M/S. ESQUIRE SHIPPING & TRADING PVT. LTD, MUMBAI V. THE ACIT 6(2)(2), MUMBAI

ITA 5484/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8504 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 28-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ABIRAMA KARTHIKEYAN LD
• Assessee Lawyers: MAHESH A RAJORA LD
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA NO.5484/MUM/2017 ESQUIRE SHIPPING & TRADING PVT. LTD. ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5484/MUM/2017 ( / ASSESSMENT YEAR: 2014-15) ESQUIRE SHIPPING & TRADING PVT. LTD. 2 ND FLOOR, J.V.HOUSE D.V.BABREKAR MARG DADAR (WEST) MUMBAI 28 / VS. ASST. COMMISSIONER OF INCOME TAX-6(2)(2) ROOM NO. 506 AAYKAR BHAVAN, M.K.ROAD 5 TH FLOOR, CHURCHGATE MUMBAI-20 ./ ./PAN/GIR NO. AAACE-7376-C ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : MAHESH A. RAJORA - LD.AR REVENUE BY : S.ABIRAMA KARTHIKEYAN, LD. DR / DATE OF HEARING : 02/01/2019 / DATE OF PRONOUNCEMENT : 03/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-12/ACIT-6(2)(2)/204/16-17 DATED 01/05/2017 QUA CONFIRMATION OF DISALLOWANCE U/S 14A. THE ASSESSMEN T FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISS IONER OF ITA NO.5484/MUM/2017 ESQUIRE SHIPPING & TRADING PVT. LTD. ASSESSMENT YEAR: 2014-15 2 INCOME TAX CIRCLE 6(2)(2), MUMBAI [AO] U/S 143(3) ON 22/12/2016 WHEREIN THE INCOME WAS ASSESSED AT RS.150.12 LACS A FTER SOLE ADDITION U/S 14A FOR RS.2.96 LACS AS AGAINST RETURNED INCOME OF RS.147.15 LACS FILED BY THE ASSESSEE ON 29/11/2014. THE ASSESSEE B EING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN CARGO HANDLING AND MARITIME CONSULTANCY. 2. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.2,27,333/- AND OFFERED SUO-MOTO DISALLOWANCE OF RS.42,572/- AGAINST THE SAME. HOWEV ER, LD. AO, BY APPLYING RULE 8D, WORKED AT AGGREGATE DISALLOWANCE OF RS.2.96 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D (2)(II) FOR RS.1.54 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS .1.41 LACS. THE DISALLOWANCE OF RS.2.96 LACS WAS ADDED TO THE INCOM E OF THE ASSESSEE WITHOUT ADJUSTING THE SUO-MOTO DISALLOWANCE OFFERED BY THE ASSESSEE. UPON FURTHER APPEAL, FIRST APPELLATE AUTHORITY WHIL E CONFIRMING THE IMPUGNED ADDITIONS, DIRECTED LD. AO TO ADJUST THE SUO-MOTO DISALLOWANCE ALREADY OFFERED BY THE ASSESSEE. AGGRI EVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US WHEREIN LD. AUTHORIZ ED REPRESENTATIVE FOR ASSESSEE [AR] SUBMITTED THAT THE SUO-MOTO DISALLOWANCE OFFERED BY THE ASSESSEE WAS FAIR AND REASONABLE. 3.1 UPON CAREFUL CONSIDERATION OF FINANCIAL STATEME NTS, IT EMERGES THAT ASSESSEES OWN FUNDS IN THE SHAPE OF SHARE CAPITAL & FREE RESERVES FAR EXCEEDED THE INVESTMENT HELD BY THE ASSESSEE AND TH E INVESTMENTS GOT REDUCED IN THE IMPUGNED AY. THEREFORE, IN TERMS OF BINDING DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS. RELIANCE UTILITIES & POWER LTD. [313 ITR 340] & CIT VS. HDFC BANK LTD. [ 366 ITR 505], A ITA NO.5484/MUM/2017 ESQUIRE SHIPPING & TRADING PVT. LTD. ASSESSMENT YEAR: 2014-15 3 PRESUMPTION WAS TO BE DRAWN IN ASSESSEES FAVOR THA T THE INVESTMENTS WERE MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THEREFORE, INTEREST DISALLOWANCE U/R 8D(2)(II) COUL D NOT BE HELD TO BE JUSTIFIED. WE ORDER SO. 3.2 SO FAR AS THE EXPENSE DISALLOWANCE U/R 8D(2)(II I) IS CONCERNED, WE FIND THAT THE ASSESSEE HAS EARNED THE STATED EXEMPT DIVIDEND INCOME ONLY FROM ONE INVESTMENT I.E. DWS ULTRA SHORT-TERM FUND. THE AVERAGE INVESTMENTS IN THIS FUND IS RS.25.49 LACS & 0.5% OF THE SAME COMES TO RS.12,749/- WHICH IS LESS THAN SUO-MOTO DISALLOWANCE OF RS.42,572/- OFFERED BY THE ASSESSEE. THIS COMPUTATION IS IN LIN E WITH THE DECISION OF DELHI TRIBUNAL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.COM 415] WHEREIN IT HAS BEEN HELD THAT ONLY EXEMPT INCOME YIELDING INVESTMENTS WERE TO BE CONSI DERED TO ARRIVE AT THE SAID DISALLOWANCE. THEREFORE, THE ADDITIONAL EX PENSE DISALLOWANCE, AS COMPUTED BY LD. AO ALSO COULD NOT BE SUSTAINED. IN NUTSHELL, THE SUO- MOTO DISALLOWANCE ALREADY OFFERED BY THE ASSESSEE WAS JU STIFIED AND THEREFORE, ADDITIONAL DISALLOWANCE OF RS.2.53 LACS AS SUSTAINED BY FIRST APPELLATE AUTHORITY WAS TO BE DELETED. WE ORDER SO. 4. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JANUARY, 2019. SD/- SD/- (PAWAN SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/01/2019 SR.PS:- JAISY VARGHESE !'#' / COPY OF THE ORDER FORWARDED TO : ITA NO.5484/MUM/2017 ESQUIRE SHIPPING & TRADING PVT. LTD. ASSESSMENT YEAR: 2014-15 4 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * +!$, , , , / DR, ITAT, MUMBAI 6. + -. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.