SHREE SATYANARAYAN INVESTMENTS CO. LTD, MUMBAI V. DCIT 1(3), MUMBAI

ITA 6888/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1990 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 12-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Depreciation; Source of fund
• Section: 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI A.K. GARODIA ,AM ./ I.T.A. NO.6888/MUM/2014 ( / ASSESSMENT YEAR: 2003-04) SHREE SATYANARAYAN INVESTMENTS CO. LTD.3 RD FLOOR, SHREE NIWAS HOUSE HAZARIMAL SOMANI MARG, FORT MUMBAI-400 001. / VS. DEPUTY COMMISSIONER OF INCOME TAX, 1(3), MUMBAI 541, AAYAKAR BHAWAN, M.K.MARG MUMBAI-400 20 ./ ./PAN/GIR NO. AABCS4627H ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI. RAHUL SARDA / RESPONDENT BY : SHRI. B.S. BIST / DATE OF HEARING : 30/11/2015 !'# / DATE OF PRONOUNCEMENT : 23/12/2015 $% / O R D E R PER AK GARODIA, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 30/07/2014 OF COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI (HER EINAFTER CALLED AS THE CIT(A) FOR ASSESSMENT YEAR 2003-04.THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. AGAINST PARTIAL DISALLOWANCE AMOUNTING TO RS.60 1456/- AGAINST CLAIM U/S 80M : A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING LD. ASSESSING OFFICER'S ACTION OF RESTRICTING THE DEDUCTION U/S 8 0M OF THE INCOME TAX ACT, 2 ITA NO. 6888/MUM/2014 (A.Y: 2003-04) SATYANARAYAN INVESTMENTS CO. VS DEPUTY COMMISSIONE R OF INCOME TAX, 1961 TO A SUM OF RS. 9515057/- ONLY AS AGAINST THE ASSESSEE'S CLAIM OF SAID DEDUCTION IN THE SUM OF RS.10116513/-. B) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN CONFIRMING LD. A/OS ACTION OF TAKING RS.L6628501- AS THE EXPENDITURE ALLEGEDLY INCURRED FOR EARNING DIVI DEND INCOME. C) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (APPEALS) AND LD. A/O BOTH ERRED IN IGNORING TH E CLEAR DIRECTIONS OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IN THIS REGAR D. D) ,FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN OBSERVING THAT APPELLANT HAD CARRIED ON THE INVESTMENT ACTIVITIES AS THE PREDOMINANT BUSINESS ACTIVITIES. 2. AGAINST CHARGING OF INTEREST OF RS.34269/- U/S 2 34D : A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE LD. A/OS WRONG ACTI ON OF CHARGING INTEREST AMOUNTING TO RS.34269/- U/S 234D OF THE INCOME TAX ACT, 1961. B) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN OBSERVING THAT THERE WAS NO REFUND THAT HAD ARISEN ON COMPLETION OF REGULAR ASSESSMENT. 3. AGAINST GRANTING OF LOWER INTEREST U/S 244A : A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE LD. A/OS ACTION OF GRANTING ONLY RS.L73286/- AS INTEREST U/S 244A OF THE INCOME TAX ACT, 1961 AS AG AINST INTEREST ALLOWABLE IN THE SUM OF RS.39450 1/- EVEN WITHOUT CONSIDERING TH E RELIEFS EXPECTED AT APPELLATE STAGE. B) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN OBSERVING THAT THE APPELLANT HAD NO DETAILS AND WORKING IN SUPPORT OF GROUND AGAINST GRANT OF LOWER INTEREST U /S 244A AND ALSO THAT THE SAID GROUND WAS A FRIVOLOUS GROUND . 3 ITA NO. 6888/MUM/2014 (A.Y: 2003-04) SATYANARAYAN INVESTMENTS CO. VS DEPUTY COMMISSIONE R OF INCOME TAX, 2. REGARDING THE GROUND NUMBER 1&2, IT WAS SUBMITTE D BY THE LD. AR ASSESSEE THAT AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COU RT REFERRED IN THE CASE OF CIT VS. CENTRAL BANK OF INDIA AS 264 ITR 522, ONLY ACTU AL EXPENSES CAN BE REDUCED FROM THE INCOME BEFORE ALLOWING DEDUCTION UNDER SECTION 80M OF THE IT ACT AND IN THE PRESENT CASE, NO ACTUAL EXPENDITURE HAS BEEN REDUCE D BY THE AO AND HE HAS REDUCED THE PROPORTIONATE EXPENDITURE. AT THIS JUNCTURE, IT WAS POINTED OUT TO HIM THAT THIS IS THE SECOND ROUND OF APPEAL AND AS PER EARLIER TERMI NAL ORDER IN HIS OWN CASE IN ITA 3457/MUM/09 DATED 18/03/2011; MATTER WAS RESTORED T O THE FILE OF THE AO FOR FRESH DECISION IN THE LIGHT OF EARLIER TRIBUNAL ORDER FOR AY 2001-02 DATED 18.01.2007. 3. IN REPLY IT WAS SUBMITTED BY LD. AR ASSESSEE THA T EVEN WHILE DECIDING THE ISSUE IN THE LIGHT OF EARLIER TRIBUNAL ORDER FOR AY 2001- 02 WHICH IS AVAILABLE IN THE PAPER BOOK ON PAGE NUMBER 22-26 IN ITA NO.2281-5282/MUM/2 013 DATED 18.01.2007, THE BINDING JUDGMENT OF HONBLE HIGH COURT SHOULD BE FO LLOWED IN PREFERENCE TO EARLIER TRIBUNAL ORDER. HE ALSO PLACED RELIANCE ON JUDGMENT S OF HONBLE BOMBAY HIGH COURT AS REPORTED IN 254 ITR 204(BOM) AND 284 ITR 586 (BO M). REGARDING GROUND NUMBER 3&4 IN RESPECT OF LEVY OF INTEREST U/S 234D AND ALL OWING OF INTEREST TO THE ASSESSEEE U/S 244A, IT WAS SUBMITTED BY THE LD. A.R. OF THE A SSESSEE THAT THESE ARE CONSEQUENTIAL. 4. I HAVE CONSIDERED RIVAL SUBMISSIONS REGARDING GR OUND NUMBER 1&2 IN RESPECT OF RESTRICTING THE DEDUCTION UNDER SECTION 80 M OF THE INCOME-TAX ACT,1961 TO A SUM OF RS.9515057/- ONLY AS AGAINST THE ASSESSEES CLAIM O F RS.10116513/-. IN THE EARLIER ORDER FOR THE SAME YEAR, IT WAS HELD BY THE TRIBUNA L THAT THE AO SHOULD DECIDE THE ISSUE AFRESH AS PER PARAMETERS LAID DOWN IN AY 2001-02 AN D 2002-03. IN THE EARLIER ORDER FOR THE AY 2001-02 WHICH IS AVAILABLE ON PAGE NUMBE R 22&26 OF THE PAPER BOOK, IT WAS HELD BY THE TRIBUNAL THAT THE AO IS REQUIRED TO ANALYSE THE FACTS SO AS TO ARRIVE AT THE QUANTUM OF EXPENDITURE THAT CAN BE APPORTIONED AMONGST VARIOUS RECEIPTS. IT WAS 4 ITA NO. 6888/MUM/2014 (A.Y: 2003-04) SATYANARAYAN INVESTMENTS CO. VS DEPUTY COMMISSIONE R OF INCOME TAX, HELD THAT EXPENDITURE INCURRED BY THE ASSESSEE FOR THESE TWO YEARS IS REQUIRED TO BE ALLOCATED AMONGST DIFFERENT SOURCES OF INCOME FIRST . EVEN IF AN ACCURATE CALCULATION OF ACTUAL EXPENDITURE CANNOT BE MADE, AN ATTEMPT SHOU LD BE MADE TO MAKE AN ESTIMATE OF EXPENDITURE ATTRIBUTABLE TO VARIOUS SOURCES OF INCO ME AS NEAR ACTUAL BASIS AS POSSIBLE ON THE BASIS OF FACTS THAT MAY BE BROUGHT ON RECORD BY THE ASSESSEE. AS PER THE SUBMISSION MADE BEFORE CIT (A) AVAILABLE ON PAGE NUMBER 30-35 OF THE PAPER BOOK, IT WAS SUBMITTED BY THE ASESSEE THAT ONLY AN AMOUNT OF RS.208690/- WAS INCURRED AS COMMON INDIRECT EXPENSES AND ALL OTHER EXPENSES OF RS.13,17,611/- OUT OF TOTAL EXPENSES OF RS.15,26,301/- ARE SPECIFICALLY ALLOCAB LE TO TAXABLE INCOME OR INFRASTRUCTURAL EXPENSES AND NO CLAIM FOR RS. 22,35 7/- WAS MADE BEING LOSS ON SALE OF FIXED ASSESTS AND THE EXPENSES WHICH WERE IN THE FO RM OF SALARIES, BONUS, GRATUITY, LEAVE ENCASHMENT, STAFF WELFARE ARE NOT TO BE CONSI DERED AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT REFERRED IN THE CASE OF C IT VS GENERAL INSURANCE CORPORATION OF INDIA 240 ITR 203 (BOM.). ASSESSEE HAS PROPOSED IN THE SUCH WRITTEN SUBMISSIONS THAT 2% OF DIVIDEND INCOME I.E. RS.2,23 ,560/- MAY BE REDUCED FROM DIVIDEND INCOME FOR THE PURPOSE OF COMPUTING DEDUCT ION U/S 80M OF THE IT ACT. 5. AT THIS JUNCTURE, I CONSIDER IT PROPER TO REFER TO THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS GE NERAL INSURANCE CORPORATION OF INDIA (SUPRA). IN THIS CASE, IT WAS HELD BY THE HON BLE BOMBAY HIGH COURT THAT EXPENSES INCURRED ON ACCOUNT OF SALARY PAID TO STAF F IS NOT DIRECTLY RELATED TO EARNING OF DIVIDEND FOR COMPUTING DEDUCTION U/S 80M OF THE IT ACT. BY RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE BOMBAY HIGH COURT. I H OLD THAT THE AMOUNT OF EXPENSES IN THE FORM OF SALARIES, BONUS, GRATUITY, LEAVE ENC ASHMENT, STAFF WELFARE OF RS.11,09,927/- CANNOT BE CONSIDERED FOR REDUCING DI VIDEND INCOME FOR COMPUTING DEDUCTION U/S 80M OF I T ACT. 5 ITA NO. 6888/MUM/2014 (A.Y: 2003-04) SATYANARAYAN INVESTMENTS CO. VS DEPUTY COMMISSIONE R OF INCOME TAX, 6. I ALSO FIND THAT THAT ON PAGE NUMBER 3 OF THE A SSESSMENT ORDER, THE AO HAS STATED THAT THE ASSESSEE HAS DEBITED EXPENSES OF RS . 18,05,483/- BUT I FIND THAT AS PER THE PROFIT & LOSS ACCOUNT AND SCHEDULE 10 AVAILABLE IN THE PAPER BOOK, TOTAL EXPENSES CLAIMED IS ONLY RS. 15,26,301/- EXCLUDING DEPRECIATION RS. 39,182/- AND INTEREST ON LOAN RS. 240,000/-. INTEREST ON LOAN C ANNOT BE CONSIDERED BECAUSE THE SAME IS RELATABLE TO INTEREST INCOME OF RS. 913,590 /- AS NOTED IN THE ASSESSMENT ORDER AND DEPRECIATION OF FIXED ASSETS IS INFRASTRUCTURAL EXPENSES. 8. AFTER CONSIDERING THESE FACTS THAT THE AMOUNT OF EXPENSES IN THE FORM OF SALARIES, BONUS, GRATUITY, LEAVE ENCASHMENT, STAFF WELFARE OF RS.11,09,927/- CANNOT BE CONSIDERED FOR REDUCING DIVIDEND INCOME FOR COMP UTING DEDUCTION U/S 80M OF I T ACT AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COUR T RENDERED IN THE CASE OF CIT VS GENERAL INSURANCE CORPORATION OF INDIA (SUPRA) A ND ALSO NON CONSIDERATION OF IS INFRASTRUCTURAL EXPENSES, I FIND FORCE IN THE SUBMI SSIONS OF THE LEARNED AR OF THE ASSESSEE BEFORE CIT (A) AS AVAILABLE ON PAGES 33 & 34 OF THE PAPER BOOK THAT ONLY 2% OF DIVIDEND INCOME I.E. RS. 223,560/- BE REDUCED FR OM DIVIDEND INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80M. I DIRE CT THE A.O. ACCORDINGLY. THE A.O. SHOULD COMPUTE THE DEDUCTION U/S 80 M AFTER REDUCIN G RS. 223,560/- FROM DIVIDEND INCOME. THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. FOR RE-COMPUTING THE DEDUCTION ALLOWED TO THE ASSESSEE U/S 80 M OF THE I T ACT AS PER ABOVE DIRECTION. GROUND NUMBER 1&2 ARE ALLOWED FOR STATISTICAL PURPO SES. 9. GROUND NO. 3&4 ARE CONSEQUENTIAL AND THEREFORE, THE A.O. SHOULD RE COMPUTE THE INTEREST CHARGEABLE FROM THE ASSESSEE U/S 234D AND PAYABLE TO ASSESSEE U/S 244A AFTER GIVING RELIEF TO THE ASSESSEE AS PER ABOVE PA RA. 6 ITA NO. 6888/MUM/2014 (A.Y: 2003-04) SATYANARAYAN INVESTMENTS CO. VS DEPUTY COMMISSIONE R OF INCOME TAX, IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2015 SD/- (A.K. GARODIA) $ / ACCOUNTANT MEMBER & ' MUMBAI; ($ DATED : 23.12.2015 PS. ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT - CONCERNED 5. ,-. //01 , 01# , & ' / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, & ' / ITAT, MUMBAI