ACIT - CIRCLE- 6 (2)(1), MUMBAI V. ESJAY INTERNATIONAL PVT. LTD., MUMBAI

ITA 5776/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5089 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 08-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT PRATAP SINGH
• Keywords: Earning of tax free income; Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 5776 /MUM/201 8 ( ASSESSMENT YEAR : 2014 - 15 ) ASSISTANT COMMISSIONER OF INCOME TAX CIR 6(2)(1) MUMBAI ROOM NO.504, 5 TH FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. M/S. ESJAY INTERNATIONAL PVT. LTD., GALA NO.48, 4 TH FLOOR LAXMI INDUSTRIAL ESTATE HANUMAN GALLY, LOWER PAREL MUMBAI 400 013 PAN/GIR NO. AAACE1066B (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI AMIT PRATAP SINGH REVENUE BY SHRI HITEN CHANDE DATE OF HEARING 05 / 11 /2019 DATE OF PRONOUNCEMENT 06 / 11 /2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 5776/MUM/2018 FOR A.Y. 2014 - 15 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI IN APPEAL NO. CIT(A) - 12/DCIT - 6(2)(2)/C - 144/17 - 18 DATED 03/07/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 144C(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 25 /12/2017 BY THE LD. ASST.CIT 6(2)(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). ITA NO .5776/MUM/2018 M/S. ESJAY INTERNATIONAL P. LTD., 2 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS WITH REGARD TO DELETION OF DISALLOWANCE MADE BY THE LD. CIT(A) U/S.14A OF THE ACT. 3. WE HAVE HEARD RIVAL SUBMI SSIONS. WE FIND THAT ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.64,34,281/ - AND CLAIMED THE SAME AS EXEMPT IN THE RETURN OF INCOME. WE FIND THAT THE ASSESSEE HAD MADE SUOMOTO DISALLOWANCE OF RS.13,38,207/ - U/S.14A OF THE ACT R.W.RULE 8D OR THE RULES IN THE RETURN OF INCOME BY CONSIDERING ONLY THOSE INVESTMENTS WHICH HAD YIELDED DIVIDEND INCOME IN TERMS OF R ULE 8D(2)(III) O F THE RULES. THE LD. AO HOWEVER PROCEEDED TO DISALLOW U/S.14A OF THE ACT BY APPLYING THE SECOND AND THIRD LIMBS OF R ULE 8D(2) OF THE RULE S IN THE SUMS OF RS.1,40,49,002/ - AND RS.28,47,647/ - RESPECTIVELY. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY OBSERVED THAT ASSESSEE IS HAVING SUFFICIENT OWN FUNDS FOR MAKING INVESTMENTS WHICH HAD YIELDED EXEMPT INCOME AND BY PLACING RELIANCE ON THE DEC ISIONS OF THE HON BLE HIGH COURT S IN THE CASE OF RELIANCE UTILITIES AND POWER LTD., REPORTED IN 313 ITR 340 AND HDFC BANK LTD. REPORTED IN 3 6 6 ITR 505 , HAD DIRECTED THE LD. AO TO DELETE THE DISALLOWANCE OF INTEREST UNDER SECOND LIMB OF R ULE 8D(2) OF THE R ULES. THIS FACTUAL FINDING OF THE LD. CIT(A) OF AVAILABILITY OF OWN FUNDS WITH THE ASSESSEE FOR MAKING INVESTMENTS HAD NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE, WE DO NOT DEEM IT FIT TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. 3.1. WITH REGARD TO DISALLOWANCE OF INDIRECT EXPENSES UNDER THIRD LIMB OF R ULE 8D(2) OF THE RULES, WE FIND THAT THE LD. CIT(A) HAD CONSIDERED THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENT (P) LTD REPORTED IN 165 ITD 27 W HEREIN IT WAS HELD THAT ONLY THOSE INVESTMENTS WHICH HAD YIELDED DIVIDEND INCOME SHOULD BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE UNDER R ULE 8D. THE LD. CIT(A) ITA NO .5776/MUM/2018 M/S. ESJAY INTERNATIONAL P. LTD., 3 OBSERVED THAT IF SUCH RATIO IS APPLIED, THE DISALLOWANCE WOULD WORK OUT ONLY TO RS. 7,83,598/ - WHEREAS THE ASSESSEE ITSELF HAD MADE SUOMOTO DISALLOWANCE OF RS.13,38,207/ - . ACCORDINGLY, THE LD. CIT(A) HAD HELD THAT NO FURTHER DISALLOWANCE IS WARRANTED AS PER RULE 8D(2)(III) OF THE RULE S . WE DO NOT FIND ANY INFIRMITY IN THE SAID ORDER OF THE LD. CI T(A) AS THE SAME HAS BEEN PASSED IN ACCORDANCE WITH BINDING JUDICIAL PRECEDENTS STATED SUPRA. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 / 11 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 06 / 11 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APP ELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//