DCIT CC 3(1) CEN RG 3, MUMBAI V. WIND WORLD WIND FARMS (INDIA) LTD, MUMBAI

ITA 6836/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1116 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2016
• Court: TRIBUNAL
• Department Lawyers: SUNIL JHA
• Assessee Lawyers: A K GHOSH
• Section: 143(3); 153A; 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6836 /MUM/ 201 6 (ASSESSMENT YEAR 20 1 2 - 1 3 ) I.T.A. NO. 6837/MUM/2016 (ASSESSMENT YEAR 2013 - 14) DCIT CC - 3(1) CENTRAL RANGE - 3 (1) ROOM NO. 1924 19 TH FLOOR AIR I NDIA BUILDING NARIMAN POINT MUMBAI - 400021. VS. M/S.WIND WORLD WIND FARMS ( INDIA ) LTD. A - 9, ENERCON TOWER VEERA DESAI ROAD VEERA INDUSTRIAL ESTATE, ANDHERI WEST MUMBAI - 400 053. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACE3530A ASSESSEE BY SHRI A.K. GHOSH DEPARTMENT BY SHRI SUNIL JHA DATE OF HEARING 4 . 5. 201 7 DATE OF PRONOUNCEMENT 4 .5 . 201 7 O R D E R THE APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER S PASS ED BY LD CIT(A) - 51, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR S 201 2 - 1 3 & 2013 - 14 . THE SOLITARY ISSUE URGED BY THE REVENUE IN THE SE APPEALS IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A READ WITH RULE 8D OF THE I.T. RULES. 2. THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF MANUFACTURE AND SALE OF WIND ENERGY . THE REVENUE CARRIED OUT SEARCH OPERATION IN THE HANDS OF THE ASSESSEE ON 14.3.2013 AND HENCE THE PRESENT ASSESSMENTS WERE COMPLETED U/S. 153A READ WITH SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE - COMPANY HAS MADE INVESTMENTS IN PREFERENCE SHARES OF GROUP COMPANIES TO THE TUNE OF RS.9.10 CRORES . THE ASSESSEE HAD DISALLOWED A SUM OF ` 2 LAKHS ONLY IN BOTH THE YEARS U/S. 14A OF THE ACT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT R ECEIVE ANY DIVIDEND INCOME IN BOTH THE YEARS. THE ASSESSING OFFICER TOOK THE VIEW THAT THE DISALLOWANCE HAS TO BE COMPUTED AS M/S. WIND WORLD WIND FARMS (INDIA) LTD. 2 PER RULE 8D OF THE I.T. RULES. ACCORDINGLY, HE COMPUTED THE DISALLOWANCE IN BOTH YEARS. HOWEVER, WHILE COMPUTING THE AMOUNT OF I NVESTMENTS, HE TOOK THE VALUE OF DEBENTURES AMOUNTING TO RS.50.00 CRORES ALSO AND ACCORDINGLY COMPUTED THE DISALLOWANCE. 3. THE LEARNED CIT(A) NOTICED THAT THE ASSESSEE HAS INVESTED A SUM OF ` 9 .1 0 CRORES IN SISTER CONCERNS AND HENCE THE SAME WOULD FALL IN THE CATEGORY OF STRATEGIC INVEST MENT. REMAINING INVESTMENT WAS MADE IN CONVERTIBLE DEBENTURES, INCOME OF WHICH IS TAXABLE. THE LEARNED CIT(A) TOOK SUPPORT OF THE DECISION RENDERED BY THE COORDINATE BENCH IN THE CASE OF GARWARE WALL ROPES (ITA NO. 7899/ MUM/2011) TO TAKE THE VIEW THAT THE STRATEGIC INVESTMENTS HAVE TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D OF THE I.T. RULES. ACCORDINGLY, HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN BOTH THE YEARS UNDER CONSIDER ATION AND HENCE THE REVENUE HAS FILED THESE APPEALS. 4. I HAVE HEARD THE PARTIES AND PERUSED THE RECORD. AS OBSERVED BY THE LEARNED CIT(A) THE ASSESSEE HAS MADE INVESTMENT OF ` 9.10 CRORES IN ITS SISTER CONCERNS BY WAY OF CUMULATIVE PREFERENCE SHARE S. OTHER INVESTMENT WAS IN THE NATURE OF CONVERTIBLE DEBENTURES WHOSE INCOME IS TAXABLE AND HENCE THE SAME IS REQUIRED TO BE EXCLUDED FOR THE PURPOSE OF SECTION 14A OF THE ACT. AGAINST INVESTMENT IN PREFERENCE SHARES OF ` 9.10 CRORES THE ASSESSEE IS HAVING OWN FUNDS OF ` 45.71 CRORES AS ON 31.3.2012 WHICH IS IN FAR EXCESS OF THE VALUE OF INVESTMENT. HENCE, AS PER THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. ( 366 ITR 505 ) , THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE OUT OF INT EREST EXPENDITURE . SINCE THE ENTIRE INVESTMENTS HAVE BEEN MADE IN THE SUBSIDIARY COMPANY, THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES ALSO AS PER THE DECISION RENDERED BY THE COORDINATE BENCH IN THE CASE OF GARWARE WALL ROPES LTD.(SUPRA). ACCORDINGLY, THE ASSESSING OFFICER WAS NOT CORRECT IN LAW IN COMPUTING DISALLOWANCE AS PER PROVISIONS OF RULE 8D OF THE I.T. RULES IN THESE TWO YEARS . M/S. WIND WORLD WIND FARMS (INDIA) LTD. 3 ACCORDINGLY I UPHOLD THE FINAL DECISION TAKEN BY THE LEARNED CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION. 5 . IN THE RESULT, BOTH AP PEAL OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 4 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 5 / 20 1 7 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. REG ISTRAR) PS ITAT, MUMBAI