KALIMATI INVESTMENT CO. LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 7921/MUM/2011

• Counselvise Citation: 792119914 RSA 2011
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 24-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SINGH
• Assessee Lawyers: RAJAN VORA
• Keywords: Reasonable cause; Notional interest
• Section: 14A

Judgement Text

1 ITA NO.7921/M/11 M/S. KALIMATI INVESTMENT CO. LTD. , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , , BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ./I.T.A. NO.7921/M/11 ( / ASSESSMENT YEAR:2008-09) / VS. ./ ./PAN/GIR NO. : AAACK4330N ( /APPELLANT ) .. ( / RESPONDENT ) M/S. KALIMATI INVESTMENT COMPANY LIMITED, BOMBAY HOUSE, 24, HOMI MODY STREET, FORT, MUMBAI 400 001. DY. COMMISSIONER OF INCOME TAX (OSD), CIRCLE 2(1), 5 TH FLOOR, ROOM NO.545, AAYAKAR BHAVAN, MUMBAI 400 020 / APPELLANT BY : SHRI RAJAN VORA ' / RESPONDENT BY : SHRI K.SINGH ' ' / DATE OF HEARING : 04.11.13 ' ' / DATE OF PRONOUNCEMENT : 08.11.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2008-09 AGAINST ORDER OF LD. CIT(A) DATED 19.08.11. THE APPEAL FILED BY THE ASS ESSEE IS BARRED BY LIMITATION BY TWO 2 ITA NO.7921/M/11 M/S. KALIMATI INVESTMENT CO. LTD. DAYS AND THE ASSESSEE HAS FILED THE AFFIDAVIT FOR C ONDONATION OF DELAY. AFTER HEARING THE LD. REPRESENTATIVES OF THE PARTIES AND CONSIDERING THE CONTENTS OF THE AFFIDAVIT, PLACED ON RECORD, WE ARE SATISFIED THAT DELAY OF TWO DAYS WAS DUE TO A REASONABLE CAUSE. HENCE, WE CONDONE THE DELAY AND ENTERTAIN THE APPEAL ON ME RITS. 2. IN GROUNDS NO.1.1 TO 1.4 OF THE APPEAL THE ASSES SEE HAS DISPUTED THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OF FICER OF ADOPTING THE ANNUAL LETTING VALUE OF THE PROPERTY BY TAKING INTO CONSIDERATION THE NOTIONAL INTEREST ON INTEREST FREE DEPOSIT OF RS.75 LAKHS AND IN NOT CONSIDERING THE F AIR RENTAL VALUE OF THE PROPERTY AS DETERMINED BY THE MUNICIPAL CORPORATION OF DELHI. 3. AT THE TIME OF HEARING THE LD. A.R. SUBMITTED TH AT THE SIMILAR ISSUE ON IDENTICAL FACTS HAS BEEN CONSIDERED BY THE TRIBUNAL BY ITS OR DER DATED 09.05.12 FOR ASSESSMENT YEAR 2004-05 IN ITA NO.2706/M/2010 ALONG WITH THE A PPEALS FOR ASSESSMENT YEARS 2005-06 TO 2007-08 AND THE SAID DECISION OF THE TRI BUNAL BE FOLLOWED. THE LD. D.R. HAS NOT DISPUTED THE ABOVE CONTENTION OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. 5. WE OBSERVE THAT THE TRIBUNAL BY FOLLOWING THE DE CISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JK INVESTORS (BOMBAY) LTD. (2001) 248 ITR 723 (BOM.) HAS HELD THAT THE NOTIONAL RENT ON T HE AMOUNT OF SECURITY DEPOSIT CANNOT BE INCLUDED IN THE ANNUAL LETTING VALUE OF THE PROP ERTY. FURTHER, THE TRIBUNAL HAS ALSO HELD BY FOLLOWING THE DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF M.V. SONAVALA VS. CIT (1989) 177 ITR 246 THAT THE I NCOME FROM HOUSE PROPERTY SHOULD BE COMPUTED ON THE BASIS OF MUNICIPAL RATABL E VALUE AND THE TRIBUNAL DIRECTED THE ASSESSING OFFICER THAT THE RATABLE VALUE OF THE PROPERTY BE CONSIDERED FOR 3 ITA NO.7921/M/11 M/S. KALIMATI INVESTMENT CO. LTD. DETERMINING THE ANNUAL LETTING VALUE OF THE PROPERT Y IN RESPECT OF THE FLAT NO.4C AT 23 PRITHVIRAJ, NEW DELHI WHICH HAS BEEN GIVEN ON LEAS E BY THE ASSESSEE TO THE PARENT COMPANY TATA STEEL LTD. HOWEVER, IT IS RELEVANT TO STATE THAT THE TRIBUNAL HAS HELD THAT THE CONTENTION OF THE ASSESSEE THAT DEDUCTION SHOUL D BE ALLOWED TOWARDS MUNICIPAL TAXES IS NOT ACCEPTABLE IN VIEW OF THE REASON THAT SUCH T AXES WERE PAID BY THE TENANT AND NOT BY THE ASSESSEE. 6. IN VIEW OF THE ALL THE EARLIER ORDERS OF THE TRI BUNAL DATED 09.05.12, WE ALLOW GROUND NO.1.1 TO1.4 OF THE APPEAL BY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL (SUPRA) AS MENTIONED HEREINABOVE. 7. IN GROUND NO.2.1 TO 2.4 THE ASSESSEE HAD DISPUTE D THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE AMOUNTIN G TO RS.1,71,36,351/- UNDER SECTION 14A OF THE ACT. THE RELEVANT FACTS ARE THA T THE ASSESSEE IS AN INVESTMENT COMPANY, REGISTERED AS A NON BANKING FINANCE COMPAN Y. THE ASSESSEE COMPANY HAS SHOWN AN AMOUNT OF RS.18,90,14,306/- AS DIVIDEND IN COME WHICH IS EXEMPT FROM TAX. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAS COMPUTED THE DISALLOWANCE UNDER SECTION 14A OF RS.49,91,518/- AS PER STATEMENT OF I NCOME AND THE RETURN FILED. HOWEVER, THE ASSESSING OFFICER BY APPLYING RULE 8D WORKED OUT THE DISALLOWANCE OF RS.1,71,36,351/- UNDER SECTION 14A OF THE ACT. SIN CE THE ASSESSEE HAS ALREADY DISALLOWED RS.49,91,518/-, THE ASSESSING OFFICER MA DE FURTHER DISALLOWANCE OF RS.1,21,44,833/- (RS.1,71,36,351/- - RS.49,91,518/- ). BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 8. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A SSESSING OFFICER STATING THAT AS PER DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF GODREJ & BOYCE MANUFACTURING LTD. VS. DCIT [(2010) 43 DTR 177)] RU LE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. SINCE THE ASSESSING OFFIC ER HAS WORKED OUT THE DISALLOWANCE 4 ITA NO.7921/M/11 M/S. KALIMATI INVESTMENT CO. LTD. IN TERMS OF RULE 8D READ WITH SECTION 14A OF THE AC T, THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER. ACCORDINGLY, THE LD. CIT (A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HENCE THIS APPEAL BY THE ASSESS EE. 9. AT THE TIME OF HEARING LD. A.R. REFERRED PAGE 4 OF THE PAPER BOOK, WHICH IS A COPY OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSING OFFICER HAD ONLY CONSIDERED THE OPENING STOCK IN TRADE AND NOT CONSIDERED THE CLOSING STOCK IN TRADE AND THEREFORE THE COMPUTATION MADE BY HIM WHI LE APPLYING RULE 8D IS NOT CORRECT. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER THE SUBMISSION OF THE ASSESSEE WHILE WORKING OUT THE DISALLOWANCE UNDER S ECTION 14A OF THE ACT. HE FURTHER SUBMITTED THAT LD. CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITHOUT DISCUSSING THE SUBMISSIONS MADE BEFORE HIM. THE LD . D.R. IN HIS REPLY COULD NOT CONTROVERT THE ABOVE SUBMISSION OF THE LD. A.R. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE DO AGREE W ITH LD. A.R. THAT THE LD. CIT(A) HAS NOT GIVEN ANY REASON WHILE CONFIRMING THE ACTION OF THE ASSESSING OFFICER, SAVE AND EXCEPT STATING THAT RULE 8D IS APPLICABLE TO THE AS SESSMENT YEAR UNDER CONSIDERATION AS PER DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYCE MANUFACTURING LTD. (SUPRA). THEREFORE, WE CONSIDER IT PRUDENT TO RESTORE THE MATTER TO THE LD. CIT(A) TO DECIDE THIS ISSUE BY A REASONED O RDER AFTER CONSIDERING THE SUBMISSIONS OF THE REPRESENTATIVES OF BOTH THE PARTIES AS PER L AW. HENCE, GROUND NO.2.1 TO 2.4 OF THE APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED FOR STATIS TICAL PURPOSE BY RESTORING THE ISSUE TO THE LD. CIT(A) TO DECIDE THE SAME AFRESH BY A REASO NED ORDER AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PARTIES. 11. GROUNDS NO.3 AND 4 OF THE APPEAL TAKEN BY THE A SSESSEE ARE CONSEQUENTIAL AND DO NOT REQUIRE ANY ADJUDICATION. 5 ITA NO.7921/M/11 M/S. KALIMATI INVESTMENT CO. LTD. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 8.11.2013 . ' - . 8.11.2013 ' SD SD ( /RAJENDRA) ( . . /B.R. MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 08/ 11 /2013 . . ./ , SR. PS '# $# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. 2 4 , ' 4 , / DR, ITAT, MUMBAI 6. 7 / GUARD FILE. / BY ORDER, 2 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI