HINDOOSTAN MILLS LTD ( ERSTWHILE THE SIRDAR CARBONIC GAS CO. LTD), MUMBAI V. DCIT 2(3), MUMBAI

ITA 6964/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1770 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 01-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Assessee Lawyers: K GOPAL AW MR JITENDRA SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . , ! ! ! ! , ' ' ' ' #$ %& #$ %& #$ %& #$ %& , ,, , ' ! ' ! ' ! ' ! ( ( ( ( BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 6964/MUM./2011 ( '* + ',+ / ASSESSMENT YEAR : 200809 ) HINDOOSTAN MILLS LTD. (ERSTWHILE THE SIRDAR CARBONIC GAS CO. LTD.) SIR VITHALDAS CHAMBERS 16, MUMBAI SAMACHAR MARG FORT, MUMBAI 400 001 .. -. / APPELLANT * V/S DY. COMMISSIONER INCOME TAX RANGE2(3), AAYAKAR BHAVAN 101, M.K. MARG, MUMBAI 400 020 .... /0-. / RESPONDENT !- . / PERMANENT ACCOUNT NUMBER AAACT0173A '* +2$ 3 4 / ASSESSEE BY : MR. K. GOPAL A/W MR. JITENDRA SINGH 5!' 3 4 / REVENUE BY : MR. AJAY *' 3 $ / DATE OF HEARING 12.02.2013 % 6, 3 $ / DATE OF ORDER 22.02.2013 % % % % / ORDER #$ #$ #$ #$ %& %& %& %& , ,, , ' ! ' ! ' ! ' ! 7 7 7 7 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS A GAINST THE IMPUGNED ORDER DATED 16 TH AUGUST 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)VI, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION HINDOOSTAN MILLS LTD. 2 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), FOR THE ASSESSMENT YEAR 200809, ON THE FOLLOWING GROUNDS: THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE MADE UNDER SECTION 14A BY THE ASSESSING OFFICER OF ` 5,53,164 OUT OF EXPENSES AS EXPENDITURE ATTRIBUTABLE TO THE EARNING OF EXEMPT I NCOME. YOUR APPELLANTS SUBMIT THAT THEY HAVE ALREADY ADDED BACK A SUM OF ` 9,32,029 IN THEIR RETURN OF INCOME UNDER SECTION 14 A AS EXPENDITURE INCURRED TOWARDS EARNING INCOME NOT CHARGEABLE TO T AX AND THAT NO FURTHER DISALLOWANCE IS CALLED FOR. YOUR APPELLANT SUBMIT THAT THE DISALLOWANCE OF ` 5,53,164 BE DELETED. WITHOUT PREJUDICE TO THE ABOVE YOUR APPELLANTS SUBM IT THAT THE DISALLOWANCE OF ` 5,53,164 MADE UNDER SECTION 14A R/W RULE 8D IS EXCESSIVE AND OUGHT TO BE REDUCED SUBSTANTIALLY . 2. FACTS IN BRIEF:- THE ASSESSEE, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND REFILLING OF ELASTIC CALENDAR BO WLS AND LEASING AND FINANCING. ON A PERUSAL OF THE ACCOUNTS, THE ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND OF ` 73,59,205, WHICH HAS BEEN CLAIMED AS EXEMPT, IT WAS FURTHER NOTED BY HIM THAT THE ASSESS EE HAS ACCRUED INTEREST OF ` 38,65,422, ON TERM LOAN AND ` 8,56,186, ON OTHERS. THE ASSESSEE, IN ITS COMPUTATION OF INCOME, HAS SUOMOTU DISALLOWED ` 8,32,029, TOWARDS INTEREST EXPENDITURE AND ` 1,00,000 TOWARDS OTHER EXPENSES UNDER SECTION 14A. THE ASSESSING OFFICER, HOWEVER, WORKED OUT THE DISALLOWANCE STRICTLY IN ACCORDANCE WITH RULE 8D AND HELD THAT 0.5% OF THE A VERAGE VALUE OF THE INVESTMENT SHOULD BE DISALLOWED. HE, THEREFORE, FUR THER DISALLOWED A SUM OF ` 5,53,164, AS PER THE DISCUSSION APPEARING IN THE AS SESSMENT ORDER. THE COMMISSIONER (APPEALS) UPHELD THE DISALLOWANCE ON T HE GROUND THAT INVESTMENT IN SHARES AND MUTUAL FUNDS IS 57.8%, WHI CH IS MORE THAN THE INVESTMENT IN FACTORY WHICH IS AT 42.20%. HE FURTHE R NOTED THAT DIRECTORS REMUNERATION IS AT ` 28,75,000, AND THE EXEMPT INCOME CONSTITUTE 42.33% OF THE TOTAL INCOME. THEREFORE, THE ADDITIONAL DISA LLOWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED. HINDOOSTAN MILLS LTD. 3 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONCE THE ASSESSEE HAS ITSELF DISALLOWED ITS SUBSTANTIAL EXPENDITURE A TTRIBUTABLE FOR EARNING OF EXEMPT INCOME, THE ASSESSING OFFICER, WITHOUT FINDI NG ANY DEFECT IN SUCH A WORKING COULD NOT HAVE RESORTED TO RULE 8D. THE ASS ESSING OFFICER IS REQUIRED TO FIRST SATISFY HIMSELF WITH REGARD TO THE ACCOUNT S OF THE ASSESSEE AND THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. ONCE HE H AS NOT COME TO ANY SATISFACTION UNDER SECTION 14(2), PROVISIONS OF RUL E 8D, CANNOT BE RESORTED TO. HE FURTHER SUBMITTED THAT INSOFAR AS COMMISSION ER (APPEALS)S OBSERVATION THAT THE ASSESSEES INVESTMENT IN FACTO RY IS 42.20% AND INVESTMENT IN SHARES AND MUTUAL FUNDS ARE FAR LOW, HE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING FOR TH E LAST SEVERAL YEARS AND THIS CANNOT BE THE CRITERIA FOR APPORTIONING OF THE EXPENDITURE. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. IN THIS CASE, IT IS NOTED THAT T HE ASSESSEE HAS DISALLOWED A SUM OF ` 8,32,029, TOWARDS INTEREST EXPENDITURE AND ` 1,00,000 FURTHER TOWARDS ANY OTHER EXPENDITURE. THIS WORKING OF THE ASSESSEE HAS NOT BEEN FOUND TO BE INCORRECT BY THE ASSESSING OFFICER WITH OUT HAVING ANY SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE WHICH CAN BE HELD TO BE ATTRIBUTABLE TO THE EXEMPT INCOME. THE ASSESSING OFFICER HAS WORKED OUT 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT AND WORKED OUT ` 6,63,164. HE HAS NOT GIVEN ANY FINDING ABOUT THE DISALLOWANCE OF ` 8,32,029 SUOMOTU MADE BY THE ASSESSEE. HE HAS GONE BY THE PRESUMPTION THAT THE ASSESSEE HAS ONLY DISALLOWED ` 1,00,000. THE MANNER IN WHICH THE COMMISSIONER (APPEALS) HAS CONFIRMED THE DISALLOWANCE IS ALSO NOT CORRECT, AS HE IS TRYING T O JUSTIFY THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO THE CORRECTNES S OF THE CLAIM. WE DO NOT FIND ANY REASON TO CONFIRM SUCH CONCLUSIONS DRAWN B Y THE COMMISSIONER (APPEALS). CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE HINDOOSTAN MILLS LTD. 4 COMMISSIONER (APPEALS) AND HOLD THAT FURTHER DISALL OWANCE OF ` 5,53,164, OVER AND ABOVE THE SUM OF ` 9,32,029, MADE BY THE ASSESSEE UNDER SECTION 14A IS UNCALLED FOR AND THE SAME IS HEREBY DELETED. 6. 2 $8 '* +2$ 3 !'$ 9 * 5$ :; < 6. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED. % 3 , = > *8 22 ND FEBRUARY 2013 3 ? < ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY 2013 SD/- . .. . ! ! ! ! B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- #$ #$ #$ #$ %& %& %& %& ' ! ' ! ' ! ' ! AMIT SHUKLA JUDICIAL MEMBER MUMBAI, > * > * > * > * DATED: 22 ND FEBRUARY 2013 % 3 /'$#@ A@,$ / COPY OF THE ORDER FORWARDED TO : (1) '* +2$ / THE ASSESSEE; (2) 5!' / THE REVENUE; (3) B () / THE CIT(A); (4) B / THE CIT, MUMBAI CITY CONCERNED; (5) @'E? /'$'* , , / THE DR, ITAT, MUMBAI; (6) ?F+ G / GUARD FILE. 0@$ /'$ / TRUE COPY %* / BY ORDER / 5. H / PRADEEP J. CHOWDHURY '2I '*5 ' / SR. PRIVATE SECRETARY J / : 5 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI