ACIT 8(3), MUMBAI V. RENAISSSANCE JEWELLERY LTD, MUMBAI

ITA 6860/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88457 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Proportionate interest
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, ( JM) . . , , ./I.T.A. NO.6860/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX 8(3), ROOM NO.217, AAYAKAR BHAVAN, M K MARG, MUMBAI-400020. / VS. M/S RENAISSANCE JEWELLERY LTD., PLOT NO.36A AND 37 MIDC MAROL, SEEPZ, ANDHERI, MUMBAI-400096. ( / APPELLANT) .. ( / RESPONDENT) ./ ! ./PAN/GIR NO. :AACCR2148B ' / APPELLANT BY SHRI LOVE KUMAR # ' / RESPONDENT BY SHRI SANJAY R PARIKH $ % # &' / DATE OF HEARING : 3.3.2015 () # &' /DATE OF PRONOUNCEMENT : 3.3.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.8.2012 PASSED BY LD CIT(A)-18, MUMBAI AND IT REL ATES TO THE ASSESSMENT YEAR 2008-09. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO TICED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME FROM MUTUAL F UNDS TO THE TUNE OF RS.53,38,266/- AND CLAIMED THE SAME AS EXEMPT. HEN CE THE AO ITA. NO.6860/MUM/2012 2 DISALLOWED FOLLOWING AMOUNTS AS PER THE PROVISIONS OF SEC. 14A R.W. RULE 8D OF IT RULES. PROPORTIONATE INTEREST U/S RULE 8D(2)(II) 21,32, 028 ADMINISTRATIVE EXPENSES 3,23,337 THE ASSESSEE ACCEPTED THE DISALLOWANCE OF ADMINISTR ATIVE EXPENSES, BUT CONTESTED THE DISALLOWANCE OF INTEREST BY FILING AP PEAL BEFORE LD CIT(A). THE ASSESSEE CONTENDED THAT IT HAD PARKED THE PROCE EDS RECEIVED THROUGH INITIAL PUBLIC OFFER (IPO) IN MUTUAL FUNDS AND NO P ART OF BORROWED FUNDS WAS USED FOR MAKING INVESTMENT. THE LD CIT(A) ACCE PTED THE CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY RESTRICTED THE DISA LLOWANCE OF PROPORTIONATE INTEREST TO RS.214/-. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 3. THE LD D.R PLACED STRONG RELIANCE ON THE ASSES SMENT ORDER. HOWEVER, THE LD A.R POINTED OUT THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE FACT THAT THE INVESTMENT HAS BEEN MADE OUT OF IPO PROCEEDS. HE INVITED OUR ATTENTION TO THE FOLLOWING OBSERVATI ONS MADE BY THE AO IN PARAGRAPH 4.2 OF THE ASSESSMENT ORDER:- REPLIES AND SUBMISSIONS OF THE ASSESSEE COMPANY A RE CONSIDERED. ASSESSEE WAS ABLE TO SHOW THAT THERE ARE NO DIRECT EXPENSES IN RELATION TO THE EARNING OF DIVIDEND INCOME. FURTHER ASSESSEE ALSO PROVED THAT THE INVESTMENT IN THE MUTUAL FUND IS OUT OF THE PROCEEDS OF IPO AND AS SUCH NO UTILIZATION O F THE BORROWED FUND FOR THE PURPOSE OF MAKING INVESTMENT. IN VIEW OF THE SAME, NO DISALLOWANCE ON ACCOUNT OF INT EREST IS CALLED FOR. ASSESSEE HAS, FURTHER, CLAIMED THAT THERE ARE NO INDIRECT EXPENSES AS THE DIVIDEND GETS ACCUMULATED AND FINALLY DISBURSED THROUGH ECS. HOWEVER, THE POSSIBILITY OF INDIRECT EXPENSES CANNOT BE RULED OUT. THEREFORE, I COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D AS UNDER. 4. THUS, WE NOTICE THAT THE AO, AFTER HAVING SATIS FIED HIMSELF THAT THE INVESTMENT HAS BEEN MADE OUT IPO PROCEEDS, HAS HOWE VER PROCEEDED TO DISALLOW THE PROPORTIONATE INTEREST EXPENDITURE ALS O. WE FURTHER NOTICE ITA. NO.6860/MUM/2012 3 THAT THE ASSESSEE HAS FURTHER SUBSTANTIATED ITS CLA IM BY DEMONSTRATING BEFORE LD CIT(A) THAT THE FUNDS WERE BORROWED FOR S PECIFIC PURPOSES AND HENCE THERE WAS NO DIVERSION. SINCE IT WAS ESTABLI SHED THAT THE BORROWED FUNDS WERE NOT DIVERTED, RATHER THE INVESTMENTS HAV E BEEN MADE OUT OF INTEREST FREE FUNDS, WE ARE OF THE VIEW THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE . UNDER THESE SET OF FACTS, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) AND ACCORDINGLY UPHOLD HIS ORDER. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 3 RD MARCH, 2015 IN THE PRESENCE OF BOTH THE PARTIES. () $ * + ,- 3RD MARCH, 2015 ) # % . SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * $ % MUMBAI:3RD MARCH,2015. . . ./ SRL , SR. PS !'#$ %$&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ 1& ( ) / THE CIT(A)- CONCERNED 4. $ 1& / CIT CONCERNED 5. 23 &4 , ' 4 , * $ % / DR, ITAT, MUMBAI CONCERNED 6. 5% / GUARD FILE. 6 $ / BY ORDER, TRUE COPY 7 (ASSTT. REGISTRAR) ' 4 , * $ % /ITAT, MUMBAI