MIRAH DEKOR LTD, MUMBAI V. ACIT CEN CIR 14, MUMBAI

ITA 6551/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87891 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Assessee Lawyers: HIRO RAI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) MIRAH DEKOR LTD., 208, PARVATI INDUSTRIAL ESTATE, LOWER PAREL (W), MUMBAI -13. PAN : AABCM 4262A (APPELLANT ) VS. THE ACIT, CENTRAL CIRCLE -14, PRATISHTHA BHAVAN, 10 TH FLOOR, 101, MK ROAD, MUMBAI 400 020 (RESPONDENT) APPELLANT BY : SHRI HIRO RAI RESPONDENT BY : SHRI S. J.SINGH DATE OF HEARING : 06/01/2015 DATE OF PRONOUNCEMENT : 06 /01/2015 ORDER PER I.P.BANSAL, J.M: ALL THESE APPEALS ARE FILED BY THE ASSESSEE AND TH EY ARE DIRECTED AGAINST A CONSOLIDATED ORDER PASSED BY LD. CIT(A)-37, MUMBAI DATED 21/08/2012 IN RESPECT OF ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11. GROUNDS OF APPEAL IN ALL THESE APPEALS ARE IDENTICAL EXCEPT DI FFERENCE IN FIGURES. GROUNDS OF APPEAL FOR A.Y. 2008-09 READ AS UNDER: 1.THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE ADD ITION MADE BY THE LD. A.C.I.T ON ACCOUNT OF DISALLOWANCE OF RS.10,25,952/- U/S. 1 4A R.W. RULE 8D. 2. THE LD. CIT(APPEALS) ERRED IN HOLDING THAT EXPEN SES ATTRIBUTED TOWARDS EARNING EXEMPT INCOME EVEN WHEN THERE WERE NO NEXUS. 3. THE LD. CIT(APPEALS) ERRED IN CONSIDERING THE FA CTS THAT THE MAJOR INVESTMENTS WERE MADE FOR ACQUIRING STRATEGIC BUSINESS STATE. ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) 2 2. FIGURES IN OTHER ASSESSMENT YEARS AS MENTIONED I N GROUND NO.1 ARE AS UNDER: ASSESSMENT YEAR 2009-10 : RS. 14,85,203/- ASSESSMENT YEAR 2010-11 : RS. 13,54,885/- 3. IN THESE APPEALS ASSESSEE IS AGITATING DISALLOW ANCE MADE UNDER SECTION 14A R.W. RULE 8D. THE OBJECTION OF THE ASS ESSEE IN THESE APPEALS IS ONLY LIMITED TO THE AMOUNT OF DISALLOWANCE MADE ON ACCOUNT OF INTEREST. AS PER COMPUTATION OF DISALLOWANCE ACCORDING TO WHICH RULE 8D, SUBMITTED BY THE ASSESSEE BEFORE AO THE DISALLOWANCE REGARDING I NTEREST IN RESPECT OF EACH ASSESSMENT YEAR WAS AS UNDER: ASSESSMENT YEAR 2008-09 : RS. 9,25,667/- ASSESSMENT YEAR 2009-10 : RS. 13,69,318/- ASSESSMENT YEAR 2010-11 : RS. 12,19,069/- 3.1 IT IS THE CASE OF THE ASSESSEE THAT NO DISALLOW ANCE ON ACCOUNT OF INTEREST COULD BE MADE IN VIEW OF THE FOLLOWING TWO DECISIONS OF HONBLE BOMBAY HIGH COURT: (A) CIT VS. HDFC BANK LTD., 366 ITR 505 (B) CIT VS. RELIANCE UTILITIES AND POWER LTD., 313 ITR 340 (BOM) 3.2 IN THE CASE OF CIT VS. RELIANCE UTILITIES & P OWER LTD.,(SUPRA) IT WAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTERE ST FREE AND OVER DRAFT AND /OR LOANS TAKEN, A PRESUMPTION ARISE THAT INVESTMEN TS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. AS IN THAT CASE THERE WERE SUFFICIENT INTEREST-FREE FUNDS AVAILABLE WIT H THE ASSESSEE, THE DISALLOWANCE WAS HELD TO BE RIGHTLY DELETED BY THE TRIBUNAL. ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) 3 3.3 IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA), FOLLOWING THE AFOREMENTIONED DECISION IN THE CASE OF CIT VS. REL IANCE UTILITIES AND POWER LTD.,(SUPRA) IT WAS HELD THAT IN VIEW OF ASSESSEES CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS BEING HIGHER T HAN THE INVESTMENT IN THE TAX FREE SECURITIES, THE DISALLOWANCE WAS RIGHT LY DELETED BY THE TRIBUNAL AS IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WIT H THE ASSESSEE. ACCORDINGLY, DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 WAS HELD TO BE RIGHTLY DELETED BY THE TRIBUNA L. 3.4 REFERRING TO THE AFOREMENTIONED DECISION, LD. A R HAS SUBMITTED THE COPY THE COMPUTATION SUBMITTED TO AO WITH REFERENCE TO DISALLOWANCE UNDER RULE 8D AS WELL AS THE BALANCE SHEET OF ALL THE YEA RS UNDER CONSIDERATION. REFERRING TO THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D LD. AR REFERRED TO THE FIGURES RELATING TO INTEREST COMPONENT AND T HESE FIGURES HAVE BEEN DESCRIBED IN THE EARLIER PART OF THIS ORDER. REFE RRING TO THE BALANCE SHEET, COPY OF WHICH WAS ALSO GIVEN TO LD. DR, REFERENCE W AS MADE TO THE FOLLOWING FIGURES: ASSESSMENT YEAR CAPITAL UNDER THE HEAD SHAREHOLDERS FUND INCLUDING SHARE CAPITAL AND RESERVES. INVESTMENT IN SHARES/SECURITIES FROM WHERE TAX FREE INCOME IS DERIVED.) 2008-09 RS. 16,99,28,144/- RS. 2,15,29, 797/- 2009-10 RS. 21,19,81,853/- RS. 2,48,24,2 99/- 2010-11 RS. 28,95,53,034/- RS. 2,95,02, 044/- REFERRING TO ABOVE FIGURES IT IS THE CONTENTION OF LD. AR THAT APPLYING THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COU RT AND KEEPING IN VIEW THE FACTS AND FIGURES MENTIONED IN THE COMPUTATI ON OF DISALLOWANCE MADE UNDER RULE 8D AS WELL AS BALANCE SHEET IT WOULD BE EVIDENT THAT ASSESSEE HAS MUCH MORE INTEREST FREE FUNDS WHICH ARE PRESUMED T O BE DEPLOYED IN THE INVESTMENT FROM WHERE THE ASSESSEE HAS EARNED TAX FREE INCOME. THEREFORE, ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) 4 IT IS THE PLEA OF LD. AR THAT NO DISALLOWANCE ON A CCOUNT OF INTEREST WOULD BE ATTRIBUTED FOR MAKING DISALLOWANCE UNDER SECTION 14 A OF THE ACT. 4. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSE E DID NOT RAISE THIS PLEA BEFORE AO AND HE RELIED UPON THE DECISION OF T HE TRIBUNAL IN THE CASE OF NUMBUS COMMUNICATION LTD. VS. ACIT, 149 ITD 508 TO CONTEND THAT EVEN IN THE CASE OF SUFFICIENT INTEREST FREE FUNDS, DISALLO WANCE ON ACCOUNT OF INTEREST COULD BE MADE. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE MANDATE OF LAW, AS EXPLAINED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD(SUPRA). IS CLEAR THAT IN A CASE WHERE ASSESSEES CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS ARE HIGHER THAN THE INVESTMENT IN THE TAX FREE SECURITIES, THEN IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY T HE ASSESSEE WOULD BE OUT OF INTEREST FREE FUND AVAILABLE WITH THE ASSESS EE. IF IT IS SO THEN IN VIEW OF SUFFICIENCY OF SHARE CAPITAL AND RESERVE AND SURPLU S, WHICH ARE MUCH MORE THAN THE AMOUNT INVESTED IN TAX FREE SECURITIES, IT WOULD BE PRESUMED THAT NO INTEREST BEARING CAPITAL WAS DEPLOYED BY THE AS SESSEE IN THE INVESTMENT FROM WHERE TAX FREE INCOME HAS BEEN EARNED. THE DE CISION RELIED UPON BY LD. DR WOULD NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE AND ALSO IN VIEW OF THE LATER DECISION HONBLE JURISDICTIONAL H IGH COURT AS THE DECISION RELIED UPON BY LD. DR IS DATED 20/12/2013 AND HAS B EEN RENDERED WITHOUT HAVING THE BENEFIT OF THE DECISION OF JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA) AND CIT VS. RELIANCE UTILITIES PVT. LTD., (SUPRA), RESPECTFULLY FOLLOWING THESE DECISIONS WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISALLOWANCE TO THE EXTENT OF INTEREST COMPONENT IS DELETED. TO BE PRECISE, OUT OF TOTAL DISALLOWANCE OF RS.10,25,952/-, RS.14,85,203/- AND RS.13,54,885/- FOR ASSESSMENT YE ARS 2008-09, 2009-10 AND 2010-11 RESPECTIVELY, DISALLOWANCES OF RS.9,25, 667/-, RS.13,69,318/- ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) 5 AND RS.12,19,069/- IN RESPECT OF ASSESSMENT YEARS 2 008-09, 2009-10 AND 2010-11 RESPECTIVELY IS DELETED. AS REGARDS REMAIN ING DISALLOWANCES OF RS.99,836/-, RS.1,15,885/- AND RS.1,35,816/- FOR A. Y 2008-09, 2009-10 AND 2010-11RESPECTIVELY, NO ARGUMENTS WERE ADVANCED BY LD. AR, THEREFORE, ADDITION TO THAT EXTENT IS UPHELD. 6. IN VIEW OF ABOVE DISCUSSIONS, ALL THE APPEALS AR E CONSIDERED TO BE PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 06/0 1/2015 ! '#$ % &' 06/01/2014 # ! ( SD/- SD/- ( . . /B.R.BASKARAN ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; & DATED 06/01/2015 ! !! ! )*+ )*+ )*+ )*+ ,+$* ,+$* ,+$* ,+$* / COPY OF THE ORDER FORWARDED TO : 1. -. / THE APPELLANT 2. )/-. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. +( )* , , / DR, ITAT, MUMBAI 6. (1 2 / GUARD FILE. / BY ORDER, /+* )* //TRUE COPY// 3 33 3 / 4 4 4 4 5 5 5 5 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS ITA NO.6551/MUM/2012 (A.Y.2008-09) ITA NO.6552/MUM/2012(A.Y.2009-10) ITA NO.6553/MUM/2012(A.Y.2010-11) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 06/01/2015 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 06/01/2014 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER