BROADCAST INITIATIVES LTD, MUMBAI V. ACIT 8 (OSD),

ITA 5863/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100819 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P PATHAKDR
• Keywords: Opportunity of being heard; Earning of tax free income; Proportionate interest
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER , , , ITA NO.5863 //MUM/2011 ASSESSMENT YEAR: 2007-08 M/S BROADCAST INITIATIVES LTD. 6 TH FLOOR, ADHIKARI CHAMBERS, NEW LINK ROAD, ANDHERI (WEST), MUMBAI-400053 / VS. INCOME TAX OFFICER-8(1)(2), ROOM NO.205, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO. AAICS3595F ITA NO.6092 //MUM/2011 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER-8(1)(2), ROOM NO.205, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S BROADCAST INITIATIVES LTD. 6 TH FLOOR, ADHIKARI CHAMBERS, NEW LINK ROAD, ANDHERI (WEST), MUMBAI-400053 ( $ / REVENUE) ( !' # /ASSESSEE) P.A. NO. AAICS3595F $ / REVENUE BY SHRI C.P. PATHAK-DR !' # / ASSESSEE BY SHRI AJAY R. SINGH M/S BROADCAST INITIATIVES LTD. ITA NO.5863 & 6092/MUM/2011 2 $% & # ' / DATE OF HEARING : 17/08/2015 & # ' / DATE OF ORDER: 09/09/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS REVENUE IS IN CROSS APPEAL S AGAINST THE IMPUGNED ORDERS BOTH DATED 08/06/2011 O F THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, FOR ASSESSMENT Y EAR 2007- 08. 2. FIRST, WE SHALL TAKE UP APPEAL OF THE ASSESSEE ( ITA NO.5863/MUM/2011), WHEREIN, THE FIRST GROUND RAISED BY THE ASSESSEE PERTAINS TO DISALLOWING A SUM OF RS.1,11,8 5,305/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAF TER THE ACT). THE CRUX OF ARGUMENT ADVANCED BY SHRI AJAY R. SINGH , LD. COUNSEL FOR THE ASSESSEE, IS IDENTICAL TO THE GROUN D RAISED BY CONTENDING THAT THIS IS NOTHING BUT REIMBURSEMENT T O THE PARENT COMPANY BY ADDING THAT THERE WAS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND PARENT COMPANY. PLEA WAS ALSO RAISED THAT IN EARLIER YEAR, IDENTICALLY T HE CLAIM OF THE ASSESSEE WAS ACCEPTED. OUR ATTENTION WAS INVITED T O PAGE 5 PARA 2.3.1 OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALONG WITH PAGE 51 OF THE PAPER BOOK. AT THIS STAGE, THE LD. DR, SHRI C.P.PATHAK, POINTED OUT THAT ADDIT IONAL EVIDENCE HAS BEEN FILED BY THE ASSESSEE. THIS FACTU AL MATRIX WAS NOT CONTROVERTED BY THE ASSESSEE. AT THIS STAGE , IT WAS PLEADED BY THE LD. DR THAT, BEING THE ADDITIONAL EV IDENCE, THIS M/S BROADCAST INITIATIVES LTD. ITA NO.5863 & 6092/MUM/2011 3 GROUND MAY BE REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER, SO THE INTEREST OF THE REVENUE MAY BE SAFE GUARDED. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE REMAND THIS GROUND TO THE FILE OF THE LD. ASSESS ING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND ADJUDICATE THE ISSUE AFRESH. THE LD. ASSESSING OFFICER EXAMINE WHETHER THE PAYMENT WAS MADE TOWARDS REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE ASSESSES BY THE PARENT CO MPANY AND RECOVERED FROM THE APPELLANT COMPANY ON ACTUAL BASI S AND ALSO WHETHER THE PARENT COMPANY DEDUCTED TDS, WHERE VER APPLICABLE, ON BEHALF OF THE APPELLANT COMPANY AND PAID TO THE CREDIT OF THE GOVERNMENT, WHILE MAKING PAYMENT TO A LL THE PAYEES AS PER THE PROVISION OF THE ACT. THE ASSESSI NG OFFICER IS ALSO TO EXAMINE WHETHER THERE IS A DOUBLE DEDUCTION . THIS GROUND NEEDS TO BE EXAMINED AFRESH. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM, THEREFOR E, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 3. THE NEXT GROUND PERTAINS TO APPLICATION OF RULE 8D AND DISALLOWANCE OF INTEREST EXPENSES OF RS.22,71,7 00/- ON BORROWED FUNDS. THE CRUX OF ARGUMENT ADVANCED ON BE HALF OF THE ASSESSEE IS THAT NEXUS WAS NOT ESTABLISHED WITH THE INVESTMENT MADE, MOREOVER, NO EXEMPT INCOME WAS EAR NED BY THE ASSESSEE. ON THE OTHER HAND, THE LD. DR DEFEND ED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. M/S BROADCAST INITIATIVES LTD. ITA NO.5863 & 6092/MUM/2011 4 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE MADE INVESTMENT OF RS.7 CRORE AND GAVE LOANS TO THE SUBSIDIARY AMOUNTING TO RS.6,28,00,000 /-. THE ASSESSEE ALSO CLAIM FINANCE CHARGES OF RS.3,00,57,7 13/-. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER AS TO W HY PROPORTIONATE INTEREST EXPENDITURE MAY NOT BE DISAL LOWED. THE STAND OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD A SUBSIDIARY COMPANY NAMELY SHRI ADHIK ARI BROTHERS MEDIA LTD. (IN SHORT SABMI). THE ASSESSEE APPLIED FOR THE SHARE OF SUBSIDIARY AND PAID AN AMOUNT OF RS.3. 90 CRORES AND LOAN OF RS.6.28 CRORES. THE ASSESSEE CAME WITH AN IPO AND RAISED RS.111.76 CRORES. THE ASSESSEE COMPANY W AS PAYING INTEREST AT THE RATE OF 10.5% TO ITS LENDERS FOR RS.4.97 CRORES. THE ASSESSING OFFICER RELIED UPON THE CASE OF CHEM INVEST LTD. VS ITO 317 ITR 86 AND HELD THAT DISALLO WANCE U/S 14A CAN BE MADE EVEN IF NO EXEMPT INCOME IS ACTUALL Y EARNED OR RECEIVED DURING THE YEAR FOR INVESTMENT IN STOCK S, SHARES, TAX FREE BONDS, TAX FREE SCHEMES, ETC. THE LD. ASSE SSING OFFICER MADE A DISALLOWANCE U/S 14A R.W.R 8D, WHICH CAME TO RS.22,71,700/- . WITHOUT GOING INTO MUCH DELIBERAT ION, WE ARE OF THE VIEW, SINCE THE ASSESSMENT YEAR INVOLVED IS 2007-08, THEREFORE, IN VIEW OF THE DECISION FROM HONBLE JUR ISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. COMPANY LTD. VS D CIT, RULE 8D OF THE RULES IS NOT APPLICABLE. IN THE ABS ENCE OF APPORTIONMENT OF DIRECT AND INDIRECT EXPENSES, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE A SSESSING OFFICER TO WORK OUT THE DISALLOWANCES AS PER THE OR DER OF THE M/S BROADCAST INITIATIVES LTD. ITA NO.5863 & 6092/MUM/2011 5 HONBLE HIGH COURT, THUS, WE FIND NO INFIRMITY IN T HE DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), TH US, THIS GROUND WAS RIGHTLY ALLOWED FOR STATISTICAL PURPOSES . THIS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES. 4. NOW, WE SHALL TAKE APPEAL OF THE REVENUE (ITA NO.6092/MUM/2011), WHEREIN, THE DEPARTMENT HAS CHALLENGED INTERPRETATION OF THE PROVISION OF SECTI ON 14A R.W.R.8D OF THE RULES BY CONTENDING THAT IT WAS NOT INTERPRETED IN RIGHT PERSPECTIVE BY FOLLOWING THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE MFG. COMPANY LTD. VS DCIT (328 ITR 81), WHICH HAS N OT BEEN ACCEPTED BY THE REVENUE. THE LD. DR ADVANCED HIS AR GUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED. ON THE O THER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCL USION ARRIVED AT IN THE IMPUGNED ORDER. ON CONSIDERATION OF FACTS AND THE BINDING NATURE OF THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN 328 ITR 81, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. SO FAR AS, THE CONTENTION OF THE LD. DR THAT THE AFORESAID DECISIO N HAS NOT BEEN ACCEPTED BY THE DEPARTMENT, SINCE, NO CONTRARY DECISION FROM HONBLE JURISDICTIONAL HIGH COURT (LATER DECIS ION) OR FROM HONBLE APEX COURT WAS BROUGHT TO OUR NOTICE, THERE FORE, WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). EVEN OTHERWISE, WHILE DISPOSING OFF GRO UND NO.2 IN THE APPEAL OF THE ASSESSEE, WE AFFIRMED THE DIRECTI ON OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, TH E APPEAL M/S BROADCAST INITIATIVES LTD. ITA NO.5863 & 6092/MUM/2011 6 OF THE REVENUE HAS REMAINED FOR ACADEMIC INTEREST O NLY. THUS, WE FIND NO MERIT IN THE APPEAL, THEREFORE, DISMISSE D. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/08/2015. SD/ - (RAJESH KUMAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 09/09/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./ ,- / THE RESPONDENT. 3. 0 0 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1# / CIT(A)- , MUMBAI 5. 3$4 .# , 0 *+' * 5 , % / DR, ITAT, MUMBAI 6. 6! 7% / GUARD FILE. / BY ORDER, /3+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI