WELLA INDIA HAIR COSMETICS P.LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 6839/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83463 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 26-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARESH G BUCH; RAVI SARVANA
• Keywords: Business income; Earning of tax free income; Source of fund; Bad and doubtful debts
• Section: 14A; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 6839/MUM/2013 ( / ASSESSMENT YEAR: 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED P & G PLAZA, CARDINAL GRACIAS ROAD, CHAKALA, ANDHERI (E), MUMBAI-400 099 / VS. DY. CIT, RANGE 8(3), MUMBAI ' ./# ./PAN/GIR NO. AAACG 2468 D ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ ' ( / APPELLANT BY : SHRI HARESH G. BUCH & SHRI RAVI SARVANA %&'$ ' ( / RESPONDENT BY : MS. NEERJA PRADHAN )* + ' , / DATE OF HEARING : 23.07.2014 -./ ' , / DATE OF PRONOUNCEMENT : 01.08.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI (CIT(A) FOR SH ORT) DATED 13.09.2013, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) R/W S. 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2005-06 VIDE ORDER DATED 28.03.2013. 2 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT 2. THE SOLE ISSUE ARISING IN THE INSTANT APPEAL IS THE QUANTIFICATION OF THE DISALLOWANCE U/S. 14A(1); THE REVENUE ESTIMATING IT AT RS.2,86,9 5,583/- , AS AGAINST AT RS.1,25,48,725/- , DISALLOWED SUO MOTU BY THE ASSESSEE (ALSO REFER PARA 4.1 OF THIS ORDER) . 3.1 STATING THE ASSESSEES CASE, IT WAS SUBMITTED B Y THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, THAT THE ASSESSEE IS A NON-BANKING FINANCIAL COMPANY (NBFC), ENGAGED IN THE PROMOTION OF NEW BUSINESSES AND, CONSEQUENTLY, INVESTS IN GROUP COMPANIES, BOTH WITHIN AND OUTSIDE INDIA. THIS IS T HE SECOND ROUND BEFORE THE TRIBUNAL, THE MATTER HAVING BEEN RESTORED BACK BY IT IN THE F IRST INSTANCE FOR RE-ADJUDICATION KEEPING IN VIEW THE DECISION BY THE HONBLE HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM), BESIDES ANY OTHER BY A HIG H COURT OR THE APEX COURT THAT MAY BE RELEVANT. REFERENCE WAS MADE BY HIM TO THE R ELEVANT PART OF THE TRIBUNALS ORDER, COMBINED FOR A.YS. 2004-05 AND 2005-06 (IN ITA NOS. 4266 & 4267/DEL/2010 DATED 11.03.2011/PB PGS.12-15). HE FURTHER CONTINUED THAT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA) IT HAS BEEN CLARIFIED THAT RULE 8D IS PROSP ECTIVE, SO THAT IT SHALL NOT APPLY FOR THE YEARS PRIOR TO A.Y. 2008-09 AND, ACCORDINGLY, A REA SONABLE METHOD, TAKING THE FACTS AND CIRCUMSTANCES OF THE CASE INTO ACCOUNT, IS TO BE AP PLIED. HE WOULD THEN TAKE US THROUGH THE ASSESSEES PAPER-BOOK, TO EXHIBIT THE SUO MOTU DISALLOWANCE AS WELL AS THE MANNER OF ITS WORKING (PB PGS. 10 - 11). THE ASSESSEE HAD IDE NTIFIED ALL THE EXPENSES WHICH HAD A BEARING ON THE DIVIDEND INCOME (AT RS.201.09 LACS). THE SAME WERE THEN ALLOCATED TO THE DIVIDEND INCOME CLAIMED TAX-EXEMPT (RS.434.96 LACS) IN THE SAME RATIO WHICH THE SAID INCOME BORE TO THE ASSESSEES GROSS INCOME FOR THE YEAR (RS.697.03 LACS), I.E., AT 62.40%. THE ASSESSING OFFICER (A.O.), HOWEVER, WITHOUT POIN TING OUT ANY ERROR IN THE ASSESSEES WORKING, WHICH HE WAS OBLIGED TO IN TERMS OF SECTIO N 14A, PROCEEDED WITH HIS OWN ESTIMATE, I.E., BY ALLOCATING THE ENTIRE EXPENDITUR E (RS.405.56 LACS) INCURRED BY THE ASSESSEE AND DEBITED TO THE PROFIT AND LOSS STATEME NT IN THE RATIO OF THE DIVIDEND INCOME TO THE ASSESSEES TOTAL INCOME AS PER THE SAID STATEME NT. THE A.O. HAVING NOT STATED THE BASIS OF HIS DIS-SATISFACTION WITH THE ASSESSEES WORKING , HIS ENTIRE EXERCISE AND, CONSEQUENTLY, ESTIMATION, WOULD FAIL. THE LEGAL POSITION IN THE M ATTER HAS BEEN AMPLY CLARIFIED, AS IN THE 3 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT CASE OF MAXOPP INVESTMENT LTD. VS. CIT [2012] 347 ITR 272 (DEL), SINCE FOLLOWED BY THE MUMBAI BENCH OF THE TRIBUNAL, AS IN THE CASE OF RAJ SHIPPING AGENCIES LTD VS. ADDL. CIT [2013] 38 TAXMANN.COM 345 (MUM). SIMILAR VIEW HAD B EEN TAKEN BY THE TRIBUNAL INDEPENDENTLY IN GARWARE WALL ROPES LIMITED (IN ITA NOS. 5408 & 4957/MUM(G)/2012 DATED 15.01.2014). THE A.O. IN FACT PROCEEDED IN TH E MATTER WITHOUT APPLICATION OF MIND, INCLUDING THE ENTIRE DIVIDEND EARNED (RS.499.31 LAC S), AS AGAINST ONLY THAT CLAIMED EXEMPT; THE DIVIDEND INCOME RECEIVED FROM FOREIGN C OMPANIES BEING TAXABLE AND DULY RETURNED BY THE ASSESSEE AS A PART OF ITS TOTAL INC OME. AGAIN, HE CONSIDERED THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE, INCLUDING THA T NOT CLAIMED BY IT IN COMPUTING ITS BUSINESS INCOME ASSESSABLE U/S.28, VIZ. DEPRECIATIO N; LOSS ON SALE OF FIXED ASSETS; AND PROVISION FOR BAD AND DOUBTFUL DEBTS. THOUGH THE AS SESSEE HAS MOVED AN APPLICATION U/S.154 OF THE ACT FOR RECTIFICATION OF THESE MISTA KES, THE SAME REMAINS UNDISPOSED OF TO DATE. THE LD. CIT(A) HAS, AGAIN, DECIDED THE MATTER ON THE BASIS OF GENERALIZATIONS, WITHOUT EXAMINING THE ASSESSEES CASE AND ADDRESSIN G THE ISSUES INVOLVED, MERELY STATING THAT THE A.O. HAD FOLLOWED THE DIRECTIONS BY THE TR IBUNAL, SO THAT NO INTERFERENCE WAS CALLED FOR. 3.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, SUBMIT THAT IT IS COMPLETELY INCORRECT TO STATE THAT THE A.O. HAS NOT EXPRESSED ANY DISSATISFACTION WITH THE ASSESSEES WORKING OF THE DISALLOWANCE U/S.14A, OR THE BASIS THEREOF. TAKING US THROUGH PARA 7 OF THE ASSESSMENT ORDER, SHE WOULD D RAW OUR ATTENTION TO THE A.O. OBSERVING THAT THE ENTIRE INCOME FLOWING TO THE ASS ESSEE AS BEING FROM INVESTMENTS, SO THAT, IN HIS VIEW, THE EXPENDITURE WOULD REQUIRE BE ING APPORTIONED PROPORTIONATELY, I.E., BETWEEN THE INTEREST AND THE DIVIDEND INCOMES, BEIN G THE TWO SOURCES OF INCOME ARISING TO THE ASSESSEE. NO INFIRMITY THEREIN, I.E., THE SAID OBSERVATION BY THE A.O., BASED ON THE FACTS, HAS BEEN SHOWN BY THE ASSESSEE. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT 4.1 THE FIRST THING THAT STRIKES US IS THE ESSENTIA L AND THE UNDERLYING UNITY BETWEEN THE METHOD ADOPTED BY THE ASSESSEE AND THAT BY THE A.O. IN ALLOCATING THE OPERATING EXPENDITURE TOWARD THE INCOME NOT FORMING PART OF T HE TOTAL INCOME, I.E., IN PRINCIPLE. SO MUCH SO THAT, ABERRATIONS APART, WE DO NOT SEE THE TWO METHODS AS YIELDING RESULTS WHICH ARE ANY DIFFERENT. BOTH SEEK TO APPORTION THE EXPEN DITURE IN THE RATIO OF EXEMPT INCOME TO THE TOTAL INCOME. WHAT, THEN, IS THE CONTROVERSY ABOUT ? THE METHOD FOLLOWED BY THE ASSESSEE, WHICH GETS IN FACT VALIDATED BY ITS ADOPT ION BY THE A.O., HAS A STRONG RATIONALE TO IT. THE DIVIDEND (TAX-EXEMPT) INCOME ARISING TO THE ASSESSEE FROM ITS INVESTMENTS (AT RS.358.43 LACS), WHICH CONSTITUTE ABOUT 93% OF ITS TOTAL FUND DEPLOYMENT, INCLUDING ON FIXED ASSETS (REFER BALANCE-SHEET AS ON 31.03.2005/ PB PG.1), AND ALONG WITH LOAN AND ADVANCES (AT RS.40.19 LACS), CONSTITUTES THE ONLY S OURCE OF ITS REVENUE STREAMS, WHICH ARE BY WAY OF DIVIDEND TAXABLE OR NON-TAXABLE - AND I NTEREST, IS AS MUCH A PART OF BUSINESS INCOME AS THE DIVIDEND INCOME THAT IS TAXABLE (FOR THE REASON THAT IT IS FROM NON-DOMESTIC COMPANIES) OR THE INTEREST INCOME. THE SAID INCOMES IN FACT FORM AND DEFINE THE ASSESSEE- COMPANYS OPERATIONAL INCOME. FURTHER, THAT THE DIV IDEND FROM DOMESTIC COMPANIES DOES NOT FORM PART OF THE TOTAL INCOME SO THAT ITS NAT URE AS BUSINESS INCOME NOTWITHSTANDING, THE EXPENSES ATTRIBUTABLE THERETO NEED TO BE DETERM INED, IS AN ALTOGETHER DIFFERENT MATTER. THE METHOD ADOPTED FOR THE ALLOCATION OF THE EXPENS ES, I.E., IN THE RATIO OF THE VOLUME OF THE TWO INCOME STREAMS TAXABLE AND NON-TAXABLE, I S THUS A NATURAL, LOGICAL AND COMMON SENSE METHOD TO DETERMINE THE EXPENSES ATTRIBUTABLE TO SUCH INCOME, NECESSITATED FOR THE REASON OF IT BEING TAX-EXEMPT, TOWARD DETERMINING T HE NET, I.E., THE QUANTUM OF SUCH, OPERATING INCOME, WHICH COULD BE ACCORDED THE TAX-E XEMPT STATUS. NOT SURPRISINGLY THEN, BOTH THE SIDES ARRIVED AT, AND WE SUPPOSE INDEPENDE NTLY, AT THE SAME METHOD, WHICH IS ITSELF VERY RARE EMPHASIZING, AS AFORE-NOTED, THE VALIDITY THEREOF. THIS ALSO EXPLAINS OUR CONSIDERING THE ISSUE ARISING IN THIS APPEAL IN TER MS OF THE VALIDITY OF THE ESTIMATION, OR AS ONE OF QUANTIFICATION, AS STATED AT PARA 2 ABOVE. NO DOUBT THE A.O. HAS COMMITTED SOME MISTAKES IN APPLYING THE METHOD, BUT THAT DOES NOT IN ANY MANNER DETRACT FROM THE MERIT THEREOF; THE ERRORS BEING IN THE NATURE OF APPARENT MISTAKES, RIGHTLY PERCEIVED AS SO BY TH E ASSESSEE, MOVING A RECTIFICATION 5 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT APPLICATION U/S. 154 IN ITS RESPECT. THAT THE SAME REMAINS UNDISPOSED, WHICH IS DEFINITELY UNFORTUNATE, AND WHICH THE A.O. IS IN ANY CASE BOUN D TO CONSIDER AND DISPOSE OF, IS AN ALTOGETHER DIFFERENT MATTER; RATHER, CONFIRMING THA T THE TWO, I.E., THE METHOD ADOPTED (BY THE A.O.) AND THE MISTAKE/S ATTENDING THE SAID APPL ICATION, ARE DISTINCT AND DIFFERENT ASPECTS OF THE MATTER. IN FACT, IN THAT SENSE, THE FIGURES ADOPTED BY THE ASSESSEE, BEING BASED ON THE COMPUTATION OF INCOME (PB PG.10), REPR ESENT A REFINEMENT OVER THOSE ADOPTED BY THE A.O., WHICH ARE TAKEN FROM THE ASSES SEES FINAL ACCOUNTS. THIS IS AS ONLY THE EXPENDITURE, TO THE EXTENT CLAIMED, EVEN WHERE NOT REFLECTED IN THE INCOME (OR THE OPERATING) STATEMENT FOR THE YEAR, IN COMPUTING THE BUSINESS INCOME U/S. 28, THAT WOULD STAND TO BE ALLOCATED. THIS ALSO EXPLAINS THE DUPLI CATION, SO THAT THE EXPENDITURE DISALLOWED IN RECKONING THE BUSINESS INCOME STANDS INCLUDED IN THE EXPENDITURE SUBJECT TO ALLOCATION, WHICH INFLICTS THE A.O.S WORKING. THE EXPENDITURE HAVING BEEN DISALLOWED, SO THAT IT IS NOT CLAIMED, THERE IS NO QUESTION OF IT BEING INCLUDED IN THE EXPENDITURE LIABLE FOR APPORTIONMENT BETWEEN THE TWO INCOME STREAMS TAXA BLE AND NON TAXABLE. 4.2 AT THIS STAGE, THE LD. AR WAS REQUIRED BY THE B ENCH TO JUSTIFY THE EXCLUSION OF SOME EXPENDITURE FORMING PART OF ITS OPERATING EXPE NSES, PER ITS ALLOCATION METHOD; THERE BEING ADMITTEDLY A DIFFERENCE BETWEEN THE EXPENDITU RE ALLOCATED (RS.201.09 LACS) AND THAT CLAIMED BY THE ASSESSEE PER ITS COMPUTATION OF BUSI NESS INCOME. HE WOULD, WITH REFERENCE TO SCHEDULE 10 TO THE ASSESSEES BALANCE- SHEET AS AT THE YEAR-END (PB PGS.1-9), POINT OUT TO THE FOLLOWING EXPENDITURE: - TRAVELLING AND CONVEYANCE RS.58.65 LACS - LEGAL AND PROFESSIONAL RS.15.45 LACS - INSURANCE RS.1.28 LACS - RATES AND TAXES RS.0.64 LACS AS REGARDS THE BASIS FOR ITS NON-CONSIDERATION OR N ON-INCLUSION IN THE STATEMENT OF ALLOCABLE EXPENDITURE (EXHIBIT B TO THE COMPUTATION OF INCOME/PB PG.11), HE WOULD STATE OF THE SAME HAVING BEEN INCURRED SOLELY FOR THE TAX ABLE INCOMES, SO THAT NO PART THEREOF IS 6 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT ALLOCABLE TO THE TAX-EXEMPT, DIVIDEND INCOME. APART FROM BEING TOTALLY UNSUBSTANTIATED, THE ASSESSEES CLAIM IS WHOLLY INCONSISTENT AND, IN FACT, CONTRARY TO ITS ACCOUNTS AND RECORD. WHAT, ONE MAY ASK, IS THERE TO SHOW THAT WHILE THE OPERATING EXPENDITURE INCURRED ON SALARY (AND OTHER RELATED COSTS), VEHICLE MAINTE NANCE, COMMUNICATION, RENT, BANK CHARGES, ETC., AGGREGATING TO RS.201.09 LACS, IS IN CURRED ON OR TOWARD BOTH SETS OF INCOME TAXABLE AND NON-TAXABLE, THAT ON THE AFORE-REFERR ED HEADS, OF THE SAME SPECIES, BEING TOWARD GENERAL ADMINISTRATION, AND INCURRED IN THE ORDINARY COURSE, OF ITS BUSINESS BY THE ASSESSEE, IS NOT ? THE ASSESSEE IS IN EFFECT UNDERTAKING A SINGLE UN DIVISIBLE ACTIVITY OF PROMOTING BUSINESSES OF, BY INVESTMENT IN EQUITY AN D BY WAY OF ADVANCES TO, GROUP COMPANIES, YIELDING DIVIDEND AND INTEREST INCOME. SURPLUS FUNDS FOR THE TIME BEING ARE INVESTED IN BANK INSTRUMENTS (FDR), YIELDING INTERE ST, WHICH PORTFOLIO IN FACT WE FIND TO HAVE BEEN LIQUIDATED DURING THE CURRENT YEAR (SCHED ULE 5 TO THE BALANCE-SHEET). THE SAME, IN ANY CASE, DEFINES THE PRINCIPAL ACTIVITY OF THE APPELLANT-COMPANY. ON WHAT BASIS, THEN, CAN IT ISOLATE SOME EXPENSES; THE SAME BEING SOLELY TOWARD ASSETS OR ITS PRINCIPAL ACTIVITY YIELDING REVENUE, WHICH ASSETS REPRESENT ONE CLASS AND ONE COMPOSITE ACTIVITY RESPECTIVELY. THE ASSESSEES EXPLANATION AND METHOD OF APPORTIONMENT IS TO THAT EXTENT ARBITRARY AND DE HORS ITS ACCOUNTS. IN FACT, THOUGH THE ASSESSEE, AS AFO RE-NOTED, HAS A SINGLE SOURCE OF INCOME, EVEN WHERE AN ASSESSEE UND ERTAKES MORE THAN ONE ACTIVITY, THE ARGUMENT WOULD BE VALID WHERE IT MAINTAINS ITS ACCO UNTS ACTIVITY-WISE. FURTHER, EVEN IN SUCH A CASE THE APPORTIONMENT OF COMMON EXPENSES WO ULD BE REQUIRED TO BE MADE ON SOME DEFINITE, OBJECTIVE BASIS. A PROXIMATE CAUSE, I.E., WITH THE TAX EXEMPT INCOME - WHICH DOES NOT FALL UNDER ANY HEAD OF INCOME, WHICH IS REQUIRED TO SATISFY THE TEST OF IN RELATION TO, SPECIFIED IN SECTION 14A(1), INCLUDIN G BOTH DIRECT AND INDIRECT EXPENDITURE, IS EMINENTLY SATISFIED IN THE PRESENT CASE; RATHER, IN THE SAME MANNER AND TO THE SAME EXTENT AS IT IS FOR THE OTHER INCOME, BEING DIVIDEND (FROM NON-DOMESTIC COMPANIES) AND INTEREST INCOME, TOWARD WHICH IT SEEKS TO SET OFF THE ENTIRE OPERATING EXPENSE, EITHER WHOLLY (RS.106.26 LACS) OR PROPORTIONATELY (RS.201.09 LACS ). REFERENCE IN THIS CONTEXT MAY BE MADE TO THE DECISION BY THE TRIBUNAL IN THE CASE OF D. H. SECURITIES (P.) LTD. VS. DY. CIT [2014] 146 ITD 1 (MUM) (TM); AND DY. CIT VS. DAMANI ESTATES AND FINANCE P. LTD. 7 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT [2013] 25 ITR (TRIB) 683 (MUM.),WHEREAT THIS ISSUE STANDS DISCUSSED AT LENGTH IN ITS DIFFERENT FACETS, RELYING PRINCIPALLY ON THE DECISI ON IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA). 4.3 NEXT, AND FINALLY, WE MAY DISCUSS THE ASSESSEE S RELIANCE ON DECISIONS, AS IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA). THE SAID RELIANCE, AS WOULD BE APPARENT FR OM THE FOREGOING, IS MIS-CONCEIVED. ON FACTS, EVEN AS CLAR IFIED DURING THE COURSE OF HEARING ITSELF (REFER PARA 3.2 ABOVE), THE A.O. HAS BEEN EXPLICIT IN STATING HIS OBJECTION TO THE ASSESSEES WORKING. RATHER, WE OBSERVE THE SAME, WHILE VALID I N ALGORITHM, TO BE EQUALLY MISTAKEN IN-AS-MUCH AS IT, IN DISREGARD OF ITS BUSINESS MODE L AND ACCOUNTS, EXCLUDES CERTAIN EXPENDITURE DEBITED IN ACCOUNTS, BESIDES NOT MAKING ALLOWANCE FOR THOSE CLAIMED (OR NOT CLAIMED), IN ALLOCATING THE EXPENDITURE TOWARD TAX EXEMPT INCOME AND, THUS, TO DETERMINE THE QUANTUM OF INCOME NOT FORMING PART OF THE TAXAB LE INCOME AND, THEREBY, THAT SUBJECT TO TAX, I.E., THE BALANCE. AS CLARIFIED IN THE AFOR ESAID DECISIONS (REFER PARA 4.2), THE EXPENSES FALLING FOR ALLOWANCE UNDER ANY PROVISION, I.E., FROM SECTIONS 15 TO 59, WOULD QUALIFY FOR DISALLOWANCE U/S.14A, WHICH IS A SEPARA TE AND COMPLETE CODE IN ITSELF. WE HAVE ALREADY OBSERVED AN IDENTITY OR UNITY, I.E., I N PRINCIPLE, BETWEEN THE WORKING OF THE ASSESSEE AND THE A.O., SO THAT WHAT REMAINS IS TO E LIMINATE THE ERRORS INFLICTING THEIR RESPECTIVE WORKINGS, DOING WHICH WOULD LEAD TO THE SAME RESULT. THE ASSESSEES CHARGE IS NOT VALID EVEN IN PRINCIPL E, I.E., ON PURELY LEGAL BASIS, EVEN AS LAW CAN ONLY BE APPLIED IN A GIVEN SET OF F ACTS. THE ASSESSEES CLAIM, MADE WITHOUT SHOWING ANY BASIS OR REASON FOR EXCLUDING C ERTAIN EXPENSES; RATHER, CLAIMED THROUGH ITS OPERATING STATEMENT OR THROUGH THE COMP UTATION OF INCOME (FORMING PART OF ITS RETURN), IN THE ALLOCATION STATEMENT (PB PG.11), EV EN AS IT PURSUES A SINGLE, COMPOSITE BUSINESS ACTIVITY AND TOWARD WHICH THE ENTIRE OPERA TING EXPENDITURE IS ADMITTEDLY INCURRED, THOUGH ALSO YIELDING INCOME NOT FORMING P ART OF THE TOTAL INCOME, IS NOT A VALID CLAIM IN LAW, WHICH ONLY WOULD DISCHARGE THE INITIA L ONUS ON IT WITH REGARD TO THE EXPENDITURE, INCLUDING AT NIL, ATTRIBUTABLE TO INCO ME NOT FORMING PART OF THE TOTAL INCOME, IN TERMS OF SECTION 14A(2) OR SECTION 14A(3) OF THE ACT. IT IS ONLY ON A DISCHARGE OF THIS 8 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT INITIAL ONUS ON THE ASSESSEE, MADE WITH REFERENCE T O ITS ACCOUNTS, OR SOME OBJECTIVE CRITERIA BASED THEREON, THAT THE SAME SHIFTS TO THE A.O., SO THAT HE IS REQUIRED TO, WHERE NOT SATISFIED THEREWITH, STATE THE REASON/S FOR THE SAM E, AGAIN ON SOME OBJECTIVE BASIS. REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISIO N IN THE CASE OF AFL PVT. LTD. VS. ASST. CIT [2013] 28 ITR (TRIB) 263 (MUM), WHERE THIS ASPECT STANDS DISCUSSED AT LENGTH, CONSIDERING THE DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA). IN THE ABSENCE OF ANY FACTUAL BASIS TO THE ASSESSEES CLAIM, THE SAME , IT WAS EXPLAINED, WOULD NOT EVEN QUALIFY TO BE ONE. THE MATTER IS FACTUAL, SO THAT W HERE, THEREFORE, THE SAID INITIAL ONUS HAS NOT BEEN DISCHARGED BY THE ASSESSEE, THE DISALLOWAN CE U/S. 14A(1) CANNOT BE IMPUGNED FOR NON-COMPLIANCE OF THE PROCEDURE LAID DOWN U/S. 14A(2). THE ISSUE, IN FACT, STANDS AMPLY CLARIFIED PER GODREJ & BOYCE MFG. CO. LTD. (SUPRA), TO WHICH ABUNDANT REFERENCE HAS BEEN MADE BY THE TRIBUNAL. ITS RELEVANT PART IN FACT FINDS REPRODUCTION IN RAJ SHIPPING AGENCIES LTD (SUPRA) (REFER PARA 6 OF THE SAID ORDER), SO THAT T HERE IS NO DISPUTE OR QUARREL IN PRINCIPLE, EVEN AS EXPLAINED IN AFL PVT. LTD. (SUPRA). THE DECISION IN GARWARE WALL ROPES LIMITED (SUPRA) IS BASED IN THE FACT SETTING WHERE NO EXPEN DITURE WHATSOEVER HAS BEEN INCURRED OR CLAIMED BY THE ASSESSEE IN RESPECT OF INCOME NOT FORMING PART OF THE TOTAL INCOME. RATHER, THE SAID DECISION SUPPORTS WH AT STANDS STATED IN THIS ORDER; THE TRIBUNAL VIDE PARA 2.4 OF THE SAID ORDER CLARIFYING THAT SECTION 14A HAS IMPLICIT WITHIN IT THE NOTION OF THE APPORTIONMENT OF EXPENSES WHERE T HE EXPENDITURE IS INCURRED FOR COMPOSITE/INDIVISIBLE ACTIVITIES RESULTING IN TAXAB LE AND NON-TAXABLE INCOME. THE SAID DECISION, AS WELL AS THAT IN THE CASE OF J. M. FINANCIAL LIMITED (IN ITA NO. 4521/MUM(J)/2012 DATED 26.03.2014), FOLLOWING IT, W OULD THEREFORE BE OF NO ASSISTANCE TO THE ASSESSEE. 5. IN VIEW OF THE FOREGOING, WE UPHOLD THE DISALLOW ANCE U/S.14A(1) IN PRINCIPLE. THE A.O. SHALL, HOWEVER, CAUSE TO REMOVE ALL THE ABERRA TIONS ATTENDING THE COMPUTATION OF THE SAID DISALLOWANCE, RESTRICTING THE EXPENDITURE TO B E APPROPRIATED TO THAT CLAIMED BY THE ASSESSEE PER ITS RETURN OF INCOME AND, TWO, ON THE INCOME NOT FORMING PART OF THE TOTAL INCOME AND CLAIMED EXEMPT. WE DECIDE ACCORDINGLY. 9 ITA NO.6839/MUM/2013 (A.Y. 2005-06) WELLA INDIA HAIR COSMETICS PRIVATE LIMITED VS. DY. CIT 6. IN THE RESULT, THE ASSESSEE APPEAL IS DISPOSED O F IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 01, 20 14 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 0+ MUMBAI; 1) DATED : 01.08.2014 *.)../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. 4*5 6 %)78 , , 78/ , 0+ / DR, ITAT, MUMBAI 6. 6 9: ; + / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , 0+ / ITAT, MUMBAI