACT). THE AO REQUIRED THE ASS ESSEE TO EXPLAIN AS TO WHY THE DISALLOWANCE SHOULD NOT BE MADE UNDER SECTION 14A R.W.R. 8D. THE ASSESSEE VIDE LETTER DATED 23/10/2012 SUBMITTED THAT NO EXPENDITU RE WHATSOEVER WAS INCURRED FOR EARNING EXEMPT INCOME. IT WAS SUBMITTED THAT INVES TMENTS HAVE BEEN MADE BY THE ASSESSEE FROM ITS OWN FUNDS AND NO BORROWED FUNDS WERE INVOLVED. HOWEVER, IT WAS SUBMITTED THAT AN ADHOC SUM OF RS.5000/- MAY BE DISALLOWED UNDER SECTION ITA NO.5169/MUM/2013 (A.Y. 2010-11) 3 14A OF THE ACT. THE AO DID NOT ACCEPT SUCH SUBMISS ION OF THE ASSESSEE AND APPLYING RULE 8D, HE CALCULATED THE DISALLOWANCE O F RS.24,30,072/- AS UNDER: I) DIRECT EXPENSES RULE 8D (2)(I) NIL II) INDIRECT INTERST EXPENSES RULE 8D(2)(II) RS. 81,589/- III)0.5% OF AVERAGE INVESTMENTS- 8D(2)(III) RS. 23,48,483/- TO TAL RS. 24,30,072/- ============ 4. THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE AO W ERE REITERATED BEFORE LD. CIT(A). IT WAS SUBMITTED THAT NO EXPENDITURE WHAT SOEVER WAS INCURRED TO EARN EXEMPT INCOME. CONSIDERING THE FACTS OF THE CASE LD. CIT(A) HAS ARRIVED AT A CONCLUSION THAT THE DISALLOWANCE, IF ANY, WAS CALL ED FOR, THE SAME SHOULD BE TO THE EXTENT OF RS.5.00 LACS AND HE RESTRICTED THE DI SALLOWANCE TO A SUM OF RS.5.00 LACS. THE RELEVANT OBSERVATIONS OF LD. CIT(A) ARE AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE. 2.3(A) IN VIEW OF THE APPELLANTS ABOVE SUBMISSIONS, THE DISALLOWANCE UNDER RULE 8D(2)(II) OF INDIRECT INTEREST EXPENSES OF RS.81,589/- IS DELETED SINCE THE INTEREST EXPENDITURE WAS PERTAINI NG TO LOAN WHICH LOAN WAS NOT UTILIZED FOR THE PURPOSE OF INVESTMENT S. IN RESPECT OF ADMINISTRATION AND MANAGERIAL EXPENSE S, DISALLOWED BY THE AO AT RS.23,48,483/- UNDER RULE 8D(2)(III), BEI NG 0.5% OF AVERAGE INVESTMENTS, THERE IS FORCE IN APPELLANTS A RGUMENT THAT 4 SINGLE TRANSACTION OF INVESTMENTS IN SHARES OF 4 CO MPANIES DOES NOT REQUIRE INCURRING OF SUCH HUGE EXPENSES. AS PER BAL ANCE SHEET, THE APPELLANT HAS MADE FRESH INVESTMENTS IN THE SHARES OF 4 COMPANIES. HOWEVER, IN THE SHARES OF 2 COMPANIES, INVESTMENTS WERE ONLY AT RS.1 LAC AND RS.1,150,000/- THE MAJOR INVESTMENTS WAS IN SHARES OF ONLY 2 COMPANIES. THESE WERE SINGLE INVESTMENT TRANSACTION S AND THEREFORE WERE NOT REQUIRING INCURRING OF SUCH HUGE EXPENSES FOR THE PURPOSE OF TAKING DECISIONS FOR PURCHASE OF SHARES AND THEREA FTER MANAGEMENT OF SUCH INVESTMENTS. CONSIDERING THE FACTS AND CIRCUMS TANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO AT RS.23,48,4 83/- UNDER RULE 8D(2)(III) IS REDUCED TO RS.5 LACS. ITA NO.5169/MUM/2013 (A.Y. 2010-11) 4 IN THE RESULT, THE DISALLOWANCE MADE BY THE AO UNDE R SEC. 14A AT RS.24,30,072/- IS REDUCED TO RS.5 LACS. 5. LD. DR RELYING UPON THE ASSESSMENT ORDER PLEADED THAT RULE 8D WAS RIGHTLY INVOKED BY THE AO AND LD. CIT(A) HAS COMMITTED AN ERROR IN GRANTING IMPUGNED RELIEF TO THE ASSESSEE. 6. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT ORDER PASSED BY LD. CIT(A) SHOULD BE UPHELD AS THE SAME IS BASED ON FA CTS. HE SUBMITTED THAT ACCORDING TO THE FACTS OF THE CASE ASSESSEE DID NOT INCUR ANY EXPENDITURE AND IN SIMILAR SITUATION, MUMBAI ITAT IN THE CASE OF M/S .JM FINANCIAL LIMITED VS. ADDL. CIT VIDE ORDER DATED 26/3/2014 IN ITA NO.4521 /MUM/2012 HAVE DELETED THE ADDITION AND COPY OF THE SAID ORDER WAS ALSO PLACE D ON OUR RECORD. IT WAS SUBMITTED THAT HONBLE DELHI HIGH COURT ALSO IN THE CASE OF CIT VS. ORIENTAL STRUCTURAL ENGINEERING PVT. LTD. HAS ACCEPTED THE D ISALLOWANCE ONLY TO THE TUNE OF 2% OF THE DIVIDEND INCOME AND COPY OF THE SAID ORDE R DATED 15/1/2013 WAS PLACED ON OUR RECORD. THUS, IT WAS PLEADED BY LD. AR THAT LD. CIT(A) DID NOT COMMIT ANY ERROR IN UPHOLDING DISALLOWANCE TO THE EXTENT OF RS.5.00 LACS IN PLACE OF DISALLOWANCE CALCULATED BY AO U/R 8D AMOUNTING TO R S.24,30,072/-. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY CONSIDERED. AFTER CAREFUL CONSIDERATION, WE ARE OF THE OPINION THAT ORDER PASSED BY LD. CIT(A) DOES NOT CALL FOR ANY INTERFERENCE FOR THE REASON THAT ACCORDING TO THE FACTS OF THE CASE THE ASSESSEE DID NOT MAKE DIRECT EXPENSES FOR EARNING EXEMPT INCOME WHICH CAN BE SAID TO BE EXCEEDING RS.5.00 LA CS. LD. CIT(A) HAS CLEARLY ITA NO.5169/MUM/2013 (A.Y. 2010-11) 5 BROUGHT OUT THE FACTS IN HIS ORDER AND THESE FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE. 7.1 IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY LD. CIT(A) AND H IS ORDER IS UPHELD. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/20 15 ! ' #$% & '() 24/02/2015 $ ' * + SD/- SD/- ( /CHANDRA POOJARI ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL EMBER MUMBAI; '( DATED 24/02/2015 ! ! ! ! ' '' ' ,-. ,-. ,-. ,-. /.%- /.%- /.%- /.%- / COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. ,201 / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. .4* ,-( , , / DR, ITAT, MUMBAI 6. *5 6 / GUARD FILE. !( !( !( !( / BY ORDER, 2.- ,- //TRUE COPY// 7 77 7 / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI