COMPUAGE INFOCOM LTD, MUMBAI V. ADDL CIT 5(1), MUMBAI

ITA 6371/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79454 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRIKANT MAHADEO
• Assessee Lawyers: SUNIL V SHAH
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.6371/M/2012 ( / ASSESSMENT YEAR: 2009 - 2010 ) M/S. COMPUAGE INFOCOM LTD, 601, D - WING, LOTUS CORPORATE PARK, RAM MANDIR LANE, NEAR JAI COACH, WESTERN EXPRESS HIGHWAY, MUMBAI - 63. / VS. ADDL CIT - 5(1), MUMBAI. ./ PAN : AABCC 4077 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL V SHAH / RESPONDENT BY : SHRI SRIKANT MAHADEO / DATE OF HEARING : 10.7.2014 / DATE OF PRONOUNCEMENT : 18 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 17/10/2012 IS AGAINST THE ORDER OF THE CIT (A) - 9, MUMBAI DATED 27.1.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: 1. THE LD CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.4,32,927/ - TO THE BUSINESS INCOME OF THE APPELLANT U/S 14A OF THE ACT MADE BY THE ADDL. CIT. 3. AT THE OUTSET, SHRI SUNIL V SHAH , LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 4.3 OF THE ASSESSMENT ORDER AND MENTIONED THAT ASSESSEE NEVER EARNED EXEMPT INCOME. HOWEVER, ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND DISALLOWED A SUM OF RS. 4,32,927/ - THOUGH THERE IS NO EXPENDITURE RELATA BLE TO THE EXEMPT INCOME. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 2 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONFIRMED THE ACTION OF THE AO ONLY AFTER OBSERVING THE PERSONS OF INVESTMENTS. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACTS OF THE CASE AND MENTIONED THAT MOST OF THE INVESTMENTS ARE MADE IN THE GREEN VISION TECHNOLOGIES PVT LTD, THE SISTER CONCERN OF THE ASSESSEE, TO ACQUIRE THE CONTROL OVER THE SISTER CONCERN. HE ALSO MENTIONED THAT ASSESSEE ALSO MADE INVESTMENT IN THE BOMBAY MERCANTILE COOPERATIVE BANK LTD T O THE TUNE OF RS. 14 LAKHS AND IN THE INCOME EARNED FROM THE SAID BANK IS NOT EXEMPT INCOME. IN ANY CASE, THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME DURING THE YEAR IN WHICH CASE NO DISALLOWANCE IS REQUIRED TO BE MADE IN VIEW OF THE JUDGMENT OF THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHIVAM MOTORS (P) LTD AND ANOTHER JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY PT LTD VIDE TAX APPEAL NO.239 OF 2014 DATED 24.3.2014. PARA 4 OF THE SAID JUDGMENT OF THE HONBLE GUJARAT HIGH COURT (SUPRA) IS RELEVANT IN THIS REGARD WHICH READS AS UNDER: 4..WE HOWEVER, NOTICE THAT SUB - SECTION (1) OF SECTION 14A PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EX EMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT TRIBUNAL HELD THAT DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. WINSOME TEXTILE INDUSTRIES LTD REPORTED IN (2009) 319 ITR 204 (PUNJ & HAR) IN WHICH ALSO THE COURT HAD OBSERVED AS UNDER: 7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. THE JUDGMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD (2006) 286 ITR 1 WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIVEN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCTION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PURPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WIT HOUT HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MADE THEREIN HAVE TO BE READ IN THAT CONTEXT. IN THE PRESENT CASE, ADMITTEDLY THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATION SECTION 14A COULD HAVE NO APPLICATION. 6. HOWEV ER, BOTH THE PARTIES MENTIONED THAT THE AO HAS NOT EXAMINED THIS ANGLE OF THE ARGUMENT AND THE TAXABILITY OF CERTAIN DIVIDEND INCOME ESPECIALLY THAT OF THE INVESTMENTS MADE IN THE COOPERATIVE BANK. THE CONTROL AND MANAGEMENT ANGLE O F T H E I N V E S T M E N T WAS ALSO NOT EXAMINED BY THE REVENUE AUTHORITIES. 3 CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE ISSUE SHOULD BE REMANDED TO THE FILES OF THE AO FOR FRESH EXAMINATION OF THE ISSUE AND FOR WANT OF SPEAKING ORDER. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 8 T H JULY, 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 8 .7.2014 . . ./ OKK , 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI