JAYNEER CAPITAL P. LTD, MUMBAI V. ITO WD 6(1)(1), MUMBAI

ITA 6203/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7794 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 28-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI T R SOOD, ACCOUNTANT MEMBER I T A NO: 6203/MUM/2009 (ASSESSMENT YEAR: 2006-07) M/S JAYNEER CAPITAL PRIVATE LIMITED, MUMBAI APPEL LANT (PAN: AAACJ1688G) VS INCOME TAX OFFICER, 6(1)(1), MUMBAI RESPONDENT APPELLANT BY: MR PARAS SAVLA RESPONDENT BY: MR S K SINGH O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE WHICH IS A COMPA NY ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE. WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2006-07. 2. THOUGH THERE ARE FIVE GROUNDS OF APPEAL WITH SEV ERAL SUB- GROUNDS, THE ONLY EFFECTIVE ISSUE IS WHETHER THE DE PARTMENTAL AUTHORITIES HAVE RIGHTLY INVOKED SECTION 14A OF THE INCOME TAX ACT, 1961, IN DISALLOWING A PART OF THE INTEREST PAID BY THE ASSESSEE AS HAVING BEEN INCURRED IN RELATION TO THE EXEMPTED IN COME. 3. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. THE CONTENTION OF THE ASSESSEE BEFORE US IS THAT IT HAS MIXED FUNDS WHICH INCLUDES OWN FUNDS AS WELL AS INTEREST BEARIN G FUNDS AND AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 34 0 (BOM), A PRESUMPTION SHOULD BE DRAWN THAT THE INVESTMENTS IN SHARES, WHICH ITA NO: 6203/MUM/2009 2 YIELDED TAX FREE DIVIDEND, CAME OUT OF INTERNAL ACC RUALS AND OWN FUNDS AND THAT THE BORROWED FUNDS WERE USED FOR EAR NING TAXABLE INCOME. THIS CONTENTION OF THE ASSESSEE SEEMS TO H AVE BEEN ACCEPTED BY THE CIT(A) IN PARAGRAPH 2.3 OF HIS ORDE R, THOUGH ULTIMATELY HE HAS NOT GIVEN THE BENEFIT OF THE PRES UMPTION TO THE ASSESSEE. THE CIT(A) HAS ALSO REFERRED TO THE AMOU NT OF OWNED INCOME AND BORROWED FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE IN THE AFORESAID PARAGRAPH. THE OWNED SOU RCES AMOUNTED TO ` 89.00 CRORES AND BORROWED FUNDS AMOUNTED TO ` 5.00 CRORES. THE INVESTMENT DURING THE YEAR WAS ` 97.00 CRORES. EVEN GOING BY THESE FIGURES AND APPLYING THE PRESUM PTION LAID DOWN IN THE AFORESAID JUDGMENT, THE INVESTMENT TO T HE EXTENT OF ` 89.00 CRORES SHOULD HAVE BEEN TAKEN TO HAVE COME OU T OF THE ASSESSEES OWNED SOURCES. IN THAT CASE THERE WOULD HAVE BEEN A MUCH LESSER DISALLOWANCE OF THE INTEREST UNDER SECT ION 14A OF THE ACT. HOWEVER, THIS EXERCISE HAS NOT BEEN DONE BY T HE CIT(A) WHO, AS WE MENTIONED EARLIER, SOMEHOW DID NOT EXTEND THE BENEFIT OF THE PRESUMPTION TO THE ASSESSEE. BE THAT AS IT MAY, TH E LEARNED COUNSEL FOR THE ASSESSEE HIMSELF FAIRLY STATED THAT IT IS FOR HIS CLIENT TO PROVE BEFORE THE ASSESSING OFFICER THE EXISTENCE OF MIXED FUNDS AND THE COMPENSATION THEREOF, INCLUDING THE QUANTUM OF THE COMPONENTS, IN ORDER TO CLAIM THE BENEFIT OF THE PR ESUMPTION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT (SUPRA). THI S IS A FACTUAL EXERCISE WHICH NEEDS TO BE CARRIED OUT BY THE ASSES SING OFFICER. WE THEREFORE DEEM IT PROPER, IN THE INTEREST OF JUS TICE, TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO SH ALL TAKE A FRESH ITA NO: 6203/MUM/2009 3 DECISION WITH REGARD TO THE APPLICABILITY OF SECTIO N 14A OF THE ACT IN RESPECT OF THE INTEREST AFTER GIVING ADEQUATE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. WE ALSO MAKE IT CLEAR THAT THE ASSESSING OFFICER SHALL NOT INVOKE RULE 8D OF THE INCOME TAX RULES WHICH HAS BEEN HELD TO BE APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09 BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ AND BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM). WE DIRECT ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSESSEE FO R STATISTICAL PURPOSES. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF THE HEARING ON 29 TH MARCH 2011. SD/- SD/- (T R SOOD) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 29 TH MARCH 2011 SALDANHA COPY TO: 1. M/S JAYNEER CAPITAL PRIVATE LIMITED CONTINENTAL BUILDING, 135 DR A B ROAD WORLI, MUMBAI 400 018 2. ITO 6(1)(1), MUMBAI 3. CIT-CITY 6, MUMBAI 4. CIT(A)-VI, MUMBAI 5. DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI