Jagdanand Invsts & Trading Co. Pvt Ltd, Mumbai V. ACIT Rg - 3(2), Mumbai

ITA 7080/MUM/2003

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48623 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 06-04-2011
• Assessment Year: misc
• Appeal Filed On: 31-10-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAV
• Assessee Lawyers: J D MISTRI
• Keywords: Additional evidence
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) JAGADANAND INVESTMENTS AND TRADING CO. PVT.LTD., 84-A, MITTAL COURT, 224, NARIMAN POINT, MUMBAI-400021. PAN:AAACJ0932H .APPELLANT VS ACIT, RANGE 3(2), OSD, AAYAKAR BHAVAN, MUMBAI-400020 ..RESPONDENT ASSESSEE BY : SHRI J D MISTRI REVENUE BY :SHRI R S SRIVASTAV O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25.08.2003 OF CIT(A) FOR THE ASSESSME NT YEAR 2000-01. 2. THE ASSESSEE HAS FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING ALLOCATION OF INTEREST AND EXPENSES TO THE EXTENT OF RS.22.91 LAK HS OUT OF RS.25.50 LAKHS TREATED BY THE AO AS INCUR RED ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 2 IN RELATION TO EARNING OF DIVIDEND INCOME AND THERE BY RESTRICTING THE EXEMPTION U/S 10(33) TO THE EXTENT; 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN REDUCING THE EXEMPTED DIVIDEND INCOME TO THE EXTENT OF ALLOCATION OF INTEREST AND EXPENSES AMOUNTING TO RS.22.91 LAKHS WHILE WORKING OUT BOOK PROFIT U/S 115JA 3. GROUNDS OF APPEAL NO.1 IS RELATING TO THE DISALLOWANCE/ALLOCATION OF INTEREST LAND EXPENSES I N RELATION TO EARNING THE DIVIDEND INCOME WHICH IS EXEMPT U/S 10 (33) OF THE ACT. 4. GROUNDS OF APPEAL NO.2 IS CONSEQUENTIAL TO THE GROUNDS OF APPEAL NO.1 AS THE INTEREST EXPENSES ALLOCATED TO THE DIVIDEND INCOME HAS TO BE ADDED BACK WHILE COMPUTI NG THE BOOK PROFIT U/S 115JA. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE RECEIVED THE DIVIDEND INCOM E OF RS.68,55,885/- WHICH IS EXEMPT U/S 10(33). ON SCRU TINY OF THE PROFIT AND LOSS ACCOUNT, IT WAS FOUND THAT THE ASSE SSEES OTHER INCOME IS MAINLY CONSISTING OF DIVIDEND AND INTERES T.. THE EXPENSES DEBITED ARE ADMINISTRATIVE EXPENSES SUCH A S SERVICE CHARGES, DISCOUNT ON DEBENTURES AND INTERES TS TO OTHERS. THE ASSESSEE WAS ASKED ABOUT WHY THE ADMINI STRATIVE EXPENSES AND INTEREST ON THE BORROWINGS SHOULD NOT BE ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 3 ALLOCATED TO THE DIVIDEND INCOME IN PROPORTIONATE. THE ASSESSEE CONTENDED BEFORE THE AO THAT THE SHARES O N WHICH THE DIVIDEND IS RECEIVED WERE ACQUIRED OUT OF OWN FUND AND INTERNAL ACCRUALS. AS REGARDS THE ADMINISTRATIVE E XPENSES, THE ASSESSEE CONTENDED THAT EVEN IN THE ASSESSEE WOULD NOT EARN ANY DIVIDEND INCOME THE ASSESSEE HAD TO INCUR SUCH EXPENSES, THEREFORE, BY NO STRETCH OF IMAGINATION, THE EXPENSES INCURRED BY THE ASSESSEE CAN BE SAID TO HA VE INCURRED IN RELATION OF THE EARNING OF THE DIVIDEN D INCOME AS REQUIRED U/S 14A OF THE ACT. THE AO DID NOT ACCEP T THE EXPLANATION OF THE ASSESSEE AND HELD THAT OUT OF IN TEREST EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS.25 LAKHS AS TREATED AS HAVING BEEN INCURRED EXCL USIVELY FOR THE PURPOSES OF EARNING OF THE INCOME WHICH IS CLA IMED AS EXEMPT. ACCORDINGLY, THE AO DISALLOWED THE SUM OF R S.25 LAKHS U/S 14A OUT OF INTEREST EXPENDITURE. 6. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANC E MADE BY THE AO. 7. BEFORE US, THE LEARNED SR.COUNSEL SHRI J D MISTR Y HAS SUBMITTED THAT THE ASSESSEE EARNED THE DIVIDEND INC OME ON SIX SCRIPTS AS DETAILED GIVEN IN PAGES NO.10 OF THE PAPER BOOK . HE HAS FURTHER SUBMITTED THAT THE ASSESSEE PURCHASE D THE ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 4 SHARES ON 1.4.1996 AND THEREAFTER NO SHARES WERE P URCHASED ON WHICH THE DIVIDEND INCOME WAS EARNED BY THE ASSE SSEE. THE LEARNED SR COUNSEL THEN REFERRED THE PAGES 12 A ND 13 OF THE PAPER BOOK AND POINTED OUT THAT THE LAST SHARES PURCHASED BY THE ASSESSEE WERE ON 1.4.1996 OF RELIANCE INDU STRIES LIMITED, WHEREAS THE INTEREST PAID ON THE LOAN TAKE N BY THE ASSESSEE ON 31.3.1997 ONWARDS AS DETAILS GIVEN AT PAGES NO.12 AND 13. THUS, THE LEARNED SR. COUNSEL HAS SU BMITTED THAT WHEN THE SHARES WERE PURCHASED PRIOR TO THE IN TEREST BEARING LOANS TAKEN BY THE ASSESSEE, THERE IS NO QU ESTION OF UTILIZING THE SAID LOAN FOR PURCHASE OF SHARES. TH E LD. SR.COUNSEL HAS HEAVILY RELIED UPON THE STATEMENT SH OWING THE DETAILS OF LOANS GIVEN AT PAGES 11 TO 13 OF THE PA PER BOOK, AND OBTAINED FROM RELIANCE CAPITAL LIMITED. THUS, THE LEARNED SR.SR. COUNSEL SUBMITTED THAT NO BORROWED FUNDS HAVE BEEN UTILIZED FOR ACQUIRING THE SHARES ON WHIC H THE DIVIDEND INCOME WAS EARNED AND THEREFORE NO DISALL OWANCE CAN BE MADE U/S 14A ON INTEREST EXPENDITURE PAID ON THE BORROWED FUNDS CAN THEREFORE NO DISALLOWANCE CAN BE MADE U/S 14A ON INTEREST EXPENDITURES PAID ON BORROWED F UNDS. 8. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE AO NOTED FROM THE PROFIT AND LOSS ACCOUNT OF T HE ASSESSEE THAT THE ASSESSEE HAS DEBITED THE EXPENDITURE OF IN TEREST ON ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 5 THE PROFIT AND LOSS ACCOUNT WHEN THE ASSESSEE WAS A SKED TO EXPLAIN ABOUT THE ALLOWABILITY OF THE EXPENDITURE D EBITED UNDER THE HEAD INTEREST, THE ASSESSEE HAS NOT SUBMITTED A NY EVIDENCE TO ESTABLISH THAT THE BORROWED FUNDS WAS N OT UTILIZED FOR PURCHASE OF SHARES. EVEN BEFORE THE CIT(A) NO EVIDENCE WAS PRODUCED TO SHOW THAT THE BORROWED FUNDS WAS NO T USED FOR THE PURPOSE OF PURCHASE OF SHARES, THEREFORE, L OWER AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE EXPEN DITURE. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES . 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. 10. AS PER THE PAPER BOOK FILED BY THE ASSESSEE DUR ING THE HEARING THE DOCUMENTS AT PAGES 11 TO 13 WHICH IS A STATEMENT SHOWING THE DETAILS OF PURCHASE OF SHARES AND DIVID END YIELD AND DETAILS OF LOAN TAKEN FROM THE RELIANCE CAPITA L LTD WERE NOT FILED EITHER BEFORE THE AO OR BEFORE THE CIT(A ) AND FOR THE FIRST TIME THESE DETAILS WERE PRODUCED BEFORE THIS TRIBUNAL WITHOUT SEEKING PERMISSION OF ADMISSION OF NEW EVID ENCE. WHEN THESE DOCUMENTS AS FORMING PART OF THE PAPER B OOK AT PAGES 11,12 AND 13 WERE NOT BEFORE THE LOWER AUTHOR ITIES AND THE ASSESSEE HAS NOW PRODUCED BEFORE US AS ADDITIO NAL EVIDENCE THEN AT THIS STAGE WE CANNOT TAKE INTO ACC OUNT THE ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 6 DOCUMENTS WHICH WERE NOT PART OF THE ASSESSMENT PRO CEEDINGS AND ALSO NOT BEFORE THE CIT(A). THE ENTIRE ARGUME NTS OF THE LEARNED SR.COUNSEL IS BASED ON THESE TWO DOCUMENTS FILED AT PAGES 11 TO 13 OF PAPER BOOK WHICH CANNOT BE ACCEP TED IN THE ABSENCE OF BEING PRODUCED BEFORE THE LOWER AUTH ORITIES. EVEN OTHERWISE THE DOCUMENTS AT PAGES 11,12 AND 13 ARE NOT ANY DOCUMENTARY EVIDENCE TO SHOW PROOF OF PURCHASE OF SHARES ON WHICH THE DIVIDEND EARNED OR ANY DOCUMENT ARY EVIDENCE SHOWING LOAN TAKEN BY THE ASSESSEE. THESE ARE ONLY THE DETAILS CONTAINING THE DATE ON WHICH THE SHARES WERE PURCHASED AND LOAN WAS OBTAINED BY THE ASSESSEE. THEREFORE, WE ARE CONSTRAINED NOT TO TAKE INTO ACC OUNT THESE DOCUMENTS PRODUCED ON RECORD AT THIS STAGE, WHEN T HE ASSESSEE HAS NOT FILED THESE DOCUMENTS IN THE FORM OF ADDITIONAL EVIDENCE AND ALSO NOT SOUGHT ANY PERMISS ION FOR ADMISSION OF THE SAME AS AN ADDITIONAL EVIDENCE. H OWEVER, SINCE THE ISSUE INVOLVED IN THIS APPEAL IS SETTLED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF GODREJ AND BOYCE MFG CO.LTD V/S DCIT (234 CTR-(BOM)-1, WE SET ASIDE THE ISSUE TO THE RECORD OF THE AO FOR FRESH ADJUDICATION. WE CLARIFY THAT THE ASSESSEE MAY PRODUCE RELEVANT E VIDENCE TO THE SATISFACTION OF THE AO. ITA NO. 7080/UM/2003 (ASSESSMENT YEAR 2001-02) 7 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 APRIL, 201 1 SD SD (J.SUDHAKAR REDDY) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 29 DAY OF APRIL, 2011 SRL:6411 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI