BAHAR AGROCHEM & FEEDS PVT LTD, MUMBAI V. DCIT, CIRCLE 14(1)(1), MUMBAI

ITA 63/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 04-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: M M GOLVALA LD
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.63/MUM/2019 ASSESSMENT YEAR :2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.63/MUM/2019 ( / ASSESSMENT YEAR: 2013-14) BAHAR AGROCHEM & FEEDS P. LTD. (SINCE MERGED WITH GODREJ AGROVET LTD.) C/O. M/S. KALYANIWALLA & MISTRY LLP ESPLANADE HOUSE, 2 ND FLOOR, 29, HAZARIMAL SOMANI MARG, FORT, MUMBAI 400 001. / VS. DCIT-14(1)(1), ROOM NO.460, 4 TH FLOOR, AAYKAR BHAVAN MK ROAD, MUMBAI 400 020. ! ./ ./PAN/GIR NO. AAACB-2147-C ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : SHRI M.M.GOLVALA, LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK, LD. DR / DATE OF HEARING : 06/07/2020 / DATE OF PRONOUNCEMENT : 08/07/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-21, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-21/DCIT-14(1)(1)/IT-371/2016-17 DATED 21/08/2018 ON FOLLOWING GROUNDS OF APPEAL:- ITA NO.63/MUM/2019 ASSESSMENT YEAR :2013-14 2 1. THE APPELLANT SUBMITS THE ASSESSMENT ORDER PASSE D ON AN ENTITY WHICH HAS BEEN DISSOLVED IS ILLEGAL AND INVALID AND REQUIRES TO BE CANCELLED. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.33 ,31,551/- UNDER SECTION 14A READ WITH RULE 8D. 3. THE APPELLANT SUBMITS THAT THE DISALLOWANCE U/S. 14A IS REQUIRED TO BE RESTRICTED TO RS.14,10,146/-. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO REDUCE THE INVESTMENTS MADE IN AADHAAR RETAILING LTD. WHILE CALCULATING AVERAGE VALUE OF TOTAL INVESTMENT S UNDER RULE 8D(2)(II). 5. THE APPELLANTS SUBMIT THAT THE ASSESSING OFFICER FURTHER BE DIRECTED TO EXCLUDE INVESTMENTS WHICH HAVE NOT EARNED EXEMPT INCOME, WH ILE COMPUTING DISALLOWANCE U/S.14A READ WITH RULE 8D. 6. BOTH THE LOWER AUTHORITIES ERRED IN APPLYING SEC TION 14A READ WITH RULE 8D WHILE COMPUTING BOOK PROFITS U/S.115JB. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE RATIO OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN ACIT V/S. VIREET INVESTMENT (P) LTD. (165 ITD 27). 8. WITHOUT PREJUDICE TO ALL THAT IS STATED ABOVE, A ND IN ANY EVENT, THE APPELLANT SUBMITS THAT THE DISALLOWANCE U/S.14A READ WITH RUL E 8D CANNOT EXCEED RS.21,14,836/- IN ANY VIEW OF THE MATTER. DURING HEARING, GROUND NO.1 HAS NOT BEEN URGED BEFO RE US. IT IS EVIDENT THAT SOLE ISSUE UNDER APPEAL IS DISALLOWANCE U/S 14 A WHILE COMPUTING ASSESSEES INCOME UNDER NORMAL PROVISIONS AS WELL A S WHILE COMPUTING BOOK PROFITS U/S 115JB. 2. THE LD. AR, DRAWING ATTENTION TO THE APPELLATE O RDER, PLEADED FOR EXCLUSION OF NON-INCOME YIELDING INVESTMENTS WHILE COMPUTING THE SAID DISALLOWANCE. THE LD. AR ALSO ADVANCED OTHER ARGUME NTS TO CONTEST THE DISALLOWANCE AS CONFIRMED BY LD. CIT(A). ON THE OTH ER HAND, LD. DR SUBMITTED THAT THE DISALLOWANCE HAS BEEN MADE AS PE R RULE 8D AND THEREFORE, THE APPELLATE ORDER REQUIRES NO INTERFER ENCE. ITA NO.63/MUM/2019 ASSESSMENT YEAR :2013-14 3 3. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. OUR ADJUDICATION TO TH E SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 4.1 THE DOCUMENTS ON RECORD WOULD SHOW THAT THE ASS ESSEE HAS BEEN ASSESSED U/S 143(3) AT RS.42.37 LACS UNDER NORMAL P ROVISIONS. THE BOOK PROFITS HAS BEEN DETERMINED AT RS.75.42 LACS. AN ADDITIONAL DISALLOWANCE OF RS.12.16 LACS HAS BEEN MADE U/S 14A WHILE COMPUTING SUCH INCOME UNDER NORMAL PROVISIONS AS WELL AS WHIL E COMPUTING BOOK PROFITS U/S 115JB. THIS IS OVER AND OVER SUO-MOTO D ISALLOWANCE OF RS.21.14 LACS OFFERED BY ASSESSEE IN ITS COMPUTATIO N OF INCOME WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB. 4.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED EXEMPT INCOME OF RS.35.91 LACS AND ATTRIBUTE D SUO-MOTO DISALLOWANCE OF RS.21.14 LACS WHILE COMPUTING ITS R ETURN OF INCOME. THE SAID DISALLOWANCE HAS BEEN WORKED OUT AS PER RULE 8 D IN FOLLOWING MANNER: - NO. PARTICULARS AMOUNT (RS.) 1. DIRECT INTEREST EXPENDITURE U/R 8D(2)(I) 13.83 L ACS 2. PRO-RATE INTEREST EXPENDITURE U/R 8D(2)(II) 2.12 LACS 3. EXPENSE DISALLOWANCE U/R 8D(2)(III) 5.19 LACS TOTAL 21.14 LACS HOWEVER, LD. AO REWORKED DISALLOWANCE TO THE EXTENT OF RS.33.31 LACS AND ENHANCED THE DISALLOWANCE BY RS.12.17 LACS. THE DIFFERENCE CAME DUE TO COMPUTATIONS MADE U/R 8D(2)(II) ON ACCOUNT O F PRO-RATA INTEREST EXPENDITURE. FOR THE PURPOSE OF SAID COMPUTATIONS, THE ASSESSEE HAS ITA NO.63/MUM/2019 ASSESSMENT YEAR :2013-14 4 TAKEN AVERAGE VALUE OF INVESTMENTS AT RS.154.17 LAC S AS AGAINST RS.1039.17 LACS TAKEN BY LD. AO. THE ASSESSEE HAD E XCLUDED INVESTMENTS MADE IN AN ENTITY NAMELY AADHAR RETAILING LTD. SINCE THE SAME WAS STATED TO BE MADE OUT OF BORROWED FUNDS AG AINST WHICH DIRECT INTEREST DISALLOWANCE WAS ALREADY OFFERED U/R 8D(2) (I). THE LEARNED CIT(A), DISREGARDING ASSESSEES SUBMISSIONS, CONFIR MED THE STAND OF LD. AO. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 5. BEFORE US, THE ONLY RELIEF SOUGHT BY LD. AR IS E XCLUSION OF NON- INCOME YIELDING INVESTMENTS WHILE COMPUTING THE SAI D DISALLOWANCE. THE WORKING OF THE DISALLOWANCE HAS BEEN PLACED ON RECO RD WHEREIN THE ASSESSEE HAS COMPUTED AGGREGATE DISALLOWANCE OF RS. 14,10,146/- AFTER CONSIDERING EXEMPT INCOME YIELDING INVESTMENTS ONLY . IN THE SAID COMPUTATIONS, THE DISALLOWANCE U/R 8D(2)(I) REMAIN THE SAME AT RS.13,83,288/- WHEREAS DISALLOWANCE U/R 8D(2)(II) & 8D(2)(III) HAS BEEN COMPUTED AT RS.19,695/- & RS.7,163/- RESPECTIVELY. TO SUPPORT THE SAID SUBMISSIONS, RELIANCE HAS BEEN PLACED, INTER-ALIA, ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT V/S HOLCIM INDIA PVT. LTD. (272 CTR 282) AND CHEMINVEST LTD. V/S CIT (378 ITR 33). 6. CONSIDERING THE FACTS OF THE CASE AND IN TERMS O F CITED JUDICIAL PRONOUNCEMENTS, WE AGREE WITH THE SUBMISSIONS OF LD . AR THAT ONLY EXEMPT INCOME YIELDING INVESTMENTS WERE TO BE CONSI DERED TO COMPUTE THE DISALLOWANCE U/S 14A. THEREFORE, LD. AO IS DIRE CTED TO VERIFY THE COMPUTATIONS AND IF FOUND CORRECT, RESTRICT THE DIS ALLOWANCE TO RS.14,10,146/-. THE SAID DISALLOWANCE WOULD BE MADE UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB SINCE THE DISALLOWANCE SUBSTANTIALLY COMPRISE-OFF OF DIRECT E XPENDITURE U/R 8D(2)(I). ITA NO.63/MUM/2019 ASSESSMENT YEAR :2013-14 5 7. THE APPEAL STANDS PARTLY ALLOWED TO THE EXTENT I NDICATED IN THE ORDER. THIS ORDER IS PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DE TAILS OF THE SAME ON THE NOTICE BOARD. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 08/07/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. -.$' , , / DR, ITAT, MUMBAI 6. .012 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.