J.K. HELENE CURTIS LTD, THANE V. DCIT 2(2), MUMBAI

ITA 5534/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2385 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H M WANARE
• Assessee Lawyers: U S AMINDY MANAGER ACCOUNTANT
• Keywords: Earning of tax free income
• Section: 143(3); 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) ./ I.T.A. NO . 5534 /MUM/20 1 5 ( / ASSESSMENT YEAR : 20 11 - 12 ) J K HELENE CURTIS LIMITED, POKHRAN ROAD NO.1, JEKEGRAM, THANE - 400606 / VS. DY. COMMISSIONR OF INCOME TAX 2(2), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACJ2511L / APPELLANT BY: SHRI U S AMIN(DY.MANAGER (ACCOUNTANT) / RESPONDENT BY SHRI H M WANARE / DATE OF HEARING : 2 1 . 7 .201 6 / DATE OF PRONOUNCEMENT : 29 . 7.2016 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 5 , MUMBAI DT. 1 2 . 10 .201 5 PERTAINING TO A.Y. 20 11 - 12 . 2. ONLY GROUND OF APPEAL IS AGAINST THE UPHOLDING OF DISAL LOWANCE OF RS.3,63,102/ - BY THE LD. CIT(A) AS MADE BY THE AO UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D(2)(II) & (III) OF THE INCOME TAX RULES, 1962 , S PECIALLY BY IGNORING THE FACT THAT THE ASSESSEE HAS SUFFICIENT OWN FUNDS TO MA KE INVESTMENT S THAT TOO IN THE GROUP COMPANIES AND DID NOT USE ANY BORROWED FUNDS FOR THE PURPOSE AS SUCH. ITA NO 5534 / M/1 4 2 3. FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 16.9.2011 DECLARING TOTAL INCOME OF RS.22,63,69,550/ - WHICH WAS PROCESSED UN DER SECTION 143(1) ON 9.1.2012 . T HEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES UNDER SECTION 143(2) READ WITH SECTION 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS RECEIVED EXEMPT INCOME BY WAY OF DIVIDEND TO THE TUNE OF RS.4,60,342/ - . THE AO ALSO OBSERVED THAT THE ASSESSEE HAS PURCHASED AND SOLD INVESTMENTS IN SEVERAL MUTUAL FUNDS ON WHICH EXEMPT DIVIDEND INCOME HAS BEEN EARNED. THE A SSESSEE HAS SUO - MOTTU MADE A DISALLOWANCE OF RS.77,240/ - U/S 14A WHILE FILING THE RETURN. THE AO FINDING FAULT WITH THE ASSESSEE IN COMPUTATION OF INCOME ISSUED SHOW CAUSE NOTICE AS TO WHY THE PROVISIONS OF SECTION 14A R.W.RULE 8D SHOULD NOT BE INVOKED. FINALLY THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE AND CALCULATED THE DISALLOWANCE OF RS.10,02,454 / - AND MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE U/S 14A BY ASSESSING THE TOTAL INCOME 22,72,94,764/ - VIDE ORDER DATED 31.1.2014 PASSED UND ER SECTION 143(3) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO IN TURN PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER : 5. I HAD CONSIDERED THE APPELLANT'S SUBMISSIONS. IN THI S CASE THE APPELLANT RECEIVED DIVIDEND INCOME OF RS 4,40,342/ - AND THE AO HAD DISALLOWED AN AMOUNT OF RS.9,25,214/ - AFTER CONSIDERING THE SUO MOTO DISALLOWANCE MADE BY THE APPELLANT OF RS.77,240/ - . DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED THAT THE DISALLOWANCE CANNOT BE MORE THAN THE EXEMPT INCOME OF RS 4,40,3421 - IN VIEW OF THE DELHI HIGH COURT DECISION IN THE CASE OF JOINT INVESTMENTS P LTD V ITA NO 5534 / M/1 4 3 IS CIT REPORTED IN 372 ITR 694 (2015). I FIND MERIT IN THE ARGUMENT OF THE APPELLANT. HENCE, THE DISALLOWANCE U/S 14A R.W.R. 8D(2)(II)(III) IS RESTRICTED TO THE AMOUNT OF EXEMPT INCOME EARNED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AT RS 4,40,342/ - . HOWEVER, SINCE THE APPELLANT HAS ALREADY DISALLOWED AN AMOUNT OF RS 77,2401 - , THE BALANCE AMOUNT OF RS . 3,63,102/ - IS TREATED AS DISALLOWANCE U /S 14A R.W.R. 8D(2)(II)(III)OF THE ACT. IN VIEW OF THE ABOVE THE DISALLOWANCE U/S 14A R.W.R. 8D(2)(II)(III) IS RESTRICTED TO RS 3,63,102/ - INSTEAD OF RS 9,25,214/ - AS DISALLOWED BY THE AO. STILL AGGR IEVED BY THE ORDER OF LD.CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 4 . AT THE TIME OF HEARING, THE LD.AR SUBMITTED THAT BEFORE US THAT WHEN THE ASSESSEES OWN FUNDS IS SUFFICIENT TO COVER THE INVESTMENT S MADE IN THE GROUP COMPANIES AND THEREFORE THE DI SALLOWANCE WAS WRONGLY CALCULATED BY THE AO AND ALSO WRONGLY RESTRICTED AND SUSTAINED BY THE LD.CIT(A) . THE LD. AR FURTHER SUBMITTED THAT ASSESSEES OWN FUNDS WERE FAR MORE THAN THE INVESTMENT S MADE IN THE GROUP COMPANIES AND ALSO THE INVESTMENT S IS O F STRATEGIC NATURE AND THEREFORE THE DISALLOWANCE MADE BY THE AO AND PARTLY ALLOWED BY THE LD.CIT(A) DESERVED TO BE DELETED. 5 . AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF RECORDS, WE FIND THAT THE ASSESSEE HAS MADE INVESTMENT S IN GROUP COMPANIES OUT OF ITS OWN FUNDS AND NO BORROWED FUNDS WERE USED FOR THE SAID INVESTMENTS AND THE INVESTMENTS WERE OF STRATEGIC NATURE AND NOT MADE WITH MOTIVE OF EARNING DIVIDEND AND THEREFORE PROVISIONS OF SECTION 14A R.W.R 8D CANNOT BE INVOKED. BUT THIS REQUIRE S VERIFICATION AND THEREFORE IT WOULD BE JUST AND PROPER IF THE ITA NO 5534 / M/1 4 4 MATTER IS RESTORED TO THE FILE OF AO. WE THEREFORE, DIRECT THE AO TO VERIFY WHETHER OWN FUNDS OF THE ASSESSEE ARE MORE THAN INVESTMENTS IN GROUP COMPANIES AND DELETE THE ADDITION ACCORDINGL Y. 6 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29TH JULY, 2016 . 29TH JULY, 2016 S D SD (JOGINDER SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 29TH JULY, 2016 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CO NCERNED 5. 6. , , / DR, ITAT, MUMBAI CONCERNED / GUARD FILE. / BY ORDER, T R UE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI