Appeal details
Counselvise Citation
[2015] 121 COUNSELVISE.COM (IT) 2132 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-10-2015
Appeal Filed By
Assessee
Bench Allotted
SMC
Assessment Year
2010-2011
Appeal Filed On
18-11-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 7043/M/2014 (AY: 2010 - 2011 ) M/S. CREATIVE TEXTILE MILLS PVT LTD, (PREVIOUSLY KNOWN AS CREATIVE PORTICO (INDIA) PVT LTD) C/O. KARNAVAT & CO, 2A KITAB MAHAL, 1 ST FLOOR, 192 DR. D.N. ROAD, MUMBAI - 01. / VS. DCIT - CIRCLE 6(2), R.NO.504, 5 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI 20. ./ PAN : AAACC5458 P ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL HIRAWAT / RESPONDENT BY : MS NEELIMA V NADKARNI, DR / DATE OF HEARING : 25 .8 .2015 / DATE OF PRONOUNCEMENT : 13 .10 .2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 18.11.2014 IS AGAINST THE ORDER OF THE CIT (A) - 12, MUMBAI DATED 7.8.2014 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN LAW, THE LD CIT (A) HAD FAILED TO APPRECIATE THAT APPLYING RULE 8D WITHOUT REJECTING THE CLAIM OF THE APPELLANT IS BAD IN LAW. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE AO NOT TO APPLY RULE 8D WITHOUT REJECTING THE CLAM OF THE APPELLANT WHILE COMPUTING THE DISALLOWANCE U/S 14A OF THE ACT. 2. ON THE FACTS AND IN LAW, THE LD CIT (A) HAD FAILED TO APPRECIATE THAT NO AMOUNT OF EXEMPT INCOME WAS RECEIVED AND ACCORDINGLY, NO DISAL LOWANCE U/S 14A IS ATTRACTED. 3. ON THE FACTS AND IN LAW, THE LD CIT (A) HAD FAILED TO APPRECIATE THAT NO AMOUNT OF INTEREST IS DISALLOWABLE U/S 14A AS THE OWN FUNDS WERE IN EXCESS OF INVESTMENTS AS ON 31.3.2009 AND EARLIER YEARS AND IN VIEW OF THE RATIO L AID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD (313 ITR 340) NO DISALLOWANCE SHOULD BE UPHELD U/S 14A OUT OF INTEREST PAID. 4. ON THE FACTS AND IN LAW, THE LD CIT (A) OUGHT TO HAVE DIRECTED THE LD AO TO RESTRICT THE DISALLOWANCE U/S 14A OF 2% OF THE EXEMPT INCOME AS CLAIMED BY THE APPELLANT BASED ON THE ORDER OF HONBLE ITAT IN APPELLANTS OWN CASE IN AY 2004 - 05. 5. ON THE FACTS AND IN LAW, THE LD CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,64,271/ - U/S 14A R.W. RULE 8D WHILE COMPUTING THE BOOK 2 PROFIT U/S 115JB. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATER, HE OUGHT TO HAVE DELETED THE SAID DISALLOWAN CE OF RS. 2,64,271/ - . 2. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL , AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT MY ATTENTION TO THE ABOVE GROUNDS AND SUBMITTED THAT THEY REVOLVE AROUND THE ARGUMENTS IN VIEW OF THE JUDGMENT OF THE HONBLE BOMBAY H IGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD (313 ITR 340) WHEREIN IT WAS HELD THAT NO DISALLOWANCE IS CALLED FOR U/S 14A R.W. RULE 8D OF THE ACT . FURTHER, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN EARLIER ASSESSMENT YEAR 2004 - 05, THE TRIBU NAL PASSED AN ORDER RESTRICTING THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT TO 2% RELYING ON THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 . FURTHER, LD COUNSEL FOR TH E ASSESSEE ALSO MENTIONED THAT THE ASSESSEE MADE INVESTMENT OF RS. 3.86 CRS (ROUNDED OF) OUT OF WHICH RS. 2,50,12,500/ - WAS INVESTED IN THE CREATIVE TEXTILE MILLS PRIVATE LIMITED, WHICH IS A 100% SUBSIDIARY COMPANY OF THE ASSESSEE. RELYING ON THE COORDINAT E BENCH DECISION IN THE CASE OF GARWARE WALL ROPES LIMITED VS. ADDL. CIT IN ITA NO. 5408/M/2012 (AY 2009 - 2010), DATED 15.1.2014 AND ANOTHER DECISION OF THE ITAT IN APPEAL ITA NO. 4521/M/2012 (AY 2009 - 2010), DATED 26.3.2014, LD COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THESE DECISION ARE RELEVANT FOR THE PROPOSITION THAT NO DISALLOWANCE U/S 14A OF THE ACT IS REQUIRED TO BE MADE WHEN THE INVESTMENTS INVOLVED THE SISTER / SUBSIDIARY CONCERNS FOR STRATEGIC INVESTMENT PURPOSES IE FOR CONTROL AND MANAGEMENT OF CON CERNS AND NOT FOR EARNING OF DIVIDEND INCOME. 3. AFT ER HEARING BOTH THE PARTIES, I FIND THAT THIS ISSUE RELATING TO STRATEGIC INVESTMENT IN THE SUBSIDIARY COMPANIES AND THE APPLICABILITY OF THE CITED DECISIONS OF THE TRIBUNAL (SUPRA) WERE NOT EXAMINED AND APPLIED TO THE FACTS OF THE PRESENT CASE BY THE REVENUE AUTHORITIES. THEREFORE, K EEPING IN VIEW THE ABOVE FACTS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THIS MATTER SHOULD BE REMANDED TO THE F ILE OF THE AO. ACCORDINGLY, I REMAND THIS MATTER TO THE FILE OF THE AO WITH A DIRECTION TO THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE A ND APPLY THE RATIO LAID DOWN IN THE ABOVE REFERRED ORDERS OF THE TRIBUNAL (SUPRA). IN RESPECT OF THE OTHER I NVESTMENTS APPEARING UNDER THE CURRENT INVESTMENT HEAD , AO IS DIRECTED TO EXAMINE THE ISSUE AFRESH AFTER CONSIDERING THE RATIO LAID DOWN BY THE J URISDICTION HIGH COURT IN THE CASE 3 OF RELIANCE UTILITIES (SUPRA). AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. THUS, ALL THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FO R STATISTICAL PURPOSES. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRO NOUNCED IN THE OPEN COURT ON 1 3 T H OCTOBER, 2015. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 1 3 . 10 .2015 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
