PODAR ADVISORY AND CONSULTING ENTERPRISE PVT. LTD., MUMBAI V. ITO - WARD- 2(2)(4), MUMBAI

ITA 7209/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0002 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 14-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 7209 / / 2018 (%. .2015-16 ) ITA NO. 7209/MUM/2018 (A.Y.2015-16) PODAR ADVISORY AND CONSULTING ENTERPRISE PVT. LTD. 4 TH FLOOR, PODAR CHAMBERS, 109, SA BRELVI ROAD FORT, MUMBAI 400 001 PAN:AAACP3336K / VS. : / APPELLANT THE INCOME TAX OFFICER,WARD 2(2)(4), AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 : / RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI AJAY PRATAP SINGH / DATE OF HEARING : 12/10/2020 / DATE OF PRONOUNCEMENT : 17/12/2020 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-5, MUMBAI ( IN SHORT THE CIT(A)) DATED 21/08/2018 FOR THE ASSESSMENT YEAR 2015-16. 2. THE PRIMARY ISSUED RAISED IN THE PRESENT APPEAL BY ASSESSEE IS AGAINST DISALLOWANCE OF RS.4,93,929/- MADE UNDER SECTION 14 A R.W.R 8D(2)(II) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2 ITA NO. 7209/MUM/2018 (A.Y.2015-16) 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RE CORDS ARE : THE ASSESSEE COMPANY IS ENGAGED IN CONSULTANCY AND ADVISORY BUSI NESS. DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL, THE ASS ESSEE MADE CERTAIN INVESTMENTS AND MADE SUO-MOTU DISALLOWANCE OF RS.8 3,009/- UNDER SECTION 14A OF THE ACT. THE SAID DISALLOWANCE WAS COMPUTED BY THE ASSESSEE BY TAKING 0.5% OF THE AVERAGE VALUE OF INVESTMENT BEING OVERH EAD EXPENSES RELATABLE TO THE EXEMPT INCOME EARNED. THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS NOT SATISFIED WITH THE COMPUTATION OF DISALLOWANCE BY ASSESSEE, MADE FURTHER DISALLOWANCE OF RS.4,93,929/- U/R 8D(2)(II) ON ACCO UNT OF INTEREST EXPENDITURE ON INVESTMENTS MADE. AGGRIEVED BY THE ASSESSMENT O RDER DATED 30/06/2017 PASSED UNDER SECTION 143(3) OF THE ACT, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTENDED THAT OWN FUNDS OF THE ASSESSEE WERE SUFFICIENT TO COVER THE INVESTMENT MADE. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS. DCIT, 366 ITR 505 AND THE DECISI ON RENDERED IN THE CASE OF CIT VS.RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM). THE CIT(A) REMAIN UNIMPRESSED WITH THE CONTENTIONS RAISED BY THE AS SESSEE AND DISMISSED THE APPEAL. AGAINST THE FINDINGS OF CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI AJAY PRATAP SINGH, REPRESENTING THE DEPARTM ENT VEHEMENTLY DEFENDED THE FINDINGS OF CIT(A) AND PRAYED FOR DI SMISSING THE APPEAL OF ASSESSEE. 5. THE SUBMISSIONS MADE BY LD.DEPARTMENTAL REPRESEN TATIVE HEARD, ORDERS OF AUTHORITIES BELOW EXAMINED. THE ASSESSEE HAS RA ISED SEVEN GROUNDS IN APPEAL. THE GROUND NO. 1 TO 5 OF THE APPEAL ARE AG AINST THE DISALLOWANCE OF 3 ITA NO. 7209/MUM/2018 (A.Y.2015-16) RS.4,23,929/- MADE UNDER SECTION 14A R.W.R. 8D(2)(I I) OF THE ACT I.E. INTEREST EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOM E. THE CONTENTION OF THE ASSESSEE IS THAT OWN INTEREST FREE FUNDS COMPRISING OF SHARE CAPITAL AND RESERVES AND SURPLUS AGGREGATING TO RS.5,67,64,599/ - ARE SUFFICIENT TO COVER THE INVESTMENT OF RS.1,66,01,808/-. WHERE BOTH INTE REST FREE FUNDS AND BORROWED FUNDS ARE AVAILABLE, THE PRESUMPTION IS TH AT THE INVESTMENTS ARE MADE FROM OWN INTEREST FREE FUNDS. IN SUPPORT OF T HIS CONTENTION RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS: (1) CIT VS. RELIANCE UTILITIES AND POWER LIMITED, 313 ITR 340(BOM) (2) CIT V. HDFC BANK LIMITED, 366 ITR 505(BOM) (3) PCIT V. SINTEX INDUSTRIES LTD. 93 TAXAMANN.COM 24(SC) THE ASSESSEE HAS ALSO RAISED A CONTENTION THAT DIS ALLOWANCE UNDER SECTION 14A R.W.R. 8D CANNOT EXCEED THE EXEMPT INCOME EARNED. TO BUTTRESS THIS CONTENTION RELIANCE HAS BEEN PLACED ON THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT. LTD. VS. ACIT, REPORTED AS [TS-92-HC- 2015(DEL)-O] 6. IT IS NO MORE RES-INTEGRA THAT WHERE THE ASSESS EE IS HAVING OWN FUNDS AS WELL AS INTEREST BEARING FUNDS, THE PRESUMPTION IS THAT THE INVESTMENTS ARE MADE FROM OWN FUNDS. IF OWN INTEREST FREE FUNDS AR E SUFFICIENT TO COVER THE INVESTMENTS NO DISALLOWANCE IN RESPECT OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) IS WARRANTED. HOWEVER, IT IS OBSERVED TH AT RELEVANT BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE HAVE NOT B EEN PLACED ON RECORD TO SUBSTANTIATE THE FACT THAT ASSESSEE HAS SUFFICIENT OWN INTEREST FREE FUNDS TO COVER THE INVESTMENTS MADE. 4 ITA NO. 7209/MUM/2018 (A.Y.2015-16) 7. IT IS ALSO A WELL SETTLED PROPOSITION THAT DISA LLOWANCE UNDER RULE 8D CANNOT EXCEED EXEMPT INCOME EARNED. HOWEVER, FROM THE PERUSAL OF ASSESSMENT ORDER AND THE ORDER OF CIT(A) THE EXEM PT INCOME EARNED BY THE ASSESSEE IS NOT EMANATING. THE CIT(A) DISMISSED T HE APPEAL OF ASSESSEE DISREGARDING THE DECISIONS RENDERED BY HONBLE JURI SDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE IN RESPECT OF FACTORS TO BE CONSIDERED FOR MAKING DISALLOWANCE UNDER RULE 8D(2)(II). 8. IN THE LIGHT OF ABOVE FINDINGS, THE IMPUGNED O RDER IS SET-ASIDE AND THE ISSUE IS RESTORED BACK TO THE FILE OF ASSESSING OFF ICER FOR DENOVO COMPUTATION OF DISALLOWANCE UNDER SECTION 14A R.W.R 8D, IN ACCO RDANCE WITH LAW EXPOUNDED IN VARIOUS JUDICIAL DECISIONS. THE GROUND NO.1 TO 5 OF THE APPEAL BY ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE, IN THE TERMS A FORESAID. 9. IN GROUND NO.6 OF THE APPEAL THE ASSESSEE HAS AS SAILED CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. THIS GROUND IS CONNECTED TO PRIMARY GROUNDS OF APPEAL ( I.E. 1 TO 5). SINCE, W E HAVE RESTORED GROUND NO.1 TO 5 OF THE APPEAL TO THE ASSESSING OFFICER, WE DEE M IT APPROPRIATE TO RESTORE THIS ISSUE AS WELL TO THE FILE OF ASSESSING OFFICER . THE GROUND OF APPEAL NO.6 IS ALLOWED FOR STATISTICAL PURPOSE. 10. GROUND NO.7 OF THE APPEAL IS GENERAL IN NATURE , HENCE, REQUIRE NO ADJUDICATION. 5 ITA NO. 7209/MUM/2018 (A.Y.2015-16) 11. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE IN THE TERMS AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY THE 17 TH DAY OF DECEMBER, 2020. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, (%/ DATED: 17/12/2020 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT , 2. *+ / THE RESPONDENT. 3. ,+ ( )/ THE CIT(A)- 4. ,+ CIT 5. -.*+% , . . . , / DR, ITAT, MUMBAI 6. ./012 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI