ASHAPURA SHIPPING LTD, MUMBAI V. ACIT CEN CIR 3(3), MUMBAI

ITA 6995/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1114 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2016
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6995 /MUM/ 201 6 (ASSESSMENT YEAR 20 12 - 1 3 ) ASHAPURA SHIPPING LTD. EUCHRISTIC CONGRESS BUILDING NO. III 2 ND FLOOR 5 - CONVENT STREET COLABA MUMBAI - 400 005. VS. ACIT CENTRAL CIRCLE - 3(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AADCA2714R ASSESSEE BY SHR I DEEPAK TRALSHAWALA DEPARTMENT BY MISS BHARTI SINGH DATE OF HEARING 4 . 5. 201 7 DATE OF PRONOUNCEMENT 4 .5 . 201 7 O R D E R THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 09 - 09 - 2016 PASSED BY LD CIT(A) - 51, MUMBAI CONFIRMING THE ADDITION MADE BY THE AO U/S 14A OF THE ACT FOR ASSESSMENT YEAR 2012 - 13. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS CARRYING ON THE BUSINESS OF SHIPPING OPERATIONS AND SERVICES. THE AO NOTICED THAT THE ASSESSEE HAS INVESTED IN SHARES OF OTHER COMPANIES AND ALSO INCURRED HUGE EXPENSES. THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. HE NCE THE AO COMPUTED THE DISALLOWANCE BY APPLYING THE PROVISIONS OF RULE 8D OF THE I T RULES. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD MADE AN INVESTMENT OF RS.130 LAKHS IN ITS SUBSIDIARY COMPANY AND RS.364 LAKHS IN ANOTHER COMPANY. THE AO DID NOT CON SIDER THE INVESTMENT MADE IN THE ASHAPURA SHIPPING LTD. 2 SUBSIDIARY COMPANY AND COMPUTED THE DISALLOWANCE BY CONSIDERING THE INVESTMENT OF RS.364 LAKHS MADE IN ANOTHER COMPANY. 3. BEFORE THE LD CIT(A), THE ASSESSEE CONTENDED THAT IT DID NOT RECEIVE ANY DIVIDEND INCOME AND HE NCE THE DISALLOWANCE U/S 14A IS NOT REQUIRED TO BE MADE. THE LD CIT(A) DID NOT ACCEPT THE SAID CONTENTIONS BY PLACING RELIANCE ON THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF GARWARE WALL ROPES (ITA NO.7899/M/2011) AND BOMBAY HIGH COURT IN THE CAS E OF GODREJ & BOYCE (328 ITR 81). WITH REGARD TO THE COMPUTATION MADE BY THE AO, THE LD CIT(A) OBSERVED AS UNDER: - FROM THE ASSESSMENT ORDER, IT IS SEEN THAT AO HAS ALSO EXCLUDED THE INVESTMENTS MADE IN SISTER CONCERN ASHAPURA SHIPPING, UAE AND HAS CON SIDERED ONLY RS.3.64 CRORES WHICH WAS INVESTED IN ASHUTOSH CONTAINER SERVICES FOR THE PURPOSE OF CALCULATION OF AVERAGE INVESTMENTS. ASSESSEE DID NOT CLAIM THAT THIS CONCERN IS EITHER SISTER CONCERN OF THE INVESTMENT THEREIN IS OF STRATEGIC IMPORTANCE. C ONSIDERING THE ABOVE FACTS, IT IS HELD THAT ASSESSEE DID NOT HAVE SUFFICIENT OWN FUNDS AND AO HAS ALREADY EXCLUDED STRATEGIC INVESTMENTS WHILE CALCULATING AVERAGE INVESTMENTS UNDER RULE 8D. THEREFORE I DO NOT FIND ANY INCONSISTENCY IN THE STAND OF AO IN C ALCULATING THE DISALLOWANCE U/S 14A. SINCE THE LD CIT(A) HAS CONFIRMED THE DISALLOWANCE WORKED OUT BY AO, THE ASSESSEE HAS FILED THIS APPEAL. 4. THE LD A.R SUBMITTED THAT THE COMPANY M/S ASHUTOSH CONTAINER SERVICES IS ALSO A GROUP COMPANY, SINCE THE ASSESSEE IS HOLDING 26% OF SHARES IN THAT COMPANY. ACCORDINGLY HE SUBMITTED THE ABOVE SAID INVESTMENT IS ALSO A STRATEGIC INVESTMENT AND HENCE THE SAME IS ALSO REQUIRED TO BE EXCLUDED, IN WHICH CASE, THERE WILL REMAIN NOTHING TO DISALLOW U/S 14A OF THE A CT. THE LD A.R ALSO SUBMITTED THAT THE ASSESSEE DID NOT RECEIVE ANY DIVIDEND INCOME AND HENCE NO DISALLOWANCE U/S 14A IS CALLED FOR IN VIEW OF THE DECISION RENDERED BY HIGH COURTS. ASHAPURA SHIPPING LTD. 3 5. I HEARD LD D.R AND PERUSED THE RECORD. THE FACT THAT M/S ASHUTOSH C ONTAINER SERVICES IS ALSO A GROUP COMPANY WAS NOT BROUGHT TO THE NOTICE OF THE TAX AUTHORITIES BY THE ASSESSEE COMPANY. HENCE THIS FACT REQUIRES VERIFICATION. IF IT IS FOUND TO BE CORRECT, THEN THIS INVESTMENT ALSO REQUIRES TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE UNDER RULE 8D, IN WHICH CASE THERE WILL NOT BE ANY DISALLOWANCE U/S 14A. FURTHER THE ASSESSEE HAS ALSO CLAIMED THAT IT DID NOT RECEIVE ANY EXEMPT DIVIDEND INCOME AND HENCE NO DISALLOWANCE IS CALLED FOR. UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF AO. ACCORDINGLY I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH THE LAW BY DULY CONSIDERI NG THE DISCUSSIONS MADE SUPRA. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 4 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 5 / 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