D.C.I.T, CIRCLE 3(1), MUMBAI V. BANK OF RAJASTHAN LTD.(NOW MEGED WITH ICICI BANK LTD W.E.F 12.8.2010), MUMBAI

ITA 7094/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3944 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJGURUDR
• Assessee Lawyers: RUSHNA DARUWALLA
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.7094/MUM/2013 ASSESSMENT YEAR: 2009-10 DCIT, CIRCLE-3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S BANK OF RAJASTHAN LTD. (NOW MERGED WITH ICICI BANK LTD. ON 12.08.2010) ICICI BANK TOWER, 9 TH FLOOR, SOUTH EAST WING BANDRA (E), MUMBAI-400051 ( / REVENUE ) ( !' # /ASSESSEE) PAN. NO . AAACT7434N / REVENUE BY SHRI RAJGURU-DR !' # / ASSESSEE BY SHRI RUSHNA DARUWALLA $ % & # ' / DATE OF HEARING : 28/04/2016 & # ' / DATE OF ORDER: 03/05/2016 ITA NO.7094/MUM/2013 M/S BANK OF RAJASTHAN (NOW MERGED WITH ICII BANK LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 16/09/2013 OF THE FIRST APPELLATE AUTHORITY, MUMBAI . THE ONLY GROUND RAISED IN THE PRESENT APPEAL PERTAINS T O RESTRICTING THE ADDITION MADE U/S 14A OF THE ACT RE AD WITH RULE 8D(2)(II) OF THE RULES, AT1/2% AVERAGE VALUE O F INVESTMENT AT RS.18,12,188/- AGAINST RS.2,19,14,325 /- MADE BY THE ASSESSING OFFICER RELYING UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF HDFC BANK LTD. (ITA NO.4529/MUM/2005) DATED 30/01/2012, WHEREIN, IT WAS HELD THAT IF THE ASSESSEES OWN FUNDS AND NON-INTER EST BEARING FUNDS ARE MORE THAN THE INVESTMENT IN THE T AX FREE SECURITIES, THERE CAN BE NO BASIS FOR DEEMING THAT ASSESSEE USED BORROWED FUNDS FOR MAKING INVESTMENT IN TAX FR EE SECURITIES WITHOUT APPRECIATING THE FACT AS PER THE PROVISIONS OF RULE-8D OF THE RULES, IF THE ASSESSING OFFICER I S NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN RESPECT OF EXPENDITURE CLAIMED, HE HAS NO OPTION BU T TO ITA NO.7094/MUM/2013 M/S BANK OF RAJASTHAN (NOW MERGED WITH ICII BANK LTD. 3 DISALLOW SUCH EXPENDITURE IN ACCORDANCE WITH THE ME THOD PRESCRIBED UNDER RULE-8D(2)(II) OF THE RULES. 2. DURING HEARING OF THIS APPEAL, SHRI RAJGURU, LD. DR, ADVANCED ARGUMENTS, WHICH ARE IDENTICAL TO THE GROU ND RAISED BY THE REVENUE. ON THE OTHER HAND, SHRI RUS HNA DARUWALA, LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ERSTWHILE, THE BANK OF RAJASTHAN, WAS REGULARLY ASSESSED TO TAX AND ENGAGED IN BUSINESS OF BANKING ACTIVITIES, WHICH MERGED WITH ICICI BANK LTD. W.E.F . 13/08/2010, THE ASSESSEE BANK, AS PER RBI NORMS, KE PT CERTAIN SECURITIES IN ORDER TO MAINTAIN IN SLR (STA TUTORY LIQUIDITY RATIO) AND CCR (CASH RESERVE RATIO) IN OR DER TO PROTECT THE BANK FROM AN UNEXPECTED HUGE AMOUNT OF WITHDRAWALS BY THE DEPOSITORS. DURING THE FINANCIAL YEAR 2008-09, THE ASSESSEE EARNED INCOME FROM DIVIDENDS, EXEMPT U/S 10(34) OF THE ACT AMOUNTING TO RS.2,79,59,278/- . THE ITA NO.7094/MUM/2013 M/S BANK OF RAJASTHAN (NOW MERGED WITH ICII BANK LTD. 4 ASSESSEE IN ITS RETURN OFFERED AN AMOUNT OF RS.18,1 2,188/- BEING 1/2 % OF THE AVERAGE VALUE OF THE INVESTMENT, AS PER PROVISIONS OF RULE 8D(2)(III) OF THE ACT. THE ASSES SING OFFICER CONSIDERING THE APPORTIONED INTEREST EXPENSES OF RS.2,19,14,325/-, TO THE EXEMPT DIVIDEND INCOME MAD E DISALLOWANCE OF THIS AMOUNT. THE AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHEREIN , THE DISALLOWANCE OF IMPUGNED AMOUNT WAS DELETED. THE RE VENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 2.1. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT FOR ASSES SMENT YEAR 2002-03 TO 2007-08, IDENTICALLY, THE CLAIM OF THE A SSESSEE WAS ALLOWED. IN THE IMPUGNED ASSESSMENT YEAR ALSO T HE ASSESSMENT WAS MADE OUT OF SHARE CAPITALS, RESERVES AND OWN INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE . THE ASSESSEE WAS HAVING COST FREE FUNDS OF RS.145.59 CR ORES AS ON 31/03/2009 AND THE INVESTMENT INS SHARES/SECURIT IES ITA NO.7094/MUM/2013 M/S BANK OF RAJASTHAN (NOW MERGED WITH ICII BANK LTD. 5 WAS RS.77.27 CRORES, MEANING THEREBY, THE INVESTMEN T WAS MADE OUT OF OWN FUNDS ONLY AND NOT FROM THE BORROWE D FUNDS. IN SUCH A SITUATION, THE ASSESSEE GETS SUPPO RT FROM THE DECISION IN RAJASTHAN STATE WAREHOUSING CORPORA TION VS CIT (242 ITR 450)(SC), CIT VS RELIANCE UTILITIES AN D POWER LTD. (313 ITR 340)(BOM.), CIT VS HERO CYCLES 323 IT R 518 (P&H) AND VARIOUS DECISIONS OF THE TRIBUNAL MENTION ED AT PAGE-5 OF THE IMPUGNED ORDER. IT IS FURTHER NOTICED THAT THE ASSESSEE ITSELF OFFERED AN AMOUNT OF RS.18,12,188/- BEING 1/2% OF THE AVERAGE VALUE OF THE INVESTMENT AS PER RULE 8D(2)(III) OF THE RULES, THEREFORE, CONSIDERING THE AFOREMENTIONED DECISIONS, WE FIND NO INFIRMITY IN T HE IMPUGNED ORDER. THE SAME IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 28/04/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 03/05/2016 ITA NO.7094/MUM/2013 M/S BANK OF RAJASTHAN (NOW MERGED WITH ICII BANK LTD. 6 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 $ 1# / CIT(A)- , MUMBAI 5. 23 .# , 0 *+' * 4 , $ % / DR, ITAT, MUMBAI 6. 5! 6% / GUARD FILE. / BY ORDER, /2+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI