SHAREKHAN FINANCIAL SERVICES P. LTD, MUMBAI V. ASST CIT CEN CIR 22, MUMBAI

ITA 5861/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83578 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SAMI
• Assessee Lawyers: HIRO RAJ
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K.BILLAIYA, AM, AND SHRI SANJAY GARG, JM ./ I.T.A. NO. 5861/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) S HAREKHAN FINANCIAL SERVICES (P) LTD. LODHA I, THINK TECHNO CAMPUS, 10 TH FLOOR, BETA BUILDING, OFF JVLR, KANJURMARG (E), MUMBAI-400042 / VS. ASST. CIT CENTRAL CIRCLE 22, 403, AAYAKAR BHAVAN, 4 TH FLOOR, M.K.ROAD, MUMBAI-400020 ./ PAN : AAICS5627E ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI HIRO RAJ / RESPONDENT BY : SHRI VIJAY KUMAR SAMI / DATE OF HEARING : 12/08/2014 / DATE OF PRONOUNCEMENT : 20 /08/2014 !' / O R D E R PER N.K.BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-39, MUMBAI, DATED 30/06/2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO T HE DISALLOWANCE OF ` .88,84,319/- U/S-14A OF THE ACT. 3. ASSESSEE IS IN THE BUSINESS OF FINANCIAL SERVICE S AND ALSO DEALS IN SECURITIES AND COMMODITIES. WHILE SCRUTINIZING THE RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE HAS BOTH EXEMPT INCOME YIELDING INVESTMENT AS WELL BUSINESS ASSETS IN THE BALANCE SHEET. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS BOTH TAXABLE AS WELL AS EXEMPT INC OME. CONSOLIDATED ACCOUNTS ARE MAINTAINED. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D SHOULD NOT BE ITA NO.5861/MUM/2011 2 MADE. THE ASSESSEE FILED A DETAILED REPLY DATED 26 /11/2010 CLAIMING THAT THE INTEREST FREE FUNDS ARE MORE THAN THE INVESTMEN TS. CONSEQUENTLY RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. IT W AS FURTHER POINTED OUT THAT THE ASSESSEE HAS SUO MOTO DISALLOWED EXPENSES OF ` .1,20,000/- U/S 14A. THIS SUBMISSION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO, WHO WAS OF THE OPINION THAT THE ASSESSEE HAS TO BE ESTA BLISH THAT AS ON THE DATE OF INVESTMENT INTEREST FREE FUNDS WERE AVAILABLE WI TH THE ASSESSEE AND ARE SUFFICIENT TO MEET ITS INVESTMENT. THE AO PROCEEDED BY COMPUTING THE DISALLOWANCE AND WORKED OUT THE DISALLOWANCE AT ` .90,04,319/- AND AFTER ALLOWING THE DEDUCTION OF ` .1,20,000/- A SUM OF ` .88,84,319/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIE D THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 4. BEFORE US, THE COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FINANCIAL POSITION OF THE ASSESSEE AND POINTED OUT THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE OWN FUNDS TO COVER THE INVESTMENT. IN SUPPORT, THE COUNSEL RELIED UPON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD 313 ITR 340 AND ALSO ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. IN ITA NO.330 OF 2012. THE COUNSEL ALSO RELIED UPON THE DECISIONS OF THE TRIBUNAL MUMBAI BENCHES. PER CONT RA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY PERUSED THE ORDER OF THE LOWER AUTHORITIES AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT BEFORE US. THE BALANCE SHEET OF THE ASSESSEE SHOWS THAT IT HAS INTEREST FREE FUNDS AMOUNTING TO ` .14,88,38,332/-, THE INVESTMENT IS AT ` .9,71,56,751/-, WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS HAVING SUFFICIENT INTER EST FREE FUNDS TO MAKE THE INVESTMENT. A FURTHER PERUSAL OF THE BALANCE S HEET SHOWS THAT THE ASSESSEE WAS HAVING LOAN FUNDS AS ON 31/03/2007 AT ` 33,29,48,063/- ITA NO.5861/MUM/2011 3 WHEREAS THE LOAN FUNDS AS ON 31/03/2008 IS AT ` .1,36,00,000/-, WHICH SHOWS THAT THERE IS A SUBSTANTIAL FALL IN THE LOAN FUNDS WHICH MEANS THAT THERE ARE NO FRESH BORROWINGS DURING THE YEAR UNDER CONSIDERATION. ON SIMILAR FACTS THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (SUPRA) HAS HELD THAT IF THERE BE INTEREST FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INV ESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESU MED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUNDS AVAIL ABLE. IN THE CASE IN HAND THE FACTS ARE MORE IN FAVOUR OF THE ASSESSEE A S MENTIONED HERE IN ABOVE THAT THERE ARE NO FRESH BORROWINGS DURING THE YEAR UNDER CONSIDERATION. A SIMILAR VIEW WAS TAKEN BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD(SUPRA). CONSIDE RING THE FACTS IN TOTALITY IN THE LIGHT OF DECISIONS REFERRED HERE IN ABOVE, IN OUR CONSIDERED VIEW, THERE IS NO BASIS FOR DEEMING THAT THE ASSESS EE HAD USED THE BORROWED FUNDS FOR INVESTMENTS IN TAX FREE SECURITI ES. FROM THE ANALYSIS OF THE BALANCE SHEET, THE ASSESSEE HAD ENOUGH INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING ITS INVESTMENT. WE THEREFORE S ET-ASIDE THE FINDINGS OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF ` 88,84,319/- MADE U/S 14A OF THE ACT. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/08/2014 !' # $ % &! 20 /08/2014 , ' ( SD/- (SANJAY GARG) SD/- (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ ) MUMBAI; &! /DATED : 20 TH AUGUST, 2014. F{X~{TA F{X~{TA F{X~{TA F{X~{TA P.S. P.S. P.S. P.S. ITA NO.5861/MUM/2011 4 ' # $%&' ('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT- , MUMBAI. 4. * / CIT(A)- , MUMBAI 5. +,' --./ , ./ , $ ) / DR, ITAT, MUMBAI 6. '01 2 / GUARD FILE. ' ) / BY ORDER, + - //TRUE COPY// * / )+ , (DY./ASSTT. REGISTRAR) , $ ) / ITAT, MUMBAI