BODHESH TRADE-INVEST P.LTD, MUMBAI V. ITO 8(1)(2), MUMBAI

ITA 6227/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101287 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 25-10-2013
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: DHIRENDRA M SHAH
• Keywords: Deemed dividend
• Section: 263; 154; 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTATN MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER . / ITA NO . 6227 / MUM./ 2013 ( / ASSESSMENT YEAR : 200 6 07 ) M/S. BODHESH TRADE INVEST PVT. LTD. PLOT NO.123, ROAD NO.17 MIDC MAROL, ANDHERI (E) MUMBAI 400 093 PAN AAACB9185A .. / APPELLANT V/S INCOM E TAX OFFICER WARD 8(1)(2), AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT / ASSESSEE BY : SHRI DHIRENDRA M. SHAH / REVENUE BY : SHRI VIVEK BATRA / DATE OF HEARING 2 4 .09.2015 / DATE OF ORDER 09.10.2015 / ORDER , / PER SAKTIJIT DEY, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19 TH AUGUST 2013, PA SSED BY THE LEARNED COMMISSIONER (APPEALS) 16, MUMBAI, FOR THE ASSESSMENT YEAR 2006 07. M/S. BODHESH TRADE INVEST PVT. LTD. 2 2. THE ONLY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL IS IN RELATION TO DISALLOWANCE OF ` 3,54,752, UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT' ). 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 20 TH OCTOBER 2006, DECLARING INCOME OF ` 31,960. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT, VIDE ORDER DATED 24 TH DECEMBER 2008, BY DETERMINING THE TOTAL INCOME AT ` 9,60,175, WHICH WAS SUBSEQUENTLY RECTIFIED UNDER SECTION 154 OF THE ACT TO ` 2,31,960. SUBSEQUENTLY, THE LEARNED COMMISSIONER, IN EXERC ISE OF POWER UNDER SECTION 263 O F THE ACT, EXAMINED THE AS SESSMENT RECORDS AND FOUND THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, AS THE ASSESSING OFFICER HAS FAILED TO TAX AN AMOUNT OF ` 1,11,62,456, AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AND FURTHER TO MAKE NEC ESSARY DISALLOWANCE UNDER SECTION 14A. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO RE FRAME THE ASSESSMENT ACCORDINGLY. AS IT APPEARS, BEING AGGRIEVED WITH THE REVISION ORDER OF THE LEARNED COMMISSIONER, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUN AL. THE TRIBUNAL, VIDE ORDER DATED 23 RD SEPTEMBER 2011, PASSED IN ITA NO.3793/MUM./2011, WHILE REVERSING THE ORDER OF THE LEARNED COMMISSIONER ON THE ISSUE OF TAXABILITY OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, HOWEVER, UPHELD THE REVISION ORD ER ON THE ISSUE OF APPLICABILITY OF SECTION 14A AND DIRECTED THE ASSESSING OFFICER M/S. BODHESH TRADE INVEST PVT. LTD. 3 TO DECIDE THE ISSUE IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF GODREJ & BOYC E MFG. CO. LTD. V/S DCIT, [2010] , 328 ITR 081 (BOM.) . IN PU RSUANCE TO THE DIRECTIONS OF THE TRIBUNAL AS AFORESAID, THE ASSESSING OFFICER AGAIN RE EXAMINED THE ISSUE RELATING TO DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE ACT IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOY C E MFG. CO. LTD. (SUPRA). THOUGH, IN PURSUANCE TO THE DIRECTIONS OF THE LEARNED COMMISSIONER UNDER SECTION 263 OF THE ACT, THE ASSESSING OFFICER HAD ALREADY DISALLOWED AN AMOUNT OF ` 5,26,156 UNDER SECTION 14A OF THE ACT BUT COMPLYING TO THE DIRECTIONS OF TRIBUNAL, THE ASSESSING OFFICER A FTER INVITING OBJECTIONS OF THE ASSESSEE IN THIS REGARD AND CONSIDERING THE M OBSERVED THAT IN THE BALANCE SHEET AS ON 31 ST MARCH 2005, THE ASSESSEE HAS SHOWN INVESTMENT OF ` 36,18,255, WHEREAS THE INVESTMENT AS ON 31 ST MARC H 2006, WAS SHOWN AT ` 1,74,32,216. THE ASSESSING OFFICER OBSERVED, THOUGH THE ASSESSEE IN ITS REPLY HAD STATED THAT PROFIT EARNED DURING THE YEAR WAS UTILISED FOR MAKING INVESTMENT BUT AT THE SAME TIME, THE ASSESSEE HAD ADMITTED THAT INTEREST BEARING FUND S OF ` 29.95 LAKH WERE USED FOR INVESTMENT, HENCE, CORRESPONDING INTEREST THEREON CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT AS PER THE BALANCE SHEET, THE UNSECURED LOAN OF THE ASSESSEE DURING THE YEAR HAS INCREASED TO ` 1,45,28,228, AS AGAINST THE LOAN OF ` 56,74,411 AT THE BEGINNING OF THE YEAR , WHICH DEMONSTRATE THAT M/S. BODHESH TRADE INVEST PVT. LTD. 4 INTEREST BEARING FUNDS OF ` 88,53,817, WERE UTILISED FOR INVESTING IN SHARES AND NOT ` 29.95 LAKH, AS CLAIMED BY THE ASSESSEE. TAKING THIS ASPECT INT O CONSIDERATION, THE ASSESSING OFFICER COMPUTED INTEREST DISALLOWABLE UNDER SECTION 14A OF THE ACT AT ` 3,54,152. 