ITO 3(3)(3), MUMBAI V. SOLITAIRE APPLIANCES P.TLD, MUMBAI

ITA 6922/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1269 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 13-11-2014
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 6922 /MUM/20 14 (ASSESSMENT YEAR 20 11 - 12 ) ITO 3(3)(3) ROOM NO. 672 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. SOLITAIRE APPLIANCES PVT. LTD. 171 - C, MITTAL COURT NARIMAN POINT MUMBAI - 400 021. ( APPELLANT ) ( RESPONDENT ) PAN NO . AABCV0807C ASSESSEE BY SHRI BHUPENDRA KARKHANIS DEPARTMENT BY DR. A.K. NAYAK DATE OF HEARING 10 .4 . 201 7 DATE OF PRONOUNCEMENT 10 . 4 . 2 01 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.8.2014 PASSED BY THE LEARNED CIT(A) - 7, MUMBAI AND IT RELATES TO A.Y. 2011 - 12. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT( A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE HELD LONG TERM INVESTMENT OF ` 161 CRORES AND ` 114 CRORES RESPECTIVELY AS ON 31.3.2011 AND 31.3.2010. THE AS SESSEE DID NOT MAKE ANY DISALLOWANCE U/S. 14A OF THE ACT. WHEN QUESTIONED, THE ASSESSEE SUBMITTED THAT IT DID NOT INCUR ANY EXPENDITURE FOR THE INVESTMENT ACTIVITY. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION S OF THE ASSESSEE AND ACCORDING LY COMPUTED THE DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D(2)(III) AT THE RATE OF 0.5% OF THE AVERAGE VALUE OF INVESTMENT , WHICH WORKED TO ` 68,95,883/ - . M/S. SOLITAIRE APPLIANCES PVT. LTD. 2 3. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE OTHER THAN THOSE RELATED TO THE TRADING ACTIVITY WAS RANGING AROUND ` 96 ,000/ - ONLY. IT WAS FURTHER SUBMITTED THAT THE MAJOR PORTION OF ITS INVESTMENT WAS MADE IN A GROUP COMPANY NAMED M/S. VIDEOCON INDUSTRIES LTD. IT WAS FURTHER SUBMITTED THAT SUCH KIND OF STRATEGIC INVESTMENT HAVE TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D AS PER DECISION RENDERED BY MUMBAI TRIBUNAL IN THE CASE OF GARWARE WALL ROPES LTD. VS. ADDL. CIT (46 TAXAMNN.COM 18). THE LEARNED CIT(A) WAS SATISFIED WITH THE CONTENTION S OF THE ASSESSEE AND ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE BY THE REVENUE. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTE D THE ORDER PASSED BY THE ASSESSING OFFICER. 5. LEARNED AR, IN ADDITION TO SUPPORTING THE ORDER PASSED BY THE LEARNED CIT(A), FURTHER SUBMITTED THAT THE ASSESSEE DID NOT EARN ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION AND HENCE THERE IS NO RE QUIREMENT OF MAKING ANY DISALLOWANCE U/S. 14A OF THE ACT AS PER DECISION RENDERED BY HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. MITSUBISHI CORP ORATION INDIA PVT. LTD. (ITA 45/2016 DATED 10.2.2016). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AN D PERUSED THE RECORD. PERUSAL OF THE ANNUAL REPORT FILED BY THE ASSESSEE WOULD SHOW THAT THE ASSESSEE HAS CLASSIFIED ITS INVESTMENT INTO TWO CATEGORIES, VIZ., QUOTE AND UNQUOTE D INVESTMENTS . QUOTED INVESTMENTS HAVE BEEN MADE IN VIDEOCON INDUSTRIES LTD. (M AJOR PORTION OF INVESTMENT) & VALUE INDUSTRIES LTD. IT WAS SUBMITTED THAT M/S VIDEOCON INDUSTRIES LTD IS A GROUP CO MPANY AND HENCE IT FALL S IN THE CATEGORY OF STRATEGIC INVESTMENTS. UNQUOTED INVESTMENT COSTING ` 101.19 CRORES HAVE BEEN BROUGHT FORWARD FR OM IMMEDIATELY PRECEDING YEAR , MEANING THEREBY THE ASSESSEE DID NOT MAKE ANY FRESH INVESTMENT DURING THE YEAR UNDER CONSIDERATION IN UNQUOTED INVESTMENTS . PERUSAL OF THE PROFIT AND LOSS ACCOUNT M/S. SOLITAIRE APPLIANCES PVT. LTD. 3 WOULD SHOW THAT THE ASSESSEE HAS INCURRED EXPENDITURE TOWARDS SALARIES TO THE TUNE OF ` 84,000/ - ONLY. ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE CONSISTED OF, INTER ALIA , FREIGHT FORWARDING EXPENSES OF ` 1.60 LAKHS AND LOSS ON INVESTMENT OF ` 1.90 LAKHS. IF WE EXCLUDE BOTH THESE ITEMS, TOTAL EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF SALARIES AND ADMINISTRATIVE EXPENSES WORK ED OUT TO AROUND ` 96,000/ - ONLY. SALES TURNOVER REPORTED BY THE ASSESSEE WA S ` 2.57 CRORES AND HENCE THE ABOVE SAID EXPENDITURE OF RS.96,000/ - MIGHT RELATE ENTIRELY TO BUSINESS ACTIVI TIES . UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS NO REQUIREMENT FOR MAKING ANY DISALLOWANCE U/S. 14A OF THE ACT AND HENCE WE AGREE WITH THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD HIS ORDER. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 10 .4 .201 7. SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 4 / 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. REGISTRAR) PS ITAT , MUMBAI