AFL P. LTD, MUMBAI V. ASST CIT CEN CIR 13, MUMBAI

ITA 5452/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0774 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Proportionate interest
• Section: 14A; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO.5452/MUM/2013 / ASSESSMENT YEAR 2010-11 AFL PRIVATE LIMITED, AFL HOUSE, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI(E), MUMBAI 400 059 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIR.13, 10 TH FLOOR, CGO BLDG., MUMBAI. ./ ./ PAN/GIR NO. : AAABCA 2212P ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI NITESH JOSHI RESPONDENT BY MS. TRIPURA SUNDARI ! ' / DATE OF HEARING : 04/06/2015 ! ' / DATE OF PRONOUNCEMENT : 04/06/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-37, MUMBAI DATED 30/5/2013 FOR ASSESSMENT YEAR 2010- 11. GROUNDS OF APPEAL READ AS UNDER: 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN CONFIRMING DISALLOWANCE OF RS. 80,43,834/- MADE BY THE ASSESSI NG OFFICER UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D O F THE INCOME TAX RULES, 1962. . / ITA NO.7630/MUM/2013 / ASSESSMENT YEAR 2010-11 2 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY REASON S AS TO WHY HE IS NOT SATISFIED WITH THE CALCULATION OF DISALLOWANCE U/S 14A MADE B Y THE APPELLANT. 3) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING INVOKING OF RULE 8D FOR CALCULATION OF DISALLOWANCE U/S 14A IN THE PRESENT CASE. 4) THE APPELLANT SUBMITS THAT EVEN UNDER RULE 8D T HE PROPORTIONATE INTEREST IN THIS CASE IS NOT DISALLOWABLE AS THE INVESTMENT HAS BEEN MADE OUT OF NON INTEREST BEARING FUND. 5) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE GROUND OF APPEAL REGARDING NOT GIVING CREDIT FOR FU LL AMOUNT OF TDS. 6) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT GIVING A DIRECTION TO ALLOW CREDIT OF BALANCE TDS AFTER VERI FICATION. 2. GROUND NO.1 TO 4 RELATES TO ONE ISSUE I.E. REGA RDING DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D OF THE INCOME TAX AC T, 1961 (THE ACT). DISALLOWANCE HAS BEEN CALCULATED BY THE AO AT A SUM OF RS.82,41,961/- AS PER FOLLOWING TABLE. PARTICULARS RS. RS. DISALLOWANCE UNDER CLAUSE(I) DISALLOWANCE UNDER CLAUSE (II) A. AMOUNT OF INTEREST 4,37,54,138/- B. AVERAGE VALUE OF INVESTMENTS VALUE OF INVESTMENTS AS ON 31.03.2009 26,55,29,855 /- VALUE OF INVESTMENTS AS ON 31.03.2010 30,75,04,355 /- TOTAL: 57,30,34,210/- AVERAGE VALUE OF INVESTMENTS 28,65, 17,105/- C. AVERAGE VALUE OF TOTAL ASSETS BOOK VALUE AS ON 31-03-2009 181,28,61,114/- BOOK VALUE AS ON 31-03-2010 186,92,11,879/- TOTAL 368,20,72,993/- AVERAGE VALUE OF TOTAL ASSETS 184,1 0,36,497/- DISALLOWANCE UNDER CLAUSE (II) [(A*B)/C] 68,09,37 6/- DISALLOWANCE UNDER CLAUSE (III) 0.5% OF THE AVERAGE VALUE OF INVESTMENTS 14,32,5 86/- TOTAL DISALLOWANCE (I)+(II)+(III) 82,41,961/- 2.1 LD. CIT(A) HAS UPHELD THE DISALLOWANCE FOLLOWIN G HIS PREDECESSORS ORDER FOR A.Y 2008-09. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. . / ITA NO.7630/MUM/2013 / ASSESSMENT YEAR 2010-11 3 3. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT TH IS ISSUE IS COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL, WHEREIN THE TRIBUNA L HAS ACCEPTED THE PROPOSITION THAT IN VIEW OF OWN FUNDS OF THE ASSES SEE, DISALLOWANCE OF INTEREST WAS NOT CALLED FOR AND THIS PROPOSITION WAS ACCEPTE D BY THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 14/08/2013 IN ITA NO.3123& 951/MUM/2012 COPY OF THE SAME WAS PLACED ON OUR REC ORD AND REFERENCE WAS MADE TO PARA 6.7 OF THE ORDER, WHICH READ AS UNDER : 6.7 SO HOWEVER, A MERE BROWSE OF THE ASSESSEES BA LANCE-SHEET FOR THE RELEVANT YEAREND (PB PGS.4-16), REVEALS TERM LOANS (FROM BAN KS) AT RS.2864.87 LACS AND WORKING CAPITAL ADVANCES (FROM BANKS) AT RS.1401.12 LACS. THE CORRESPONDING YEAR-END BALANCES OF FIXED ASSETS (NET OF DEPRECI ATION) AND NET CURRENT ASSETS ARE AT RS.5237.52 LACS AND RS.3328.29 LACS RESPECTI VELY, SIGNIFYING COMPLETE ABSORPTION OF THE BORROWED FUNDS FOR THE SPECIFIED PURPOSES, I.E., FOR WHICH THEY STAND CONTRACTUALLY AVAILED. THE ASSESSEE, THEREFOR E, IN OUR VIEW, HAS A STRONG PRIMA FACIE CASE OF ENTIRE BANK BORROWINGS BEING AP PLIED FOR THE RESPECTIVE PURPOSES, SO THAT NO PART THEREOF COULD BE SAID TO HAVE BEEN INVESTED IN RELEVANT SECURITIES YIELDING TAX-FREE INCOME. IF SO, NO PART OF THE INTEREST EXPENDITURE THEREON COULD BE ATTRIBUTED TO THE SAID INVESTMENTS ON THE ASSUMPTION OF THE SAME COMPRISING THE GENERAL POOL OF FUNDS. THE MATT ER, ACCORDINGLY, IS TO BE RESTORED TO THE FILE OF THE A.O., WHO SHALL CONFIRM THE UTILIZATION OF THE BORROWED FUNDS FOR THE SPECIFIED PURPOSES FOR THE ENTIRE YEA R, RETURNING A FINDING IN THE MATTER. WHERE SO, THE PROPORTIONATE FORMULA WOULD A PPLY BY EXCLUDING THE CORRESPONDING ASSETS. AS SUCH, IF AN ASSET OF RS.10 0/- IS FINANCED BY BANK BORROWINGS TO THE EXTENT OF RS.75/-, ASSETS TO THAT EXTENT (RS.100/-) WOULD STAND EXCLUDED IN COMPUTING THE PROPORTIONATE FORMULA UND ER RULE 8D; THE FINANCING OF THE SAID ASSET HAVING BEEN ESTABLISHED. 3.1 IT WAS FURTHER SUBMITTED THAT IN RESPECT OF ASS ESSMENT YEAR 2009-08, TRIBUNAL FOLLOWING THE AFOREMENTIONED ORDER HAS AL SO RESTORED BACK THE ISSUE TO THE FILE OF AO AS PER PAPRA-6. REFERENCE WAS MA DE TO THE ORDER DATED 12/11/2014 IN ITA NO.958/MU/2013, COPY PLACED ON RE CORD. THE OBSERVATION READ AS UNDER: 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBUNAL (SUPRA) DATED 14.8. 2013. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND, THE SIMILAR ISSUE WAS ADJUDICATE D BY THE ITAT AND REMANDED THE MATTER TO THE FILE OF THE AO. PARA 7 OF THE SAID TRIBUNALS ORDER (SUPRA) IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARA 7, THE SAME IS EXTR ACTED WHICH READS AS UNDER: 7. IN OUR CLEAR VIEW, THEREFORE, THE INITIAL ONUS T O STATE ITS CASE QUA THE CLAIMED DISALLOWANCE U/S.14A IS ON THE ASSESSEE, WHICH IS T O BE MADE WITH REFERENCE TO ITS . / ITA NO.7630/MUM/2013 / ASSESSMENT YEAR 2010-11 4 ACCOUNTS AND/OR OTHER RECORDS, WITH THE A.O. OBLIGE D TO ALLOW THE ASSESSEE AN OPPORTUNITY TO PROVE THE SAME. THEN THE A.O. IS TO EXAMINE THE SAME WITH A VIEW TO SATISFY HIMSELF AS TO ITS CORRECTNESS, STATING THE REASONS FOR HIS OBJ ECTIVE SATISFACTION, OR NOT SO, AS THE CASE MAY BE, AND PROCEED ACCORDINGLY. IN THE INSTANT CAS E, THE SAID INITIAL ONUS HAVING BEEN CLEARLY NOT DISCHARGED BY THE ASSESSEE, WHICH FINDI NG HAS BEEN ENDORSED BY US, THE DISALLOWANCE CANNOT BE IMPUGNED FOR WANT OF NONCOMP LIANCE OF THE PROCEDURE LAID DOWN U/S.14A(2). AGAIN, HOWEVER, AS WE OBSERVE, NONE OF THE PARTIES OR THEIR REPRESENTATIVES HAVE EVEN AS MUCH AS CARED TO LOOK AT THE FACTS, WH ICH PRIMA FACIE REFLECT AN APPARENT CASE OF BANK BORROWINGS HAVING BEEN AVAILED FOR AND UTILIZED FOR SPECIFIED PURPOSES, SO THAT THE INTEREST THEREON COULD NOT BE SUBJECT TO A PPORTIONMENT ON THE BASIS OF GENERAL POOL OF FUNDS HYPOTHESIS, WHICH WOULD OTHERWISE PRE VAIL. WE CAN ONLY EXPRESS OUR ANGUISH AT THIS CLEAR DISREGARD FOR FACTS, WHICH AR E OF PRIME RELEVANCE IN DECIDING ANY CASE; ON THE CONTRARY, RAISING A HOST OF IRRELEVANT LEGAL ISSUES BEFORE US. THE MATTER MUST, THEREFORE, TRAVEL BACK TO THE FILE OF THE A.O. TO A LLOW THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE IN THE MATTER, WHO SHALL DECIDE THE SAME I N ACCORDANCE WITH THE LAW, ISSUING DEFINITE FINDINGS OF FACT. THE RELEVANT GROUNDS ARE DECIDED ACCORDINGLY. 7. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THE TRIBUNAL HAS RIGHTLY REMANDED THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION AND SPEAKI NG ORDER. RESPECTFULLY, FOLLOWING THE SAID DECISION OF THE TRIBUNAL AS WELL AS FOLLOWING THE P RINCIPLE OF CONSISTENCY, WE REMAND THE ISSUE UNDER CONSIDERATION TO THE FILE OF AO WITH IDENTIC AL DIRECTIONS GIVEN IN THE SAID ORDER OF THE TRIBUNAL. ACCORDINGLY, GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3.2 LD. AR FURTHER SUBMITTED THAT DELETION OF DISAL LOWANCE OF INTEREST ON ACCOUNT OF OWN FUNDS OF THE ASSESSEE HAS BEEN ACCEP TED BY HONBLE HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD., IN I.T. APPE AL NO.330 OF 2012 ORDER DATED 23/07/2014. THUS IT WAS SUBMITTED BY LD. AR THAT GRIEVANCE OF THE ASSESSEE IS REGARDING DISALLOWANCE OF INTEREST CALC ULATED UNDER RULE 8D CALCULATION AT A SUM OF RS.68,09,376/- AND FOR VER IFICATION OF THE OWN FUNDS OF THE ASSESSEE THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO IN LINE WITH THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. AFTER HEARING BOTH THE PARTIES, RESPEC TFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE WE RESTORE THIS ISSUE TO THE FILE OF AO FOR RE-COMPUTATION OF DISAL LOWANCE UNDER SECTION 14A R.W. RULE 8D IN THE SIMILAR MANNER AS HAS BEEN DIRE CTED IN THE AFOREMENTIONED . / ITA NO.7630/MUM/2013 / ASSESSMENT YEAR 2010-11 5 ORDERS OF THE TRIBUNAL. WE DIRECT ACCORDINGLY. F OR STATISTICAL PURPOSES GROUND NO.1 TO 4 ARE TREATED AS ALLOWED IN THE MANNER AFOR ESAID. 6. APROPOS GROUND NO.5 & 6, IT WAS SUBMITTED BY LD. AR THAT LD. CIT(A) HAS DIRECTED THE ASSESSEE TO FILE APPLICATION UNDER SECTION 154 TO CLAIM APPROPRIATE RELIEF AND THE SAME HAS BEEN FILED VIDE LETTER DATED 5/4/2013, BUT AO TILL DATE HAS NOT DECIDED THE SAID APPLICATION. IT WAS SUBMITTED THAT THE AO MAY BE DIRECTED TO DISPOSE OF THE APPLICATION FILED BY THE ASSESSEE EXPEDITIOUSLY. 7. AFTER HEARING BOTH THE PARTIES, SINCE ASSESSEE H AS ALREADY FILED AN APPLICATION UNDER SECTION 154, WE DIRECT THE AO TO DISPOSE OF THE SAID APPLICATION OF THE ASSESSEE AFTER GIVING THE ASSESS EE A REASONABLE OPPORTUNITY OF HEARING WITHIN A PERIOD OF TWO MONTHS FROM THE D ATE OF RECEIPT OF THIS ORDER. WE DIRECT ACCORDINGLY. THESE GROUNDS ARE ALLOWED F OR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 8. IN THE RESULT, APPEAL IS CONSIDERED TO BE ALLOWE D FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 04/06/2015 () * + 04/06/2015 SD/- SD/- ( , / RAJENDRA) ( . . / I.P. BANSAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ( MUMBAI; * DATED 04/06/2015 . / ITA NO.7630/MUM/2013 / ASSESSMENT YEAR 2010-11 6 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. .! ( ) / THE CIT(A)- 4. .! / CIT 5. /0 !12 , ' 12 , ( / DR, ITAT, MUMBAI 6. 3 / GUARD FILE. / BY ORDER, /! ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI . . ./ VM , SR. PS