4. BEING AGGRIEVED OF SUCH DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED COMMISSIONER (APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYC E MFG. CO. LTD. (SUPRA), HAS HELD THAT THE DIVIDEND INCOME BEING TAX FREE WOULD COME UNDER THE PURVIEW OF SECTION 1 4 A OF THE ACT. HE, HO WEVER, OBSERVED THAT AS PER THE SAID DECISION, RULE 8D, WOULD NOT BE APPLICABLE PRIOR TO ASSESSMENT YEAR 2008 09. HENCE, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS TO BE WORKED OUT ON REASONABLE BASIS. A PPLYING THE SAID PRINCIPLES, THE LEARNED COMMI SSIONER (APPEALS) FINALLY CONCLUDED THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY THE ASSESSING OFFICER BY APPLYING THE RATE OF INTEREST ADOPTED BY THE ASSESSEE ITSELF IS REASONABLE. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSING OFFICER WAS NOT CORRECT IN HOLDING THAT UNSECURED LOAN OF ` 88.53 LAKH WERE UTILISED IN INVESTMENT IN SHARES AND FURTHER THE SAID UNSECURED LOAN WAS INTEREST BEARING. IT WAS SUBMITTED, SOME OF THE M/S. BODHESH TRADE INVEST PVT. LTD. 5 UN SECURED LOAN BEING INTEREST FREE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN QUANTIFYING THE DISALLOWANCE ON THE UNSECURED LOAN OF ` 88.53 LAKH. FURTHER, REFERRING TO SCHEDULE 9 OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006, THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD DERIVED PROFIT FROM SALE OF SHARES AMOUNTING TO ` 95,69,790, WHICH WAS INVESTED IN SHARES. THEREFORE, IT CANNOT BE SAID THAT INTEREST BEARING FUNDS WERE ENTIRELY USED FOR INVESTMENT. HE FURTHER SUBMITTED THAT IF AT ALL ANY DISALLOWANCE IS TO BE MADE UNDER SECTION 14A OF THE ACT, IT CANNOT EXCEED AN AMOUNT OF ` 1,26,156, WHICH IS THE NET OF INTEREST RECEIVED AND INTEREST PAID. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELYING UPO N THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) IN PARA 2.3 OF HIS ORDER SUBMITTED, AS THE ASSESSING OFFICER H AS MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT, IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYC E MF G. CO. LTD. (SUPRA), BY COMPLYING TO THE DIRECTIONS OF THE TRIBUNAL, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE WE PROCEED TO DECIDE THE ISSUE, IT IS NECESSARY TO LOOK INTO THE SPECIFIC DIRECTIONS OF THE TRIBUNAL M/S. BODHESH TRADE INVEST PVT. LTD. 6 TO THE ASSESSING OFFICER WHILE REMITTING THE ISSUE , WHICH IS REPRODUCED HEREUNDER: 5. ON MERITS, THIS ISSUE IS NOW REQUIRED TO BE ADJUDICATED IN VIEW O F THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. P. LTD VS ASSTT. COMMISSIONER OF INCOME TAX, REPORTED IN 328 ITR 81. SINCE THE CIT IN THE IMPUGNED ORDER HAS DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY DISALLO WANCE; THEREFORE, THE ASSESSING OFFICER HAS TO DECIDE THE ISSUE IN LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD. (SUPRA) AND NO INTERFERE IS REQUIRED ON OUR PART OF THE IMPUGNED ORDER IN RESPECT OF SEC. 14A . 8. ON A PERUSAL OF THE AFORESAID FINDINGS OF THE CO ORDINATE BENCH, IT IS AMPLY CLEAR THAT THE BENCH HAS REFUSED TO INTERFERE WITH THE DIRECTIONS O F THE LEARNED COMMISSIONER ON THE ISSUE OF APPLICABILITY OF SECTION 14A OF THE ACT. THEREFORE, THE ASSESSING OFFICER CONSIDERING THE FACT THAT ASSESSEE HAS UTILISED UNSECURED LOAN OF ` 88,53,817, WHICH IS INTEREST BEARING FOR INVESTING IN SHARES HAS COMPUTED THE DISALLOWANCE BY APPLYING THE INTEREST RATE AS ADOPTED BY THE ASSESSEE ITSELF. THAT BEING THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER IN COMPUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AND THE LEARNED CIT(A) CONFIRMING THE SAME. THOUGH THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT ENTIRE UNSECURE D LOAN OF ` 88,53,817, IS NOT INTEREST BEARING AND SOME UNSECURED LOANS ARE ALSO INTEREST FREE , BUT , IN THE ABSENCE OF ANY MATERIAL SUBMITTED BY THE ASSESSEE TO DEMONSTRATE SUCH FACT, IT IS DIFFICULT TO ACCEPT THE CONTENTION OF THE LEARNED COUNSEL FOR THE M/S. BODHESH TRADE INVEST PVT. LTD. 7 ASSESSEE. IN THE AFORESAID VIEW OF THE MATTER, WE ARE INCLINED TO UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE FIRST APPELLATE AUTHORITY. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, ASSESSEES AP PEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 09.10.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 09.10.2015 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE RE VENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI