SAJJAN INDIA LTD, MUMBAI V. DCIT (OSD) 7, MUMBAI

ITA 6721/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARVANAN
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NO. 6721/ MUM /2014 ( / ASSESSMENT YEAR: 2010-11 M/S. SAJJAN INDIA LTD., C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BLDG., 265, PRINCESS STREET, MUMBAI-400 002 / VS. THE DCIT (OSD) - 7, AAYAKAR BHAVAN, MUMBAI-400 020 / I .TA NO. 7204/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) THE DCIT (OSD) - 7, AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. SAJJAN INDIA LTD., C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BLDG., 265, PRINCESS STREET, MUMBAI-400 002 ./ ./ PAN/GIR NO. AAACS 6498M ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI S.L. JAIN / REVENUE BY: SHRI J. SARVANAN / DATE OF HEARING :04.07.2016 ! / DATE OF PRONOUNCEMENT :29.07.2016 / O R D E R PER C.N. PRASAD, JM: THESE APPEALS ARE FILED BY THE ASSESSEE AND THE RE VENUE AGAINST ORDER OF THE LD. CIT(A)-13, MUMBAI DATED 30 .9.2014 PERTAINING TO ASSESSMENT YEAR- 2010-11. ITA NOS. 7204 & 6721/M/14 2 2. IN ASSESSEES APPEAL, THE ASSESSEE IS CHALLENGIN G THE ORDER OF THE LD. CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 3 8,56,695/- U/S. 14A R.W. RULE 8D(2)(III) AS OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME. THE REVENUE ALSO IN ITS APPEAL CHALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE U/S. 14A R.W. RU LE 8D(2)(II) AND 8D(2)(III) OF THE I.T. RULES. 3. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHIL E COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE RECEIVED DIVIDEND INCOME OF RS. 1,43,59,191/- AND THIS WAS CLAIMED AS EXEMPT INCOME . THE ASSESSEE DISALLOWED RS. 38,56,695/- IN THE COMPUTATION OF IN COME TOWARDS ADMINISTRATIVE EXPENSES INCURRED IN RELATION TO EXE MPT INCOME AS PER RULE 8D(2)(III). THE ASSESSING OFFICER REWORKED OU T THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D FOR THE REASON THAT ASSESSEE DID NOT DISALLOW INTEREST UNDER RULE 8D(2)(II) THOUGH IT WA S PAYING INTEREST AND ASSESSEE DID NOT SHOW THAT THE INVESTMENTS WER E MADE OUT OF OWN FUNDS AND NOT FROM BORROWED FUNDS. THE ASSESSI NG OFFICER ARRIVED AT INTEREST PORTION OF RS. 3,74,523/- AND R S. 72,83,764/- BEING 0.5% OF AVERAGE VALUE OF INVESTMENTS AND DISA LLOWED BOTH THESE AMOUNTS AGGREGATING TO RS. 76,58,287/-. HOWEV ER, SINCE THE ASSESSEE HAS DISALLOWED SUO MOTO AN AMOUNT OF RS. 3 8,56,695/-, HE HAS RESTRICTED THE DISALLOWANCE TO RS. 38,01,592/-. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CONTENDING THAT ALL THE INVESTMENTS ARE MADE OUT OF OWN FUNDS AND NOT FROM BORROWED FUNDS. THEREFORE, NO PART OF INT EREST SHOULD BE DISALLOWED. IT WAS FURTHER CONTENDED THAT THE INVES TMENTS WHICH ITA NOS. 7204 & 6721/M/14 3 DOES NOT YIELD ANY DIVIDEND INCOME SHOULD BE EXCLUD ED FOR THE PURPOSE OF CALCULATING AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D(2)(III), BASED ON THE DECISION OF THE TRIBUNAL F OR ASSESSMENT YEARS 2007-08 TO 2009-10. THE LD. CIT(A) FOLLOWING THE OR DER OF THE TRIBUNAL IN ITA NOS. 449 & 7532/M/2011 & 5856/M/12 DATED 23.4.2014 WORKED OUT THE DISALLOWANCE BASED ON THE DIRECTIONS CONTAINED IN THE TRIBUNALS ORDER AND ARRIVED AT TH E DISALLOWANCE TO BE MADE TOWARDS ADMINISTRATIVE EXPENSES ONLY FROM T HE EMPLOYEES REMUNERATION OF RS. 18.97 LAKHS AND THAT TO ON PROP ORTIONATE BASIS. HOWEVER, SINCE THE ASSESSEE HIMSELF HAS CALCULATED SUCH ADMINISTRATIVE AND OTHER EXPENSES FOR DISALLOWANCE U/S 14A AT RS. 38,56,695/- AND THIS WAS DISALLOWED BY THE ASSESSEE HIMSELF IN THE COMPUTATION OF INCOME, HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R.W. RULE 8D. THE LD. COUNSEL FOR THE ASSESSEE CONTENTS BEFORE US THAT THE LD. CIT(A) SHOULD NOT HAVE CONFIRMED THE DISALLOWANCE OF RS. 38,56,695/- AS OF FERED BY THE ASSESSEE IN THE RETURN OF INCOME HAVING SAID THAT O NLY A PROPORTION OF EXPENSES OUT OF RS. 18.97 LAKHS IS DISALLOWABLE U/S . 14A R.W. RULE 8D OF THE ACT. 5. THE LD. DEPARTMENTAL REPRESENTATIVE PLACES RELIA NCE ON THE ORDERS OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS FAR AS THE CONTENTION OF THE ASSESSEE IS THAT THE LD. CIT(A) SHOULD NOT HAVE CONFIRMED THE DISALL OWANCE OF RS. 38,56,695/- IS CONCERNED, WE DO NOT FIND MUCH FORCE IN THE CONTENTION OF THE ASSESSEE SINCE ASSESSEE HIMSELF H AS CALCULATED THESE ITA NOS. 7204 & 6721/M/14 4 EXPENSES AS EXPENSES INCURRED FOR EARNING EXEMPT IN COME. THUS, WE FIND NO GRIEVANCE TO THE ASSESSEE AS THE LD. CIT(A) HAS DELETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R.W. RULE 8D FOLLOWING THE DIRECTIONS OF THE TRIBUNAL IN EARLIER YEARS. THUS, WE DISMISS THE GROUND OF THE ASSESSEE. 7. COMING TO THE REVENUES APPEAL THE GROUND RAISED IN RESPECT OF DELETION OF DISALLOWANCE MADE U/S. 14A R.W. RULE 8D (2)(II) AND UNDER RULE 8D(2)(III). SINCE THE LD. CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE AFTER E XAMINING THE SURPLUS FUNDS AND INVESTMENTS MADE AND ALSO FOLLOW ING THE DIRECTIONS OF THE TRIBUNAL IN EXCLUDING INVESTMENTS WHICH DOES NOT YIELD ANY DIVIDEND INCOME FOR THE PURPOSE OF RULE 8 D(2)(III), WE DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE LD . CIT(A). THIS GROUND OF THE REVENUE IS REJECTED. 8. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S. 80IA ON CAPTIVE POWER PLANT SET UP IN THE YEAR 2003-04. 8.1. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSE E SUBMITS THAT MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DECIDE AFTER COMPLETION OF THE PROCEEDINGS U/S. 263 IN THI S MATTER WHICH IS PENDING. THEREFORE, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE ISSUE AFRESH AND IN AC CORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTIC AL PURPOSE. ITA NOS. 7204 & 6721/M/14 5 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR S TATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) / ACCOUNTANT MEMBER $ % /JUDICIAL MEMBER MUMBAI; ( DATED 29 TH JULY, 2016 . % . ./ RJ , 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. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI