ECO RECYCLING LTD, MUMBAI V. CIT (A)-16, MUMBAI

ITA 5433/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1838 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 09-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-11-2015
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Earning of tax free income
• Section: 14A; 115JB; 2

Judgement Text

, , G, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5433/MUM/2015 ASSESSMENT YEAR: 2011-12 ECO RECYCLING LTD. 205, CENTRE, POINT, J.B. NAGAR, ANDHERI (E) MUMBAI- 400049 / VS. CIT - 9 MUMBAI- ( APPELLANT ) (RESPONDENT ) P.A. NO. A AACS6183R APPELLANT BY SHRI M. SUBR AMANIAN ( A R) REVENUE BY SHRI PRAKASH MANE (DR) / DATE OF HEARING: 09/11/2016 / DATE OF ORDER: 18 /11/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS), MUMBAI- 16 (IN SHORT CIT(A)}, DATED 04.09.2015 PASSED AGAINST AS SESSMENT ORDER U/S 143(3), DATED 27.07.2014 FOR ASSESSMENT Y EAR 2011- 12 ON THE FOLLOWING GROUNDS: THE LEARNED CIT (A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS. 282894/- U/S SECTION 14 R.W.R 8D(2)(III) DISREGARDING THE FACT THAT THE APPELLANT CASE IS ECO RECYCLING LTD. 2 COVERED U/S 8D(1)(B) FURTHER THE LEARNED CIT (A) ER RED IN NOT RESTRICTING THE DISALLOWANCE U/S 14 READ WITH R ULE 8D TO THE EXTENT OF EXEMPT INCOME WHICH IN APPELLAN T CASE WAS RS. 148829/- THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOW ANCE OF PRELIMINARY EXPENSES OF RS 619273/- ON GROUND TH AT THE APPELLANT DID NOT PRESS THE GROUND BEFORE HIM . THIS IS CONTRARY TO FACTS SINCE THE APPELLANT STOOD BY THE SUBMISSIONS MADE VIDE THE STATEMENT OF FACTS AND LE TTERS DATED 18/08/2015 AND 28/08/2015 FILED BEFORE THE LEARNED CIT(A) WHICH HAS MENTIONED IN PAGES 2 TO 5 OF HIS ORDER. DURING THE COURSE OF HEARING FOLLOWING ADDITIONAL G ROUNDS WERE ALSO FILED BY THE ASSESSEE: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E & IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING ADD ITION TO THE EXTENT OF RS.2,82,894/- MADE U/S 14A ALTHOUGH T HE PROVISION OF SECTION 14A HAS NO APPLICATION AS NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE EA RNING OF EXEMPT INCOME. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE ADDITION OF RS.6,19,558/- MADE AS 'DEDUCTION U/S.35D'AND THA T TOO WITHOUT ASSIGNING ANY PROPER REASON. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E & IN LAW, THE LEARNED A.O. ERRED IN MAKING AN ADDITION O F AN AMOUNT OF RS.30,667/- U/S 41(1) OF THE ACT AND THAT TOO WITHOUT ASSIGNING ANY PROPER REASON. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED A.O. ERRED IN ADDING AN AMOUNT OF RS.5,46,,558/- U/S 14A READ WITH RULE 8D OF THE I.T . RULES, WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE AC T. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELE TE ANY OR ALL OF THE GROUNDS OF APPEAL AT ANY TIME. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI M. SUBRAMANIAN, AUTHORISED REPRESENTATIVES (AR ) ON BEHALF OF THE ASSESSEE AND BY SHRI PRAKASH MANE, DEPARTMENTAL REPRESENTATIVE (CIT-DR) ON BEHALF OF T HE REVENUE. ECO RECYCLING LTD. 3 3. GROUND NO.1 OF MAIN GROUNDS AND GROUND NO.1 OF ADDITIONAL GROUNDS: THESE GROUNDS DEAL WITH THE DISALLOWANCE U/S 14A. THE BRIEF FACTS ARE THAT THE AO MADE TOTAL DISALLOWANCE U/S 14A OF RS.5,46,558/- WHICH WAS RED UCED TO RS.2,82,894/- BY LD. CIT(A). THE LD. CIT(A) HAD DEL ETED THE DISALLOWANCE MADE BY THE AO UNDER RULE 8D(2)(II) PE RTAINING TO THE INTEREST, BUT SUSTAINED THE DISALLOWANCE MAD E UNDER SUB-CLAUSE (III) @ 0.5% OF AVERAGE VALUE OF INVEST MENT AMOUNTING TO RS.2,82,894/-. 3.1. DURING THE COURSE OF HEARING, LD. COUNSEL OF THE A SSESSEE FAIRLY SUBMITTED THAT EXEMPT INCOME WAS RECEIVED IN THE FORM OF DIVIDEND AMOUNTING TO RS.1,48,829/- AND THEREFOR E, AMOUNT OF DISALLOWANCE COULD NOT HAVE EXCEEDED THIS AMOUNT . 3.2. PER CONTRA, LD. DR DID NOT RAISE ANY OBJECTION IN THIS REGARD. 3.3. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E SIDES. THE LAW IN THIS REGARD IS WELL SETTLED NOW T HAT THE DISALLOWANCE UNDER RULE 8D(2)(III) CANNOT EXCEED AM OUNT OF EXEMPT INCOME. UNDER THESE CIRCUMSTANCES, WE DIRECT THE AO TO REDUCE THE DISALLOWANCE TO RS.1,48,629/- BEING T HE AMOUNT OF EXEMPT INCOME. THE BALANCE DISALLOWANCE IS DIREC TED TO BE DELETED. THUS, THE ASSESSEE GETS PART RELIEF. 4. GROUND NO.2 OF MAIN GROUNDS AND GROUND NO.2 OF ADDITIONAL GROUNDS : THESE GROUNDS DEAL WITH THE DISALLOWANCE MADE BY THE AO UNDER SECTION 35D FOR RS.6,19,273/-. 4.1 . WITH THE ASSISTANCE OF BOTH THE PARTIES, IT WAS N OTED BY US THAT THE ASSESSEE HAD MADE DETAILED SUBMISSIONS BEF ORE THE LD. CIT(A) FOR DELETION OF THIS DISALLOWANCE. BUT, LD. CIT(A) ECO RECYCLING LTD. 4 WRONGLY OBSERVED IN HIS ORDER THAT THIS GROUND WAS NOT PRESSED BY THE ASSESSEE. BOTH THE PARTIES JOINTLY S TATED THAT UNDER THESE CIRCUMSTANCES THESE GROUNDS MAY BE SENT BACK TO THE FILE OF THE LD. CIT(A). 4.2. IT IS NOTED BY US THAT THE ASSESSEE HAD MADE DETAI LED SUBMISSION BEFORE THE LD. CIT(A) ON THIS ISSUE VIDE ITS LETTERS DATED 18.08.2015 AND 28.08.2015. THUS, LD. CIT(A) O UGHT TO HAVE DECIDE THIS GROUND ON MERITS. THUS, THESE GROU NDS ARE SENT BACK TO THE FILE OF THE LD. CIT(A) FOR DECIDIN G FRESH AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSES SEE AND AFTER CONSIDERING ENTIRE MATERIAL AND SUBMISSIONS A S MAY BE PLACED BY THE ASSESSEE BEFORE THE LD. CIT(A). THESE GROUNDS MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.3 OF ADDITIONAL GROUNDS: THIS GROUND PERTAINING TO ADDITION MADE UNDER SECTION 41(1) FOR RS.30,667/- WAS NOT PRESSED DURING THE COURSE OF HE ARING, THEREFORE SAME IS DISMISSED. 6. GROUND NO.4 OF ADDITIONAL GROUNDS: THIS GROUND IS WITH REGARD TO ADJUSTMENT TO BE MADE BY THE AO FOR COMPU TING BOOK PROFIT U/S 115JB FOR THE AMOUNT OF DISALLOWANC E MADE U/S 14A. THIS GROUND WAS AGREED TO BE CONSEQUENTIAL . THUS, THE AO SHALL TAKE INTO ACCOUNT AND MAKE ADJUSTMENT OF AMOUNT OF EXEMPT INCOME CREDITED IN THE PROFIT & LO SS A/C AS WELL AS DISALLOWANCE SUSTAINED U/S 14A WHILE MAKING ADJUSTMENT IN THE BOOK PROFITS. THIS GROUND IS DECI DED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED THE ASSESSEE IS PA RTLY ALLOWED. ECO RECYCLING LTD. 5 ORDER PRONOUNCED IN THE OPEN COURT AT THE CONCLUSIO N OF THE HEARING. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 18/11/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI