MULTIGRAPH MACHINERY CO. LTD, MUMBAI V. DCIT 3(2), MUMBAI

ITA 8015/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93075 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGAR ZAIN V P
• Assessee Lawyers: KINJAL S DOSHI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.8015/MUM/2011 ASSESSMENT YEAR: 2008-09 MULTIGRAPH MACHINERY COMPANY LTD. 2 ND FLOOR, SIDHWA HOUSE, N.A. SAWANT MARG, COLABA, MUMBAI-400005 / VS. DCIT-3(2), MUMBAI, ( !' # /ASSESSEE) ( $ / REVENUE) P .A. NO. AAACM3137H !' # / ASSESSEE BY MS. KINJAL S. DOSHI $ / REVENUE BY SHRI ASGAR ZAIN, V.P. DR % $& ' # ( / DATE OF HEARING : 07/07/2015 ' # ( / DATE OF ORDER: 09/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 05/10/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO N OT DELETING THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 196 1 (HEREINAFTER THE ACT) AMOUNTING TO RS.16,26,637/-. MULTIGRAPH MACHINERY COMPANY LTD. ITA NO.8015/MUM/2011 2 2. DURING HEARING OF THIS APPEAL, THE CRUX OF ARGU MENT ADVANCED BY MS. KINJAL S. DOSHI, LD. COUNSEL FOR TH E ASSESSEE, IS IDENTICAL TO THE GROUND RAISED BY ASSERTING THAT THE LD. FIRST APPELLATE AUTHORITY DID NOT DELETE THE DISALLOWANCE IN SPITE OF THE FACT THAT NO EXPENDITURE WAS INCURRED IN EARNIN G THE EXEMPT INCOME. ON THE OTHER HAND, SHRI ASGAR ZAIN, V.P., LD. DR, DEFENDED THE CONCLUSION ARRIVED IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT, THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS.1,85,87,400/- WHICH WAS CLAIMED EXEMPT FROM TAXA TION, WHEREAS, NO EXPENDITURE WAS OFFERED FOR DISALLOWANC E U/S 14A OF THE ACT BY THE ASSESSEE BY CLAIMING THAT THE INVESTMENT IS MAINLY IN ONE COMPANY I.E. M/S MANUGR APH LTD. AND THAT IS AN OLD INVESTMENT. IT WAS ALSO CL AIMED THAT IT WAS A BUSINESS INVESTMENT AS THE ASSESSEE WAS EARNI NG COMMISSION ON THE SALE OF THE PRODUCTS OF M/S MANUG RAPH LTD. IT WAS ALSO CLAIMED BY THE ASSESSEE OWN FUNDS WERE UTILIZED FOR THE INVESTMENT, THEREFORE, NO INTEREST IS DISALLOWABLE. WE FIND THAT THE LD. ASSESSING OFFICE R ACCEPTED THE CONTENTION OF THE ASSESSEE TO THIS EXTENT THAT NO INTEREST HAS BEEN DISALLOWED U/S 14A, WHEREAS DISALLOWANCE O N ACCOUNT OF ADMINISTRATIVE EXPENSES WERE CALCULATED AT 0.5% OF THE AVERAGE INVESTMENT, UNDER RULE-8D OF THE RUL ES, WHICH COMES TO RS.16,26,637/- WHICH HAS BEEN CHALLENGED B Y THE ASSESSEE. WE NOTE THAT ASSESSEE INCURRED EXPENDITUR E OF RS.2.44 CRORES ON ACCOUNT OF SALARIES AND RS.1.06 C RORES ON MULTIGRAPH MACHINERY COMPANY LTD. ITA NO.8015/MUM/2011 3 ACCOUNT OF OTHER EXPENSES. THE ASSESSEE ALSO MADE PURCHASES AND SALE OF OTHER SHARES OTHER THAN THAT OF M/S MANUGRAPH LTD. AND ALSO MADE INVESTMENT IN MUTUAL F UNDS AS IS EVIDENT FROM THE DECLARED INCOME IN THE FORM OF LONG TERM AND SHORT TERM CAPITAL GAINS. THUS, BROADLY, W E ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO THE EXTENT SINCE THE ASSESSMENT YEAR INVOLVED IS 2008-09, THEREFORE, THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS CIT 328 ITR 81 (MUM. ) IS APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. THER EFORE, DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS TO BE CALCULATED AS PER RULE 8D. HOWEVER, AT THE TIME OF HEARING BEFORE US, THE LD A.R CONTENDED THAT THE ASSESSEES MAJORITY OF INVESTMENTS ARE BROUGHT FORWARD FROM EARLIER YEA R AND FURTHER MOST OF THE INVESTMENTS ARE STRATEGIC INVES TMENTS IN NATURE AND THEY HAVE NOT BEEN MADE WITH THE OBJECTI VE OF EARNING DIVIDEND INCOME. ACCORDINGLY IT WAS CONTEN DED THAT THE DISALLOWANCE TO BE WORKED OUT AS PER RULE 8D WI LL WORK OUT MORE AND ACCORDINGLY PRAYED THAT THE PROVISIONS OF RULE 8D SHOULD NOT BE APPLIED TO THE FACTS OF THE INSTAN T CASE. SINCE THE PRESENT CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER, WE ARE OF THE VI EW THAT THIS ISSUE REQUIRES FRESH CONSIDERATION. ACCORDINGLY, W E SET ASIDE THE ORDER OF LD COMMISSIONER OF INCOME TAX (APPEALS ) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY DULY CONSIDERING THE CONTENTIONS OF THE ASSESSEE RAISED BEFORE US. MULTIGRAPH MACHINERY COMPANY LTD. ITA NO.8015/MUM/2011 4 FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN TH E PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/07/2015. SD/ - (B.R.BASKARAN) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % & MUMBAI; ) DATED : 09/10/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. % 0# ( *+ ) / THE CIT, MUMBAI. 4. % 0# / CIT(A)- , MUMBAI 5. 2$3 .# , *+( * 4 , % & / DR, ITAT, MUMBAI 6. 5! 6& / GUARD FILE. / BY ORDER, /2+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI