JEWELEX INDIA P.LTD, MUMBAI V. ADDL CIT RG 3(2), MUMBAI

ITA 7176/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2616 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER& SHRI SANJAY GARG, JUDICIAL MEMBER. ITA NO. 7176 /MUM/2014 (ASSESSMENT YEAR : 2011-12) M/S. JEWELEX INDIA PVT. LTD. 401, TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA(EAST), MUMBAI 400 051 PAN:AABCJ 4523H ... APPELLANT VS. THE ADDL. CIT, RANGE.3(2), AAYKAR BHAVAN, MK RAOD, MUMBAI 400 051. .... RESPONDENT APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY : SHRI JEEVAN LAL DATE OF HEARING : 30/06/2016 DATE OF PRONOUNCEMENT : 13/07/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAININ G TO ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST AN ORDE R PASSED BY CIT(A)- 4, MUMBAI DATED 21/10/2014, WHICH IN TURN ARISES OU T OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 04/02/2014. 2 ITA NO. 7176 /MUM/2014 (ASSESSMENT YEAR : 2011-12) 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS WITH REGARD TO A DISALLOWANCE OF RS.1,99,127/- REPRESENTING INTERE ST EXPENDITURE BY APPLYING RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) FOR THE PURPOSES OF SECTION 14A OF THE ACT. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE C OMPANY WAS FOUND TO HAVE EARNED DIVIDEND INCOME TO THE TUNE OF RS.73 ,80,000/-, WHICH WAS EXEMPT FROM TAX. IN THE RETURN OF INCOME ASSE SSEE HAD MADE A SUO-MOTU DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER PROCEE DED TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IN AC CORDANCE WITH RULE 8D OF THE RULES AND ACCORDINGLY, THE TOTAL DISALLOW ANCE WAS COMPUTED AT RS.2,06,127/-. ACCORDINGLY, THE AFORESAID AMOU NT OF RS.2,06,127/- WAS ADDITIONALLY DISALLOWED WHILE COMPUTING THE TOT AL INCOME. BE THAT AS IT MAY, THE PRESENT PLEA OF THE ASSESSEE IS THA T THE DISALLOWANCE OF RS.1,99,127/- ON ACCOUNT OF INTEREST EXPENDITURE I N TERMS OF RULE 8D(2)(II) OF THE RULES OUT OF TOTAL DISALLOWANCE OF RS.2,06,127/- IS UNJUSTIFIED. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE EXPLAIN ED THAT SO FAR AS THE OPENING INVESTMENTS ARE CONCERNED, NO INTEREST CAN BE ATTRIBUTABLE TO THE SAME AS IN THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR OF 2010- 11 NO DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS BEEN MADE OUT OF INTEREST EXPENDITURE. SIMILARLY, WITH REGARD TO TH E INVESTMENTS MADE DURING THE YEAR, THE LD. REPRESENTATIVE FOR THE ASS ESSEE POINTED OUT THAT THE PROFITS FOR THE YEAR UNDER CONSIDERATION A RE MUCH MORE THAN THE VALUE OF SUCH INVESTMENTS AND IN THIS CONTEXT HE HAS REFERRED TO THE COPY OF THE ANNUAL AACCOUNTS PLACED IN THE PAPER BO OK AT PAGES 7 TO 3 ITA NO. 7176 /MUM/2014 (ASSESSMENT YEAR : 2011-12) 12. IT WAS, THEREFORE, CONTENDED THAT IN VIEW OF T HE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS. DCIT, 383 ITR 529 (BOM) INTEREST EXPENDITURE COULD NOT BE MAD E A SUBJECT-MATTER OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE MERELY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE PLEA OF THE ASSESSEE IS THAT IN THE PRESENT CASE, THE INTER EST FREE FUNDS, IN THE SHAPE OF PROFITS ARE AVAILABLE WHICH ARE MORE THAN THE INVESTMENTS MADE AND, THEREFORE, THE PRESUMPTION IS THAT SUCH I NVESTMENT IS OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. TH E AFORESAID PRESUMPTION IS SUPPORTED BY THE JUDGMENT OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM). THE SAID PRESUMPTION WAS APPLIED BY THE H ON'BLE BOMBAY HIGH COURT WHILE INTERPRETING SECTION 14A OF THE ACT IN THE CASE OF CIIT VS. HDFC BANK LTD., 366 ITR 505(BOM). SUCH A POSITION HAS BEEN FURTHER ENDORSED BY THE HON'BLE BOMBAY HIGH COURT SUBSEQUEN TLY IN THE CASE OF THE HDFC BANK LTD. VS. DCIT REPORTED IN 383 ITR 529 (BOM). THUS, CONSIDERING THE FACTUAL MATRIX BROUGHT OUT BY THE L D. REPRESENTATIVE FOR THE ASSESSEE, IT IS QUITE CLEAR THAT THE INVESTMENT S IN QUESTION CAN BE PRESUMED TO HAVE BEEN MADE OUT OF INTEREST FREE FUN DS AND, THEREFORE, NO INTEREST EXPENDITURE CAN CONSIDERED WHILE APPLY ING RULE 8D(2)(II) OF THE RULES FOR COMPUTING THE DISALLOWANCE UNDER SECT ION 14A OF THE ACT. THUS, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.1,99,127/- MADE BY INVOKING RULE 8D(2)(II)OF TH E RULES R.W.S. 14A OF THE ACT. 4 ITA NO. 7176 /MUM/2014 (ASSESSMENT YEAR : 2011-12) 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13/07/2016 SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI, DATED 13/07/2016 VM , 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. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI