AEGIS LOGISTICS P.LTD, MUMBAI V. DCIT 1(1)(1), MUMBAI

ITA 7157/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9657 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Assessee Lawyers: KETAN VED AW MS URVI MEHTA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI G. MANJUNATH A , ACCOUNTANT MEMBER ITA NO. 7157 / MUM . /201 8 ( ASSESSMENT YEAR : 20 13 14 ) AEGIS LOGISTICS LTD. 1202, TOWER B, PENINSULA BUSINESS PARK G.K. MARG, LOWER PAREL (WEST) MUMBAI 400 013 PAN AAACA3302N . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI KETAN VED A/W MS. URVI MEHTA REVENUE BY : SHRI MICHAEL JERALD DATE OF HEARING 12 .0 2 .2020 DATE OF ORDER 13.03.2020 O R D E R PER SAKTIJIT DEY. J.M. T HE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 31 ST JULY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2 , MUMBAI, FOR THE ASSESSMENT YEAR 20 13 14. 2. T HE ONLY ISSUE RAISED IN THE PRESENT APPEAL RELATES TO THE DISALLOWANCE OF ` 70,45,995, MADE UNDER SECTION 14A R/W RULE 8D. 2 AEGIS LOGISTICS LTD. 3. B RIEF FACTS ARE, THE ASSESSEE , A RESIDENT COMPANY , FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29 TH NOVEMBER 2013, DECLARING INCOME OF ` 50,02,46,740. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS EARNED CERTAIN I NCOME WHICH HAS BEEN CLAIMED AS EXEMPT , CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD NOT BE MADE BY APPLYING RULE 8D. TH OUGH, THE ASSESSEE SUBMITTED ITS EXPLANATION OBJECTING TO THE PROPOSED DISALLOWANCE, H OWEVER, REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER COMPUTED DISALLOWANCE UNDER SECTION 14A R/W RULE 8D, FOR AN AMOUNT OF ` 76,19,090, COM PRISING OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) FOR ` 58,78,773, AND ADMINISTRATIVE EXPENDIT URE UNDER RULE 8D(2)(III) FOR AN AMOUNT OF ` 17,40,317. SINCE , THE ASSESSEE ITSELF HAD MADE A DISALLOWANCE OF ` 5,73,095, THE ASSESSING OFFICER MADE A NET DISALLOWANCE OF ` 70,45,995. THOUGH , THE ASSESSEE CONTESTED THE A FORESAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL . 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NO DISALLOWANCE OUT OF INTEREST EXPENDITURE CAN BE MADE AS THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUND AVAILABLE WITH IT. TO SUBSTAN TIATE SUCH CLAIM , LEARNED AUTHORISED REPRESENTATIVE FURNISHED BEFORE US A 3 AEGIS LOGISTICS LTD. STATEMENT SHOWING AVAILABILITY OF SURPLUS FUND. FURTHER, HE SUBMITTED , THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) HAS TO BE COMPUTED BY TAKING INTO CONSIDERATION ONLY THOSE INVESTMENTS WHICH ARE CAPABLE OF YIELDING EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. FURTHER, HE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011 12, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO D ELETE THE DISALLOWANCE OF INTEREST EXPENDITURE AND FOR DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE TO CONSIDER ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS FAR AS THE BASIC FACTS ARE CONCERNED, THERE IS NO DISPUTE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND AMOUNTING TO ` 7,49,09,613, AND ON ITS OWN ASSESSEE HAS DISALLOWED AN AMOUNT OF ` 5,73,095, UNDER SECTION 14A R/W RULE 8D. HO WEVER, THE ASSESSING OFFICER NOT BEING SATISFIED WITH THE DISALLOWANCE COM PUTED BY THE ASSESSEE HAS MADE DISALLOWANCE AT A MUCH HIGHER FIGURE. FROM THE MATERIAL PLACED BEFORE US, IT IS NOTICED THAT AS ON 31 ST MARCH 2013, THE ASSESSEE HAD SURPLUS 4 AEGIS LOGISTICS LTD. INTEREST FREE FUND OF ` 32.30 CRORE BY WAY OF SH ARE CAPITAL AND RESERVE AND SURPLUS. WHEREAS, THE CURRENT AND NON CURRENT INVESTMENT HELD BY THE ASSESSEE WERE TO THE TUNE OF ` 12.21CRORE. THUS, FROM THE AFORESAID FACTS, IT BEC OMES CLEAR THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUND AVAILABLE WITH IT TO TAKE CARE OF THE INVESTMENT S . THEREFORE, NO DISALLOWANCE OF INTEREST EXPENDITURE CAN BE MADE UNDER RULE 8D(2)(II). AS REGARDS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL, DELHI BENCH, IN ACIT V/S VIREET INVESTMENT PVT. LTD., [2017] 82 TAXMANN.COM 415 (SB) (DEL.) ONLY THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR UNDER CONSIDERA TION CAN BE INCLUDED IN THE AVERAGE VALUE OF INVESTMENT FOR COMPUTING DISALLOWANCE . THE A SSESSING OFFICER IS DIRECTED TO FOLLOW THE RATIO LAID DOWN IN THE AFORESAID DECISION AND COMPUTE DISALLOWANCE UNDER SECTION 14A ACCORDING LY . GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7. IN THE RESULT, APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 13.03.2020 SD/ - G. MANJUNATH A ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2020 5 AEGIS LOGISTICS LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI