HARSHIT FINLEASE & INVESTMENTS PVT LTD., MUMBAI V. D.C.I.T. 1(1), MUMBAI

ITA 7264/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71745 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 19-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Earning of tax free income
• Section: 234B; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL H HH H BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . !' !' !' !' , # # # # $% $% $% $% BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T.A I.T.A I.T.A I.T.A. NO. . NO. . NO. . NO.7264/MUM/2011 7264/MUM/2011 7264/MUM/2011 7264/MUM/2011 ( & & & & ' ' ' ' / ASSESSMENT YEAR :2008-09) M/S HARSHIT FINLEASE & INVESTMENTS PVT. LTD. THE INTERNATIONAL, 5 TH FLOOR, 16, NEW MARINE LINES, CROSS ROAD, NO. 1, CHURCHGATE, MUMBAI-400020 / VS. DEPUTY COMMISSIONER OF INCOME TAX 1(1) MUMBAI %( # ./ ) ./ PAN/GIR NO. :AAACH8737Q ( (* / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( +,(* / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) & && & -. -. -. -. 0 1 0 1 0 1 0 1 /ASSESSEE BY : SHRI DIVYESH I. SHAH % % % % 0 1 0 1 0 1 0 1 / REVENUE BY : SHRI PITAMBER DAS 0 00 0 .# .# .# .# / DATE OF HEARING : 19 TH NOVEMBER 2013 23' 23' 23' 23' 0 00 0.# .# .# .# /DATE OF PRONOUNCEMENT: 22 ND NOVEMBER 2013 $4 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 29.7.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1.1 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS. 19,44,680/- AS EXPENSES INCURRED TOWARDS EARNING EX EMPT INCOME U/S. 14A OF THE ACT R.W.R. 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 1.2 THE CIT(A) ERRED IN APPLYING RULE 8D FOR THE PU RPOSE OF DISALLOWANCE U/S 14A OF THE ACT. ITA NO.7264/M/2011 HARSHIT FINLEASE & INVESTMENTS PVT. LTD. 2 1.3 THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE OF RS. 19,44,680/- SHOULD BE DELETED. 2.1 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTER NATIVE IF ANY DISALLOWANCE OF EXPENDITURE IS REQUIRED TO BE MADE, THE SAME SHOULD BE CAPITALIZED ALONG WITH COST OF INVESTMENT . 3.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. IN DISALLOWING INTEREST EXPENSES OF RS.4,80,818/-ON TH E ALLEGED GROUND THAT THE AMOUNT BORROWED ON ACCOUNT OF LCD H AS BEEN INVESTED IN EARNING EXEMPT INCOME. 3.2 THE APPELLANT PRAYS THAT THE DISALLOWANCE OF IN TEREST OF RS.4,80,818/- BE DELETED. 4.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. LEVYING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 4.2 THE APPELLANT PRAYS THAT THE A.O. BE DIRECTED T O DELETE INTEREST UNDER THE ACT. 3. GROUND NO. 1 REGARDING DISALLOWANCE MADE U/S 14A R.W.R 8D OF THE INCOME TAX ACT. THE ASSESSEE HAS EARNED DIVIDEND IN COME OF ` 65,20,535/- WHICH IS EXEMPT U/S 10(34) OF THE INCOM E TAX ACT. THE A.O NOTED THAT THE ASSESSEE HAS NOT DISALLOWED ANY EXPE NDITURE FOR EARNING THE EXEMPT INCOME. THE A.O DISALLOWED A SUM OF ` 19 ,44,680/- U/S 14A BY APPLYING RULE 8D. ON APPEAL, THE CIT(A) HAS CONFIRM ED THE DISALLOWANCE MADE BY THE A.O. 4. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT AS FAR AS THE RULE 8D IS CONCERNED THE SAME IS APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF HON BLE JURISDICTION HIGH COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD VS D CIT 328 ITR 81. HOWEVER, THE LD. A.R HAS CONTENDED THAT THE A.O HAS DISALLOWED THE INTEREST EXPENDITURE BY APPLYING RULE 8D WITHOUT CO NSIDERING THE FACT THAT THE ASSESSEE HAS NOT USED ANY BORROWED FUND FOR THE PURPOSE OF ITA NO.7264/M/2011 HARSHIT FINLEASE & INVESTMENTS PVT. LTD. 3 INVESTMENT IN QUESTION. HE HAS FURTHER SUBMITTED TH AT THE INVESTMENT HAS BEEN MADE IN THE ASSESSMENT YEAR 2006-07 AND NOT IN THE YEAR UNDER CONSIDERATION. HE HAS POINTED OUT THAT THE INTEREST EXPENDITURE IN QUESTION IS IN RESPECT OF INTER CORPORATE DEPOSITS WHICH WAS INVESTED BY THE ASSESSEE IN THE NABARD CAPITAL GAIN BOND AND TH E INCOME OF WHICH IS TAXABLE. THUS, THE LD. A.R HAS SUBMITTED THAT NO BO RROWED FUND WAS USED BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT FROM WHICH THE DIVIDEND INCOME IS RECEIVED BY THE ASSESSEE. HE HAS REFERRED THE HDFC BANK A/C AT PAGE NO. 21 AND 22 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE RECEIVED THE ICD FROM DANDVATI INVESTMENTS OF ` 13. 88 CRORES ON 12.12.2005 WHICH HAS BEEN USED BY THE ASSESSEE FOR INVESTMENT IN NABARD CAPITAL GAIN BOND OF ` 23.86 CRORES ON THE S AME DAY I.E. 12.12.2005. THUS, THE LD. A.R HAS SUBMITTED THAT TH E INTEREST BEARING FUND RECEIVED UNDER ICD HAS BEEN USED FOR INVESTMENT IN NABARD CAPITAL GAIN BOND IN THE YEAR 2005 AND THE ASSESSEE HAS NOT BORR OWED ANY OTHER AMOUNT EXCEPT ICD. THEREFORE, THE LD. A.R OF THE AS SESSEE HAS SUBMITTED THAT THE A.O IS NOT JUSTIFIED IN DISALLOWING THE IN TEREST EXPENDITURE U/S 14A. AS REGARDS, THE OTHER COMMON EXPENSES, THE LD. A.R HAS ACCEPTED THE DISALLOWANCE U/S 14A. ON THE OTHER HAND, THE LD. D. R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE RELEVANT MATERIAL ON RECORD WE NOTE THAT THE A.O HA S DISALLOWED THE INTEREST OF ` 13,79,999/- U/S 14A. THIS INTEREST HA S BEEN PAID BY THE ASSESSEE ON THE BORROWED FUND UNDER ICD FROM DANDVA TI INVESTMENTS ITA NO.7264/M/2011 HARSHIT FINLEASE & INVESTMENTS PVT. LTD. 4 WHICH IS EVIDENT FROM THE BANK ACCOUNT AND STATEMEN T OF ACCOUNT OF THE ASSESSEE WITH HDFC BANK. WE FURTHER NOTED THAT THE ASSESSEE HAS INVESTED A SUM OF ` 23.86 CRORES IN NABARD CAPITAL GAIN BOND ON THE SAME DAY I.E. 12.12.2005. THUS, IT IS CLEAR THAT TH E ENTIRE FUND OF ` 13.88 CRORES RECEIVED UNDER ICD HAS BEEN UTILIZED FOR THE PURPOSE OF INVESTMENT IN THE NABARD CAPITAL GAIN BOND. THE CAPITAL GAIN O N NABARD BOND IS A TAXABLE INCOME AND THEREFORE, THE INTEREST PAID ON BORROWED FUND IS AN ALLOWABLE DEDUCTION. THOUGH THIS ASPECT OF UTILIZIN G THE BORROWED FUND FOR THE PURPOSE OF INVESTMENT OF NABARD CAPITAL GAIN BO ND HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW, HOWEVER PRIMA FA CIE WE FIND FROM THE RECORD THAT THE BORROWED FUND OF ` 13.88 CRORES REC EIVED UNDER ICD HAS BEEN USED BY THE ASSESSEE FOR INVESTMENT IN NABARD CAPITAL GAIN BOND. THEREFORE, NO DISALLOWANCE OF INTEREST EXPENDITURE IS CALLED FOR U/S 14A IN VIEW OF THE FACT THAT THE ASSESSEE HAS NOT UTILIZED BORROWED FUND FOR THE PURPOSE OF INVESTMENT IN SECURITIES ON WHICH THE DI VIDEND INCOME IS EARNED. ACCORDINGLY WE DELETE THE DISALLOWANCE OF I NTEREST EXPENDITURE U/S 14A. AS REGARDS, THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES THE ASSESSEE HAS NOT DISPUTED THE SAME AND THEREFORE, T HE ORDERS OF THE AUTHORITIES BELOW TO THE EXTENT OF DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S 14A IS CONFIRMED. 6. GROUND NO. 2 IS AN ALTERNATIVE PLEA WHICH BECOME S INFRUCTUOUS IN VIEW OF OUR FINDING IN THE GROUND NO. 1. ACCORDINGL Y, THIS GROUND OF THE ASSESSEE IS DISMISSED. ITA NO.7264/M/2011 HARSHIT FINLEASE & INVESTMENTS PVT. LTD. 5 7. GROUND NO. 3 REGARDING DISALLOWANCE OF INTEREST OF ` 4,80,818/-. AT THE TIME OF HEARING THE LD. A.R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE DOES NOT PRESS THIS GROUND AND THE SAME MA Y BE DISMISSED AS NOT PRESSED. THE LD. D.R HAS RAISED NO OBJECTION IF THE GROUND NO. 3 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. ACCO RDINGLY, THE GROUND NO. 3 OF THE ASSESSEES APPEAL IS DISMISSED BEING N OT PRESSED. 8. GROUND NO. 4 REGARDING LEVY OF INTEREST U/S 234B AND 234C. THE LEVY OF INTEREST U/S 234B AND 234C IS CONSEQUENTIAL IN N ATURE AND THEREFORE NO SPECIFIC FINDING IS REQUIRED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF NOVEMBER 2013 SD/- SD/- ( . . !' ) # $% (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) & $% (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND NOVEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI