CENTRUM CAPITAL LTD, MUMBAI V. DCIT CIR 2(1), MUMBAI

ITA 5594/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3971 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 01-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2011
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY SURENDRA NIJSURE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO. 5594/MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTNT MEMBER) I.T.A. NO.5594/MUM/2011 (ASSESSMENT YEAR : 2008-09) CENTRUM CAPITAL LTD 2 ND FLOOR, BOMBAY MUTUAL BLDG DR. D.N. ROAD, FORT MUMBAI 400 001 VS DY.CIT, CIR.2(1) MUMBAI PAN :AACC5099G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI J.D. MISTRY / SURENDRA NIJSURE RESPONDENT BY SHRI ABHISHEK SHARMA DATE OF HEARING : 03-05-2016 DATE OF ORDER : 05-05-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY ASSESSEE RAISING VAR IOUS FACETS OF DISALLOWANCE MADE U/S 14A FOR ASSESSMENT YEAR 2008- 09. 2. DURING THE COURSE OF HEARING BEFORE US THE LD.CO UNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE OF DISALLOWANCE OF COMPONE NT OF INTEREST STANDS COVERED WITH THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2009-10 WHEREIN THE SAME HAS BEEN DELETED ON THE GROUND THA T OWN FUNDS OF THE 2 ITA NO. 5594/MUM/2011 ASSESSEE ARE MORE THAN THE AMOUNT OF INVESTMENT MAD E IN THE TAX FREE SECURITIES. WITH REGARD TO DISALLOWANCE OUT OF OTH ER EXPENSES ALSO IT WAS SUBMITTED THAT THE SAME ISALSO NOT SUSTAINABLE IN V IEW OF VARIOUS DECISIONS IN FAVOUR OF THE ASSESSEE. 3. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE LOWER AUTHORITIES. 4. WITH THE ASSISTANCE OF THE PARTIES IT WAS NOTICE D BY US THAT THE TRIBUNAL HAS DECIDED THE ISSUE OF DISALLOWANCE OF INTEREST I N THE CONTEXT OF SECTION 14A VIDE ITS ORDER DATED 29-01-2016 IN ITA NO.7708/MUM/ 2012 WITH THE FOLLOWING OBSERVATIONS :- 6.5.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD ; INCLUDING THE JUDIC IAL PRONOUNCEMENTS CITED. IT IS SEEN FROM THE DETAILS PLACED BEFORE US , THAT THE ASSESSEE HAS SHOWN THAT IN THE PERIOD UNDER CONSIDERATION IT HAS HU GE SURPLUS FUNDS I.E. FROM SHARE CAPITAL AND RESERVES AND SURPLUS, FAR IN EXCE SS OF THE INVESTM4ENTS AND THEREFORE IT CAN BE REASONABLY PRESUME D THAT NO INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR MAKING THESE INV ESTMENTS IN TAX FREE SECURITIES. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. HEDFC BANK LTD IN ITA NO.330 OF 2012 DT. 23. 7.2014 AT PARAS 4 AND 5 THEREOF HAS LAID DOWN THE PROPOSITION THAT, IF THE AS SESSEES CAPITAL, PROFITS, RESERVES AND SURPLUS AND CURRENT ACCOUNT DEPOSITS ARE HI GHER THAN THE INVESTMENTS IN TAX FREE SECURITIES, THEN IT WOULD BE PRESUMED THAT THE INVESTMENTS MADE BY THE ASSESSEE WOULD BE OUT OF I NTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THIS DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA) HAS BEEN FOLLOWED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CENTRUM DIRECT LTD IN ITA NO.5595/MUM/201 1 DT. 15.10.2015. RESPECTFULLY FOLLOWING HE DECISION OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OF (SUPRA) AND OF THE CO-ORDINATE BENCH IN THE CASE OF CENTRUM DIRECT LTD. IN ITA NO. 5595/MUM/2011 T.15.10.2015, WE CONC UR WITH THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE OF INTEREST CAN BE MADE U/ 14A R.W.RULE 8D OF THE ACT. 3 ITA NO. 5594/MUM/2011 5. WITH REGARD TO DISALLOWANCE OUT OF EXPENSES U/R 8D(2)(III) IT WAS FURTHER SUBMITTED THAT NO DISALLOWANCE COULD HAVE BEEN MADE ON ACCOUNT OF INVESTMENT MADE IN SUBSIDIARIES FOR STRATEGIC REASO NS. IT WAS FURTHER SUBMITTED THAT THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT EXCE ED EXEMPT INCOME. 6. WE FIND FORCE IN THE ARGUMENTS OF THE LD.COUNSEL AND SEND THE ISSUE OF DISALLOWANCE U/S 14A BACK TO THE FILE O ASSESSING O FFICER WITH FOLLOWING DIRECTIONS:- A. IN CASE OWN FUNDS ARE MORE THAN TAX FREE INVESTM ENTS, THEN, NO DISALLOWANCE ON ACCOUNT OF INTEREST SHOULD BE MADE U/S 14A. B. THE AMOUNT OF DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME RECEIVED BY THE ASSESSEE DURING THE YEAR UND ER CONSIDERATION. C. AMOUNT OF INVESTMENT MADE IN SUBSIDIARY COMPANIE S FOR STRATEGIC REASONS SHOULD BE EXCLUDED FROM THE AMOUNT OF INVES TMENT TO BE CONSIDERED FOR MAKING DISALLOWANCE OUT OF EXPENSES U/R 8D(2)(III). 7. THE ASSESSEE SHALL SUBMIT REQUISITE DETAILS AND EVIDENCES BEFORE THE ASSESSING OFFICER IN SUPPORT OF ITS CLAIM FOR WHICH THE ASSESSING OFFICER SHALL GIVE ADEQUATE OPPORTUNITY O HEARING TO THE ASSESSEE AND SHALL CONSIDER ENTIRE MATERIAL PLACED BEFORE HIM BY THE ASSESSEE BEFORE D ECIDING THIS ISSUE AFRESH. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES BEFORE THE ASSESSING OFFICER. 8. WITH THESE DIRECTIONS, THE GROUNDS RAISED BEFORE US ARE SENT BACK TO THE FILE OF THE ASSESSING OFFICER AND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 4 ITA NO. 5594/MUM/2011 9. AS A RESULT, THIS APPEAL IS TREATED AS ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE CONCLUSIO N OF THE HEARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 05 TH MAY, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , C,BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES