WELSPUN WINTEX LIMITED, MUMBAI V. D.C.I.T.7(3), MUMBAI

ITA 7550/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8082 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: F V IRANI
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 7550/MUM/2011 (ASSESSMENT YEAR: 2007-08) M/S. WELSPUN WINTEX LTD. VS. D C I T - 7(3) TRADE WORLD, 'B' WING, 9TH FLOOR SENAPATI BAPAT MARG LOWER PAREL, MUMBAI 400013 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AAACW0488M APPELLANT RESPONDENT APPELLANT BY: SHRI F.V. IRANI RESPONDENT BY: SMT. PARMINDER DATE OF HEARING: 15.09.2014 DATE OF PRONOUNCEMENT: 15.09.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-18, MUMBAI AND IT PERTAINS TO AY 2007-08. 2. THE FLOWING GROUNDS WERE URGED BEFORE US: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT PASSING SPEAKING ORDER ON GROUND NO.2 RAISED BY THE APPELLANT DISPUTING THE DISALLOW ANCE OF INTEREST ` 26,09,400/- MADE BY THE AO U/S.37. 2.A) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO FOLLOW RULE 8D FOR THE PURPOSES OF COMPUTING DISALLOWANCE U/S. 14A IN RESP ECT OF DIRECT AND INDIRECT EXPENSES WHICH IS TO BE RESTRICTED TO ACTUAL EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AND IN DOING SO THE ID. CIT(A) FAILED TO APPRECIATE THAT:- (I) INTEREST WAS PAID IN RESPECT OF CAPITAL BORROWED IN THE PAST FOR THE PURPOSES OF THE BUSINESS OF TRADING IN FABRICS; (II) THERE IS NO REASON AND BASIS IN REACHING TO DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM O F THE APPELLANT THAT NO EXPENDITURE OTHER THAN DEMATE CHA RGES ITA NO. 7550/MUM/2011 M/S. WELSPUN WINTEX LTD. 2 OF ` 2,246/- WAS INCURRED IN RELATION TO DIVIDEND INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ; (III) THE MOST OF THE SHARES HAVE BEEN ACQUIRED FOR CONTR OLLING INTEREST IN GROUP COMPANIES; (IV) THE APPELLANT INCURRED TOTAL EXPENDITURE CONSISTING OF INTEREST OF ` 26,09,400/- AND OTHER EXPENDITURE OF ` 83,212/- ON THE BUSINESS OF TRADING IN FABRICS AND INVESTMENT IN SHARES; AND (V) THE MAJOR PART OF THESE EXPENSES WERE INCURRED IN R ELATION TO THE TRADING BUSINESS AND AS SUCH DISALLOWANCE OF TH E ENTIRE EXPENSES IS ILLOGICAL AND IRRATIONAL ON THE FACTS OF THE CASE. B) IN REACHING TO THE CONCLUSION AND CONFIRMIN G SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE W AS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVAN T CONSIDERATIONS AND FACTORS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DISALLOWANCE PART OF EXPENDITURE U/S. 14A R.W. RULE 8D WILL BE ADDED TO THE BOOK PRO FIT SHOWN BY THE APPELLANT AND THE SAME WILL BE LIABLE TO TAX U/ S. 115JB. B) THE LD. AO FAILED TO APPRECIATE BOOK PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT MAY BE ACCEPTED WITHOUT ANY ARTIFI CIAL VARIATION. 4. THE LD. CIT(A) ERRED IN NOT DISPOSING THE GROUN D NO. 3 RAISED DISPUTING LEVY OF INTEREST U/S. 234C OF THE INCOME TAX ACT, 1961. THE APPELLANT DENIES ITS LIABILITY FOR SUCH INTERES T. 3. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUES WERE CONSIDERED BY THE ITAT G BENCH, MUMBAI IN ASSESSEES OWN CASE FOR AY 2006-07 (ITA NO. 1191/MU M/2010 DATED 23.11.2011) WHEREIN THE BENCH SET ASIDE THE MATTER TO THE FILE OF THE AO TO RE-EXAMINE THE ISSUES AFRESH. THE FOLLOWING OBSERVA TIONS OF THE TRIBUNAL IN THIS REGARD ARE RELEVANT: - 13. IN THE ABSENCE OF ACCEPTANCE BY ANY AUTHORITY OF THE CLAIM OF THE ASSESSEE THAT THE ENTIRE BORROWED FUNDS WERE UT ILISED FOR PAYING TRADE LIABILITIES AND NOT FOR MAKING INVESTMENTS IN SHARES, WE ARE OF THE CONSIDERED OPINION THAT THE ARGUMENTS OF THE AS SESSEE CANNOT BE ACCEPTED. THERE WAS NO ASSESSMENT ORDER FOR ASSESSM ENT YEAR 2002- 03 AND, HENCE, RELIANCE PLACED BY THE ASSESSEE ON V ARIOUS CASE LAWS TO THE EFFECT THAT NO DISALLOWANCE OF INTEREST CAN BE MADE ON OPENING BALANCES, WHERE SUCH DISALLOWANCE HAS NOT BE MADE I N THE EARLIER ITA NO. 7550/MUM/2011 M/S. WELSPUN WINTEX LTD. 3 YEARS, IS DEVOID OF MERIT. THE ASSESSEE HAS TO PROV E HIS CLAIM FOR ASSESSMENT YEAR 2004-05 AND BASED ON THE FINDINGS O F THE ASSESSING OFFICER, IN THAT YEAR, A DECISION CAN BE TAKEN IN T HE CURRENT ASSESSMENT YEAR. KEEPING THESE IN VIEW, WE SET ASIDE THE IMPUG NED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH IN ACCORD ANCE WITH LAW. 14. INSOFAR AS THE DISALLOWANCE UNDER SECTION 14A IS CO NCERNED, WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.), HAS PARTLY REVERSED THE DECISION OF MUMBAI SPECIAL BENCH OF TH E TRIBUNAL IN ITO V/S DAGA CAPITAL MANAGEMENT P. LTD. (2008) 119 TTJ (MUM.) 289 (SB). UNDER THESE CIRCUMSTANCES, WE DEEM IT APPROPRIATE T O SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DEN OVO ADJUDICATION IN THE LIGHT OF THE PROPOSITIONS LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA). THE ASSESSING OFFICER IS HEREBY DIRECTED NOT TO APPLY THE PROVISI ONS OF RULE-8D, FOR THE IMPUGNED ASSESSMENT YEAR. AS THE ASSESSEE IS FREE T O RAISE ALL CONTENTIONS BEFORE THE ASSESSING OFFICER, WE DO NOT THINK IT FIT TO LAY DOWN ANY PROPOSITION OR CONDITION ON ANY OF THE ISS UES. CONSEQUENTLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO.3 IS CONSEQUENTIAL TO GROUND NO.2. HE RE ALSO, WE RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFF ICER FOR DENOVO ADJUDICATION IN THE LIGHT OF OUR DIRECTIONS GIVEN I N PARA-14 ABOVE. CONSEQUENTLY, THIS GROUND IS ALSO ALLOWED FOR STATI STICAL PURPOSES. 16. THE LAST ISSUE RELATES TO LEVY OF INTEREST UNDE R SECTIONS 234B, 234C AND 234D OF THE ACT. THIS ISSUE BEING CONSEQUE NTIAL IN NATURE, THE ASSESSING OFFICER IS HEREBY DIRECTED TO GIVE CO NSEQUENTIAL EFFECT WHILE RE-COMPUTING THE INCOME OF THE ASSESSEE. 4. THE LEARNED D.R. SUBMITTED THAT THE ISSUES HEREIN A RE IDENTICAL. 5. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE DECISIONS OF THE ITAT WE SET ASIDE THE ORDERS PASSE D BY THE AO AND THE CIT(A) ON THIS ISSUE AND RESTORE GROUND NO. 1 TO TH E FILE OF THE AO FOR ADJUDICATION OF THE ISSUE IN ACCORDANCE WITH LAW. 6. SIMILARLY GROUND NO. 2 IS ALSO RESTORED TO THE FILE OF THE AO TO ADJUDICATE THE ISSUE DE NOVO IN THE LIGHT OF THE PR OPOSITIONS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MANUFACTURING CO. LTD. 328 ITR 81. 7. GROUND NO. 3 IS CONSEQUENTIAL TO GROUND NO. 2 AND T HEREFORE THE SAID ISSUE IS RESTORED TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION. ITA NO. 7550/MUM/2011 M/S. WELSPUN WINTEX LTD. 4 8. LAST ISSUE RELATES TO LEVY OF INTEREST WHICH IS CON SEQUENTIAL IN NATURE. THEREFORE THE AO IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT WHILE COMPUTING THE INCOME OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2014. SD/- SD/- ( D. KARUNAKARA RAO ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 15 TH SEPTEMBER, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 18, MUMBAI 4. THE CIT 7, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.