AUCHTEL PRODUCTS LTD, MUMBAI V. ACIT CIR 6(1), MUMBAI

ITA 6212/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7873 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: KUNAL SHARM A
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.6212/MUM/2013 (AY. 2009-10) AUCHTEL PRODUCTS LIMITED, 142C, VICTOR HOUSE, N.M.JOSHI MARG, LOWER PAREL (W), MUMBAI 400 013. PAN: AAACH 0975L ...... APPELLANT VS. THE ACIT, CIR.6(1), AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI KUNAL SHARMA RESPONDENT BY : SHRI RAJESH KUMA R YADAV DATE OF HEARING : 22/02/2017 DATE OF PRONOUNCEMENT : 31/03/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-14, MUMBAI DATED 29/08/2013, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/11/2011. 2. IN THIS APPEAL THE ONLY ISSUE RELATES TO A DISAL LOWANCE OF RS.8,24,555/- DETERMINED THE INCOME TAX AUTHORITIES UNDER SECTION 14A OF THE ACT BY 2 ITA NO.6212/MUM/2013 (AY. 2009-10) APPLYING THE FORMULA CONTAINED IN RULE 8D OF THE IN COME TAX RULES, 1962 ( IN SHORT THE RULES.) 3. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE F OR THE ASSESSEE POINTED OUT THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS BEEN MADE OUT OF INTEREST AS WELL AS OTHER EXPENSES AMOUNTING TO RS. 7,49,217/- AND RS.75,338/- RESPECTIVELY. IT WAS POINTED OUT THAT ASSESSEE HAS CONSISTENTLY ASSERTED THAT THERE IS NO NEXUS BETWEEN THE INTERES T BEARING DEPOSITS AND THE INVESTMENTS MADE AND, THEREFORE, THERE WAS NO I NTEREST EXPENDITURE INCURRED IN RELATION TO THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE INSTANT YEAR, THERE ARE NO FRESH INVESTMENTS MADE AND THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR OF 2008-09, ON REMAND BY THE TRIBUN AL VIDE ORDER IN ITA NO.3185/MUM/2011 DATED 30/04/2012, THE ASSESSING OF FICER HAS MADE NO DISALLOWANCE UNDER SECTION 14A OF THE ACT WITH RESP ECT TO THE INTEREST EXPENDITURE. IT IS POINTED OUT THAT THE INVESTMENT S IN QUESTION HAD BEEN MADE FROM OWN FUNDS WHICH CARRY NO INTEREST COST AN D THAT ASSESSEE COMPANY HAD FREE RESERVES OF RS.697.20 LACS AS ON 3 1/03/2009, WHICH WAS QUITE ENOUGH TO COVER THE INVESTMENTS OF RS.147.34 LACS AS AT 31/03/2009. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE H AS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY THE APPELLANT BUT CON TENDED THAT THE LOWER AUTHORITIES HAVE COMPUTED THE DISALLOWANCE BY APPLY ING RULE 8D OF THE RULES NOTICING THAT ASSESSEE HAD EARNED EXEMPT INCO ME DURING THE YEAR UNDER CONSIDERATION. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. ADMITTEDLY, ASSESSEE IS IN RECEIPT OF EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION. 3 ITA NO.6212/MUM/2013 (AY. 2009-10) HOWEVER, THE PRESENCE OF EXEMPT INCOME BY ITSELF CA NNOT BE THE SOLE BASIS TO COMPUTE THE DISALLOWANCE ENVISAGED UNDER SECTION 14A OF THE ACT IN TERMS OF RULE 8D OF THE RULES. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. CIT, 328 ITR 81(BO M) HAS OBSERVED THAT APPLICATION OF RULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE RESTS ON A PRE-CONDITION THAT THE ASSESSING OFFICER WAS NOT SA TISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE RELATABLE TO THE EXEMPT INCOME. IN OTHER WORDS, IF IN A GIVEN CASE, THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED IN RESPECT OF THE EXEMPT INCOME, THEN THE ASSESSING OFFICER CAN APPLY RULE 8D OF THE RULES FOR DETERMINATION OF THE AMOUNT DISALLOWABLE, ONLY IF H E WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IN F ACT, THE AFORESAID PROPOSITION CLEARLY FLOWS FROM SUB-SECTIONS (2) &(3 ) OF SECTION 14A OF THE ACT AND HAS ALSO BEEN ADVERTED TO BY THE TRIBUNAL IN AS SESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 30/04/2012 (SUPRA). BE THAT AS IT MAY, IN THE INSTANT YEAR WE FIND THAT THE LOWER AUT HORITIES HAVE NOT RECORDED ANY SATISFACTION THAT ASSESSEES CLAIM OF NON-INCUR RENCE OF ANY INTEREST EXPENDITURE IN RELATION TO THE EXEMPT INCOME IS INC ORRECT. EVEN OTHERWISE, ON FACTS ALSO, IT IS QUITE CLEAR THAT ASSESSEE HAD SUFFICIENT OWN NON-INTEREST BEARING FUNDS TO COVER UP THE INVESTMENTS WHICH HAV E YIELDED EXEMPT INCOME AND, THEREFORE, ON THIS COUNT ALSO IT CANNOT BE SAID THAT ANY INTEREST EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE EX EMPT INCOME. THEREFORE, IN SO FAR AS THE DISALLOWANCE OF RS.7,49,217/- OUT OF INTEREST EXPENDITURE IS CONCERNED, THE SAME IS HELD TO BE UNTENABLE AND IS HEREBY DIRECTED TO BE DELETED. 4 ITA NO.6212/MUM/2013 (AY. 2009-10) 6. IN SO FAR AS THE DISALLOWANCE OF OVERHEAD EXPEN SES DETERMINED IN TERMS OF RULE 8D(2)(III) OF THE RULES IS CONCERNED, WE FIND NO INFIRMITY IN THE STAND OF THE LOWER AUTHORITIES INASMUCH AS SIMILAR POINT HAS ALSO BEEN DISALLOWED BY THE ASSESSING OFFICER IN PURSUANCE TO THE ORDER OF THE TRIBUNAL DATED 30/04/2012(SUPRA) FOR ASSESSMENT YEAR 2008-09 . EVEN IN THIS YEAR, AT THE TIME OF HEARING BEFORE US, THE LD. REPRESENTATI VE FOR THE ASSESSEE HAS NOT DISPUTED THE JUSTIFIABILITY OF THE DISALLOWANCE OUT OF THE OVERHEAD EXPENSES IN TERMS OF RULE 8D(2)(III) OF THE RULES W HICH HAS BEEN DETERMINED BY THE ASSESSING OFFICER AT RS.75,338/-. THUS, TO T HE AFORESAID EXTENT, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IS RETAIN ED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/2017 SD/- SD/- (RAVISH SOOD ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 31/03/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI