DCIT CIR 2(2)(2), MUMBAI V. PUDUMJEE INDUSTRIES LTD, MUMBAI

ITA 5286/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0434 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 09-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: K V BESWAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5286/MUM/2015 ASSESSMENT YEAR : 2010 11 ITA NO.5322/MUM/2015 ASSESSMENT YEAR : 2011 12 DY. CIT CIRCLE 2(2)(2) MUMBAI VS. PUDUMJEE INDUSTRIES LTD 60, JATIA CHAMBERS, DR V B GANDHI MARG, FORT, MUMBAI 400 023 PAN : AAACP0487B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJAT MITTAL RESPONDENT BY : SHRI K V BESWAL DATE OF HEARING : 10. 08 .2017 DATE OF PRONOUNCEMENT : 11 .0 8 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST THE RESPECTIVE ORDERS OF THE CIT(A)-5, MUMBAI, DATED 21 .08.2015, FOR A.YS. 2010- 11 AND 2011-12, BY TAKING FOLLOWING COMMON GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALL OWANCE MADE BY THE ASSESSING OFFICER ADOPTING METHOD OF CALCULATIO N PROVIDED IN RULE 8D THEREBY OVERLOOKING THE CRUCIAL FACT THAT T HIS METHOD OF CALCULATION HAS BEEN PRESCRIBED BY THE STATUTE AND HELD AS A REASONABLE METHOD BY THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. 328 ITR 81 (BOM) ITA NOS.5286 & 5322/MUM/2015 PUDUMJEE INDUSTRIES LTD. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFI CER TO RESTRICT THE DISALLOWANCE U/S. 14A R.W. RULE 8D(II) BY EXCLUDING THE LONG TERM INVESTMENTS IN SUBSIDIARY/GROUP CONCERNS RELYING ON THE DECISION OF ITAT IN TE CASE OF GARWARE WALL ROPES LTD. (65 SOT 86) WITHOUT APPRECIATING THE FACT THAT THE DECISION OF THE ITAT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN ADMI TTED BY THE HONBLE HIGH COURT. BOTH THE PARTIES AGREED THAT SINCE THE ISSUES INVOL VED IN BOTH THE ASSESSMENT YEARS ARE COMMON, THEREFORE, THEY MAY BE DECIDED ON THE BASIS OF THE FACTS INVOLVED IN A.Y. 2010-11 AND THE SAME VIEW MAY BE T AKEN FOR A.Y. 2011-12 AS WELL. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 3. GROUND.2 RELATES TO RESTRICTING THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(III) MADE BY THE ASSESSING OFFICER BY RESTRIC TING THE LONG TERM INVESTMENTS IN SUBSIDIARY/GROUP CONCERNS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AS ON 31.03.2010, THE ASSESSEE HAD AN INVESTMENT OF ` 12,68,00,000/- ON WHICH THE ASSESSEE HAD EARNED DIVIDEND AMOUNTING TO ` 8,53,213/- THE ASSESSING OFFICER AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE COMPUTED THE DISALLOWANCE U/S. 14A R.W. RULE 8D AND DISALLOWED A SUM OF ` .47,66,695/-. ON APPEAL BEFORE THE ITA NOS.5286 & 5322/MUM/2015 PUDUMJEE INDUSTRIES LTD. 3 CIT(A), THE ASSESSEE CONTENDED THAT IT HAS RECEIVED TAX FREE DIVIDEND AMOUNTING TO ` 8,53,212/-. THE ASSESSEE HAS NOT ACQUIRED ANY FRE SH SHARES AND THE SHARES ACQUIRED IN THE EARLIER YEARS WERE F ROM OUT OF ITS OWN FUNDS AND PROFITS. THUS, NO BORROWED FUNDS WERE UTILIZED , WHICH FACT HAS ALSO BEEN ACCEPTED IN THE A.Y. 2007-08. THE DIVIDEND RECEIVE D WAS FROM THE SUBSIDIARY GROUP COMPANIES. THE CIT(A) AFTER EXAMINING THE BALANCE SHEET OF THE ASSESSEE TOOK THE VIEW THAT THE SHARE CAPITAL IS MO RE THAN THE INVESTMENT MADE BY THE ASSESSEE AND THE INVESTMENT ARE MAINLY IN THE SUBSIDIARY GROUP COMPANIES. THEREFORE, RELYING ON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT N THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM) DELETED THE DISALLOWANCE OF INTEREST EXPENSES . HE FURTHER DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE INVESTMENTS MADE I N THE SUBSIDIARY COMPANIES AND DISALLOW 0.5% OF AVERAGE INVESTMENTS U/S. 14A OF THE ACT. 5. THE LEARNED DR BEFORE US VEHEMENTLY RELIED ON TH E ORDER OF THE ASSESSING OFFICER BUT COULD NOT FILE ANY COGENT MAT ERIAL/ EVIDENCE OR CASE LAWS, WHICH MAY COMPEL US TO INTERFERE WITH THE ORD ER OF THE CIT(A). WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER O F THE CIT(A) AND, THEREFORE, DISMISS BOTH THE APPEALS. ITA NOS.5286 & 5322/MUM/2015 PUDUMJEE INDUSTRIES LTD. 4 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DAY OF AUGUST, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 11 TH AUGUST, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI