IDEAL TOLL & INFRASTRUCTURE P. LTD, MUMBAI V. ITO 6(1)(2), MUMBAI

ITA 6193/MUM/2013

• Counselvise Citation: 619319914 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2008-2009
• Appeal Filed On: 22-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACHHIDANAND DUBEY
• Assessee Lawyers: A K GHOSH
• Section: 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO.6193/MUM/2013 / ASSESSMENT YEAR 2008-09 IDEAL TOLL & INFRASTRUCTURE PRIVATE LIMITED, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST) MUMBAI 72. / VS. THE INCOME TAX OFFICER 6(1)(2), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ./ ./ PAN/GIR NO. : AAACJ 9074C ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI A.K.GHOSH RESPONDENT BY SHRI SACHHIDANAND DUBEY ! ' / DATE OF HEARING : 26/05/2015 ! ' / DATE OF PRONOUNCEMENT : 26/05/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-14, MUMBAI DATED 27/09/2013 FO R ASSESSMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DI SALLOWANCE MADE U/S 14A R.W. RULE 8D(III) OF RS.20,68,102/- WITHOUT APPRECI ATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING TH E ADDITION MADE TO THE BOOK PROFIT U/S. 115JB OF RS.21,89,059/- ON ACCOUNT OF A MOUNT DISALLOWED U/S.14A WITHOUT APPRECIATING THE FACTS OF THE CASE. . / ITA NO.6193/MUM/2013 / ASSESSMENT YEAR 2008-09 2 2. IN THIS CASE THE ASSESSEE HAD EARNED DIVIDEND I NCOME OF RS.1,08,362/- ON MUTUAL FUNDS WHICH WAS TAX FREE. APPLYING RULE 8D AO HAS DISALLOWED A SUM OF RS.21,89,059/- AS PER FO LLOWING CALCULATIONS: WORKING OF DISALLOWANCE OF INTEREST EXPENDITURE U/R 8D: A INTEREST AMOUNT DEBITED TO P&L A/C. 325216 B AVERAGE VALUE OF INVESTMENT: I) INVESTMENT AS ON 31/03/2008 401550274 II) INVESTMENT AS ON 01/04/2007 425690578 AVERAGE VALUE + (I + II)/2 413620426 C AVERAGE VALUE OF ASSETS I)TOTAL ASSETS AS ON 31/03/2008 1169823419 II)TOTAL ASSETS AS ON 01/04/2007 1054368874 AVERAGE VALUE + (I + II)/2 111209614 FORMULA AXB/C 120957 0.5% OF THE AVERAGE VALUE OF INVESTMENT 20 68102 AMOUNT OF EXPENDITURE TO BE DISALLOWED. 21 89059 3. SO FAR AS IT RELATES TO DISALLOWANCE OF INTEREST OF RS.1,20,959/-, LD. CIT(A) HAS ALLOWED THE SAME, THEREFORE, NOW DISALLOWANCE I S RESTRICTED TO RS.20,68,102/-, WHICH IS DISALLOWANCE OF 0.5% OF AV ERAGE OF INVESTMENT. 3.1 IT IS THE CASE OF THE ASSESSEE THAT ALL THE MAJ OR INVESTMENTS MADE BY THE ASSESSEE PERTAINS TO INVESTMENT IN ASSOCIATED COMPA NIES AND SUBSIDIARIES FROM WHERE NO DIVIDEND INCOME IS COMING. INVESTMENT IS OUT FUNDS OWNED BY THE ASSESSEE. THE ASSESSEE DOES NOT REQUIRE TO MAKE AN Y EXPENDITURE IN RELATION TO EARNING OF THE EXEMPTED INCOME, THEREFORE, DISALLOW ANCE OF RS.20,68,102/- CANNOT BE MADE. IN SHORT, IT IS THE SUBMISSION OF THE ASSESSEE THAT OUT OF TOTAL ADMINISTRATIVE EXPENSES OF RS.22,95,940/-, DISALLOW ANCE, IF ANY, CAN BE CONSIDERED ONLY WITH REGARD TO A SUM OF RS.7,68,753 /-, THEREFORE, IT IS THE CASE OF THE ASSESSEE THAT LD. CIT(A) HAS COMMITTED AN ER ROR IN UPHOLDING THE DISALLOWANCE TO THE EXTENT OF RS.20,68,102/-. THES E SUBMISSIONS WERE ALSO MADE BEFORE THE AO AND REFERENCE CAN BE MADE TO THE FOLLOWING REPLY OF THE ASSESSEE, WHICH HAS BEEN REPRODUCED IN THE ASSESSME NT ORDER ITSELF: REGARDING DISALLOWANCE OF OVERHEAD U/R.8D(III) @ 0 .5% OF AVERAGE INVESTMENT, IT IS SUBMITTED THAT OUT OF THE TOTAL OVERHEAD OF RS.22,4 5,940/-, EXPENSES OF RS.13,67,558/- WHICH INCLUDES BANK CHARGES, SALARY AND WAGES AND O THER EXPENSES AS PER LIST WERE INCURRED AT FURSUNGI SITE AND EXPENSES OF RS. 1,09 ,629/- BEING DONATION AND LOSS ON . / ITA NO.6193/MUM/2013 / ASSESSMENT YEAR 2008-09 3 SALE OF ASSETS ARE ALREADY DISALLOWED IN THE COMPUT ATION. THUS EXPENSES OF RS.7,68,753/- CAN ONLY BE CONSIDERED AS GENERAL OV ERHEADS AND DISALLOWANCE U/S.14A R.W.S. 8D(III) SHOULD BE RESTRICTED TO THE SAME. 3.2 TO SUPPORT THE ABOVE CONTENTION, REFERENCE WAS MADE TO SCHEDULE-G ATTACHED TO THE FINANCIAL ACCOUNTS WHICH DESCRIBES INVESTMENT AND COPY OF WHICH IS FILED AT PAGE 4 OF THE PAPER BOOK. OUT OF TOTAL INVESTMENT OF RS.40.15 CRORES INVESTMENT OF RS.26.14 CRORES HAS BEEN MADE IN M/S.IRB INFRASTRUCTURE DEVELOPMENT LTD. BEING ASSOCIATE COMPANY. A SUM OF RS.20.26 LACS AND RS.3.40 CRORES IS MADE IN THE SHARE OF VCR TOLL S ERVICES PVT. LTD., WHICH IS ALSO AN ASSOCIATE COMPANY AND A SUM OF RS.10.14 LAC S INVESTMENT IS MADE IN MEP TOLL ROAD PVT. LTD. BEING SUBSIDIARY COMPANY. THUS, IT WAS SUBMITTED THAT ONLY INVESTMENT MADE BY THE ASSESSEE IN THE M UTUAL FUNDS OUT OF WHICH TAX FREE INCOME HAS BEEN EARNED IS THE TATA INFRAST RUCTURE FUND, IN WHICH INVESTMENT MADE IS OF RS.25.82 LACS. REFERENCE WAS ALSO MADE TO THE INCOME AND EXPENDITURE ACCOUNT, COPY OF WHICH IS FILED AT PAGE 2 OF THE PAPER BOOK, IN WHICH ADMINISTRATIVE AND OTHER EXPENSES HAVE BEEN C LAIMED. A TOTAL SUM OF RS.22,43,940/- HAS BEEN INCURRED, THE DETAILS OF W HICH IS GIVEN AT PAGE-7 OF THE PAPER BOOK. REFERRING TO THE VARIOUS EXPENSES WHICH HAVE BEEN PARTLY DESCRIBED IN THE REPLY FILED BY THE ASSESSEE BEFORE AO, WHICH IS ALSO REPRODUCED ABOVE, IT IS THE CASE OF THE ASSESSEE THAT NO EXPEN DITURE CAN BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING DIVIDEND. 3.3 THUS, IT IS THE CASE OF LD. AR THAT DISALLOWANC E SHOULD BE DELETED IN ITS ENTIRETY OR REASONABLE DISALLOWANCE SHOULD BE MADE . 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WE FOUND THAT SUBSTANCE IN THE SUBMIS SIONS OF THE ASSESSEE THAT DISALLOWANCE TO THE EXTENT OF RS.20,68,102/- CANNOT BE MADE KEEPING IN VIEW THE FACTUAL ASPECT OF THE MATTER. WE HAVE CAREFULL Y GONE THROUGH THE DETAILS OF . / ITA NO.6193/MUM/2013 / ASSESSMENT YEAR 2008-09 4 THE ADMINISTRATIVE EXPENSES. WE HAVE FOUND THAT TH E EXPENDITURE EXCEEDING RS.1.00 LAC ARE INCURRED UNDER THE HEADS BANK CHARG ES, EMPLOYEES EMOLUMENTS AND MOTOR CAR EXPENSES WHICH ARE A SUM OF RS.5.90 LACS, RS.10.69 LACS AND RS.1.25 LACS RESPECTIVELY. THE A SSESSEE IS EARNING THE INCOME MERELY FROM TOLL COLLECTION AND ROAD REPAIRI NG CHARGES, WHICH IS A SUM OF RS.3.81 CRORES AND MISCELLANEOUS INCOME OF THE A SSESSEE IS ONLY A SUM OF RS.13.10 LACS. KEEPING IN VIEW THESE FACTS IN MIND , WE ARE OF THE OPINION THAT OUT OF ADMINISTRATIVE AND OTHER EXPENSES, DISALLOWA NCE ONLY TO THE EXTENT OF RS.1.00 LAC WOULD MEET THE ENDS OF JUSTICE. ACCOR DINGLY, WE RESTRICT THE DISALLOWANCE TO RS. 1.00 LAC AND BALANCE DISALLOWA NCE OF RS.19,68,102/- IS DELETED. IN THE RESULT, GROUND NO.1 IS PARTLY ALLO WED. 6. APROPOS GROUND NO.2, IT WAS SUBMITTED BY LD. AR THAT THE SAME IS CONSEQUENTIAL. THEREFORE, AFTER HEARING BOTH THE P ARTIES, AO IS DIRECTED TO AMEND THE COMPUTATION MADE UNDER SECTION 115JB BY R ESTRICTING DISALLOWANCE UNDER SECTION 14A OF THE ACT TO A SUM OF RS. 1.00 L AC IN PLACE OF RS.21,89,059/-. THIS GROUND IS ALSO PARTLY ALLOWED . 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/05/201 5 () * + 26/05/2015 SD/- SD/- ( , / RAJENDRA) ( . . / I.P. BANSAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ( MUMBAI; * DATED 26/05/2015 . / ITA NO.6193/MUM/2013 / ASSESSMENT YEAR 2008-09 5 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. .! ( ) / THE CIT(A)- 4. .! / CIT 5. /0 !12 , ' 12 , ( / DR, ITAT, MUMBAI 6. 3 / GUARD FILE. / BY ORDER, /! ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI . . ./ VM , SR. PS