MATA SECURITIES INDIA P.LTD, MUMBAI V. ASST CIT CIR 4(3), MUMBAI

ITA 6431/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1391 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6431/MUM/2014 ASSESSMENT YEAR 2010-11 MATA SECURITIES INDIA PVT. LTD., 2 ND FLOOR, RAHIMTOOLA HOUSE, 7 HOMJI STREET, FORT, MUMBAI 400 001 VS. ACIT, CIRCLE 4(3), AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI 400 020 PAN/GIR NO. : AAA CM 4228 M APPELLANT .. RESPONDENT DATE OF HEARING: 17.11.2016 DATE OF PRONOUNCEMENT: 28.12. 2016 O R D E R PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 8, MUMBAI AND ARISES OUT O F ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. (A) THE HON'BLE COMMISSIONER OF INCOME-TAX (APP EALS)-8, MUMBAI [HEREINAFTER REFERRED TO AS 'CIT (A)'] ERRED IN UP- HOLDING THE ACTION OF THE LEARNED ASSTT. COMMISSIONER OF INCOME-TAX (HEREINAF TER REFERRED TO AS 'ACIT) BY CONFIRMING DISALLOWANCE OF RS. 1,99,993 U /S 14A OF THE OF ACT. (B) THE APPELLANT-COMPANY SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS IN LAW, THE G ROUNDS ON WHICH THE APPELLANT BY: MS D . HARIYA, AR RESPONDENT BY: SHRI S . K . PODDAR, DR ITA NO. 6431/MUM/2014 2 HON'BLE CIT (A) HAS CONFIRMED THE DISALLOWANCE OF R S. 1,99,993 U/S 14A OF THE ACT IS CONTRARY TO THE SPIRIT OF THE ACT AND IS BAD IN LAW AND THEREFORE, THE IMPUGNED DISALLOWANCE BE SET-ASIDE. II. (A) THE HON'BLE CIT (A) ERRED IN UP-HOL DING THE ACTION OF THE LEARNED ACIT BY CONFIRMING DISALLOWANCE OF DEPRECIATION OF RS.12,75,070 ON VEHICLES ACQUIRED BY THE APPELLANT-COMPANY. (C) THE APPELLANT-COMPANY SUBMITS THAT ON THE F ACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS IN LAW, THE GROUNDS ON WHIC H THE HON'BLE CIT (A) HAS CONFIRMED THE DISALLOWANCE OF DEPRECIATION OF RS.12 ,75,070 IS CONTRARY TO THE SPIRIT OF THE ACT AND IS BAD IN LAW AND THEREFO RE, THE IMPUGNED DISALLOWANCE BE SET ASIDE. III THE ORDER OF THE HONBLE CIT(A), TO THE EXTENT OF THE ABOVE MATTERS, BEING CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE , AS WELL AS IN LAW, APPROPRIATE RELIEF BE GRANTED TO THE APPELLANT COMP ANY IN VIEW OF THE GROUNDS OF APPEAL. 3. WE BEGIN WITH 1 ST GROUND OF APPEAL. THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INC OME OF RS. 3,94,943/- WHICH WAS NOT A PART OF TOTAL INCOME. TH E ASSESSEE HAD NOT COMPUTED THE AMOUNT OF EXPENSES ATTRIBUTABLE TO EAR NING OF SUCH EXEMPT INCOME. THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF INVESTMENTS ON WHICH IT HAD DERIVED THE EXEMPT INCO ME AND EXPLAIN AS TO WHY DISALLOWANCE OF EXPENDITURE SHOULD NOT BE MADE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES 1962. THE AO THEN COMPUTED THE DISALLOWANCE U/S 14A READ WITH RULE 8D AT RS. 1,99,993/-. 4. THE ASSESSEE PREFERRED APPEAL AGAINST THE ABOVE DISALLOWANCE MADE BY THE AO BEFORE THE LEARNED CIT(A). RELYING O N THE DECISION IN THE CASE OF CHEMINVEST LTD. VS. ITO 317 ITR 86 (AT), SOUTHERN PETRO CHEMICALS INDUSTRIES (3 SOT 157), ACIT VS. CITICORP FINANCE (INDIA) LTD. (108 ITD 457), ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. VIDE ITS ORDER DATED 20.10.2008, IN ITA NO. 8057/MUM/03, THE LEARNED CIT(A) ITA NO. 6431/MUM/2014 3 UPHELD THE DISALLOWANCE OF RS. 1,99,993/- MADE BY T HE A.O. U/S 14A OF THE ACT. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE S UBMITS THAT AS PER ITS FINANCIAL STATEMENTS, THE SHAREHOLDERS FUND IS ALMOST RS. 1300 LACS; THE INTEREST EXPENSE DURING THE YEAR WAS ONLY RS. 3.15 LACS, THE YEAR END AMOUNT OF LOAN ON WHICH INTEREST WAS PAID WAS ONLY RS. 25.73 LACS AND THE INVESTMENT IN SHARES WAS RS. 300 LACS OUT OF WHICH INVESTMENT IN SHARES OF SUBSIDIARY COMPANIES WAS AP PROXIMATELY RS. 250 LACS. IT IS SUBMITTED THAT WHERE INVESTMENT IN SHARES ARE MADE OUT OF ASSESSEES OWN FUNDS AND NON-INTEREST BEARIN G FUNDS, THEN, AS SUCH, NO DISALLOWANCE U/S 14A CAN BE MADE. THE LEAR NED COUNSEL FURTHER STATES THAT INVESTMENT IN ASSOCIATES AND SU BSIDIARIES FOR STRATEGIC BUSINESS PURPOSE CANNOT BE CONSIDERED FOR DISALLOWANCE U/S 14A READ WITH RULE 8D. RELIANCE WAS PLACED BY HER INTER ALIA ON THE DECISION IN THE CASE OF GARWARE WALL ROPES LTD. VS ACIT [(2014) 65 SOT 86 (MUM TRIB.)], M/S. JM FINANCIAL LIMITED VS. ADDL. CIT [ITA NO. 4521/MUM/12, ORDER DATED 26.03.2014], THOMAS COOK (INDIA) LTD. VS DCIT [(2016) 49 ITR (T) 178 (MUM. TRIB.)], CAPGEMINI INDIA (P.) LTD. VS I.T.O. [(2016) 66 TAXMANN.COM 163 (MUM TRIB.)], ADITYA BIRLA NUVO LTD. VS ACIT [(2015) 68 SOT 403 (MUM TRIB.)]. 6. THE LEARNED DR SUPPORTS THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE OF RS. 1,99,993/ - MADE BY THE A.O. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT AS PER THE BALANCE SHEET OF THE ASSESSEE-COMPANY AS AT 31 ST MARCH, 2010 THE SHAREHOLDERS FUNDS WAS RS. 129, 188, 846. THE INVESTMENTS STAND AT RS. 30, 553,387/-. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF PROPORTIONATE INT EREST EXPENDITURE ITA NO. 6431/MUM/2014 4 OF RS. 56,066/- MADE BY THE AO AS PER RULE 8D(2)(II ) IS DELETED. IN RESPECT OF DISALLOWANCE UNDER RULE 8D(2)(III), IN V IEW OF THE DECISIONS MENTIONED AT PARA 5 HERE-IN-ABOVE, THE AO IS DIRECT ED TO EXCLUDE STRATEGIC INVESTMENT MADE IN SUBSIDIARIES FOR COMPU TATION. THE ASSESSEE-COMPANY IS DIRECTED TO PRODUCE BEFORE THE AO THE DETAILS OF STRATEGIC INVESTMENTS MADE IN SUBSIDIARIES FOR VERI FICATION. IN THE LIGHT OF THE ABOVE, THE 1 ST GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 8. WE NOW COME TO THE 2 ND GROUND FILED BY THE ASSESSEE IN THIS APPEAL. THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS . 12,75,070/- ON PURCHASE OF MOTOR CARS. THE AO ON PERUSAL OF THE DE TAILS FILED BY THE ASSESSEE FOUND THAT THE MOTOR CARS WERE PURCHASED A ND REGISTERED IN THE NAME OF THE DIRECTORS DURING THE F.Y. 2009-10. THE AO DISALLOWED THE CLAIM OF THE DEPRECIATION AS THE ASSESSEE WAS N OT THE LEGAL OWNER OF THE VEHICLE. AS PER HIM EVEN THOUGH THE MOTOR CA RS ARE PURCHASED FROM THE FUNDS OF THE COMPANY, THE DEPRECIATION WOU LD BE ALLOWED ONLY IF THE SAME IS IN THE NAME OF THE COMPANY. IN VIEW OF THE ABOVE, THE AO DISALLOWED THE CLAIM OF DEPRECIATION OF RS. 12,75,070/-. 9. THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) AGAINST THE ABOVE DISALLOWANCE MADE BY THE AO THE L EARNED CIT(A) AGREED WITH THE FINDINGS OF THE AO AND CONFIRMED TH E DISALLOWANCE. 10. THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON T HE ORDER OF THE ITAT E BENCH MUMBAI IN THE CASE OF KISEN RATILAL CHOKSEY SHARES & SECURITIES (P) LTD. VS ADDL. CIT (2016) 69 TAXMANN.COM 51 (MUMBAI) TRIB. 11. THE LEARNED DR SUPPORTED THE ORDER PASSED BY TH E LEARNED CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO. ITA NO. 6431/MUM/2014 5 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE AROSE BEFORE TH E COORDINATE BENCH IN THE CASE OF KISEN RATILAL CHOKSEY SHARES & SECURITIES (P) LTD. (SUPRA) . THE FACTS IN THAT CASE AND THE DECISION THEREON ARE MENTIONED BELOW: 3. FIRST WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE. THE FIRST ISSUE RELATES TO DISALLOWANCE OF RS.5,30,107/-, BEI NG DEPRECIATION CLAIMED ON MOTOR CAR. THE ASSESSEE HAD PURCHASED VEHICLES I N THE NAME OF ITS DIRECTOR, BUT DISCLOSED THE SAME AS PART OF ITS ASS ETS. ACCORDINGLY, IT CLAIMED DEPRECIATION ON THE VEHICLES. HOWEVER, THE AO DISALLOWED THE DEPRECIATION ON THE REASONING THAT THE VEHICLES WER E NOT IN THE NAME OF ASSESSEE COMPANY. THE LD. CIT(A), HOWEVER, ALLOWED THE DEPRECATION BY FOLLOWING THE DECISION DATED 30.9.2010 RENDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 4917/MUM/2009 AND 4 821/MUM/2009 RELATING TO ASSESSMENT YEAR 2006-07. 3.1 THE ASSESSEE HAS FURNISHED A COPY OF THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006- 07, WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION RENDERED ON AN I DENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06. IN THE ASSESSMENT YEAR 2005-06, THE TRIBUNAL HAD FOLLOWED THE DECISION REN DERED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF USHA RECTIFIER CORPORATION (I) PVT. LTD. V/S INSPECTING ASSISTANT COMMISSIONER [19 89] 35 TTJ 602 (ITAT)[DEL]) AND ALSO THE DECISION OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT V/S DILIP SINGH SARDARSINGH BAGGA R EPORTED IN 201 ITR 995 (BOM), WHEREIN IT HAS BEEN HELD THAT THE REGIST RATION UNDER MOTOR VEHICLE ACT IS NOT AN ESSENTIAL REQUIREMENT FOR ACQ UIRING OWNERSHIP OF THE MOTOR VEHICLE AND THAT AN ASSESSEE PURCHASING A MOTOR VEHICLE FOR VALUABLE CONSIDERATION AND USING THE SAME FOR HIS B USINESS CANNOT BE DENIED BENEFIT OF DEPRECIATION ON THE GROUND THAT T HE VEHICLE WAS NOT REGISTERED UNDER MOTOR VEHICLE ACT. 3.2 IN THE INSTANT CASE, THE LD. CIT(A) HAS ONLY FO LLOWED THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL ON THIS ISSUE AN D HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. 12.1 THE FACTS BEING SIMILAR, WE FOLLOW THE ABOVE O RDER OF THE COORDINATE BENCH AND DELETE THE DISALLOWANCE OF RS. 12,75,070/- MADE BY THE AO. THUS THE 2 ND GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSE. ITA NO. 6431/MUM/2014 6 ORDER PRONOUNCED IN THE OPEN COURT ON 28/12/2016 SD/- SD/- (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI; DATED: 28/12/2016 BISWAJIT, SR. P.S. 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