ACIT 14(2)(1), MUMBAI V. ITD CEMENTATION INDIA LTD, MUMBAI

ITA 82/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8897 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 27-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Earning of tax free income; Question of law
• Section: 14A; 115JB

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL -I BENCH MUMBAI , ,, , . . . . . . . . , ,, , BEFORE S/SHRI RAJENDRA, ACCOUNTANT MEMBER AND C.N. PRASAD, JUDICIAL MEMBER / ITA NO.82/MUM/2015 : /ASSESSMENT YEAR-2010-11 ACIT-14(2)(1), MUMBAI. VS. M/S. ITD CEMENTATION INDIA LTD., NATIONAL PLASTIC BUILDING, A-SUBHASH ROAD, PARANJPE B SCHEME, VILE PARLE (EAST), MUMBAI 57. PAN : AAACT 1426 A (APPELLANT) (RESPONDENT) / ITA NO.157 /MUM/2015 : /ASSESSMENT YEAR-2010-11 M/S. ITD CEMENTATION INDIA LTD., VILE PARLE (EAST), MUMBAI 57. VS. ACIT-14(2)(1), MUMBAI. (APPELLANT) (RESPONDENT ) REVEN UE BY: SHRI K. MOHANDAS DR ASS ESSEE BY: SHRI VIJAY MEHTA CA / DATE OF HEARING: 27/10/2016 / DATE OF PRONOUNCEMENT: 04/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 17/10/2014 OF THE CIT(A )-21,MUMBAI,THE ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE YEAR UNDER CONSIDERATION.THE ASSESSEE VIDE ITS APPLICATION,DATED 10/10/2016,MADE A REQUES T TO ADMIT ADDITIONAL GROUNDS OF APPEAL.IT HAS BEEN CLAIMED THAT ADDITIONAL GROUNDS RAISED PUR ELY QUESTION OF LAW AND THAT NO NEW FACTS WERE REQUIRED TO BE BROUGHT ON RECORD,THAT THE ADDI TIONAL GROUNDS WERE ABOUT BOOK PROFIT TO BE COMPUTED UNDER SECTION 115JB AND RATE OF MAT.DUR ING THE COURSE OF HEARING BEFORE US, THE AUTHORISED REPRESENTATIVE(AR)ADVANCED THE SAME ARGUMENTS,FOR ADMISSION OF THE ADDITIONAL GROUNDS,THAT WERE PART OF THE APPLICATIO N MADE ON 10/10/2016.THE DEPARTMENTAL REPRESENTATIVE(DR)LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.WE FIND THAT BOTH THE GROUNDS ARE PURELY LEGAL IN NATURE AND NO NEW FACTUAL THING S ARE TO BE BROUGHT ON RECORD. THEREFORE, ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ADMIT TED. ITA NO. 157/MUM/2015 2.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF CIVIL , MINING ,MARINE,ENGINEERING AND CONSTR -UCTION ACTIVITIES,FILED ITS RETURN OF INCOME ON 07 /10/2011, DECLARING LOSS AT RS.11.39 CRORES. THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE A CT,ON 24/02/2014,DETERMINING ITS INCOME AT RS.12.66 CRORES UNDER NORMAL PROVISIONS A ND RS. 18.65 CRORES UNDER SECTION 115JB ITA NO.7677 /MUM/2014 (A.Y. 2010-11) 2 OF THE ACT.DURING THE COURSE OF HEARING, THE AR DID NOT PRESS GROUNDS NO. 1 & 4. HENCE, SAME STAND DISMISSED. 3. EFFECTIVE GROUND OF APPEAL IS ABOUT PARTLY CONFIRMI NG THE DISALLOWANCE OF RS.9.99 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO OBSERVED T HAT ASSESSEE HAS MADE HUGE INVEST - MENTS,INCOME FROM WHICH WAS LIKELY TO BE EXEMPT AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY,HE DIRECTED THE ASSESSEE TO FURNISH THE WORKING OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES,1962( RULES)FOR EARNING THE EXEMPT INCOME. IN ITS REPLY,THE ASSESSEE ARGUED THAT NO EXPENDITUR E HAD BEEN INCURRED TOWARDS EARNING OF THE EXEMPT INCOME, THAT NO DISALLOWANCE UNDER SECTION 1 4A SHOULD BE MADE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT MA KING OF INVESTMENT AND EARNING OF EXEMPT INCOME REQUIRED EFFORTS. HE MADE DISALLOWANCE OF RS .1.13 CRORES (RS.1.03 CRORES UNDER THE HEAD INTEREST EXPENDITUREAND RS. 9.99 LAKHS UNDER THE HEAD 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT)INVOKING THE PROVISIONS OF SECTION 14A R .W.R. 8D OF THE RULES. HE ADDED THE SAID DISALLOWANCE TO THE BOOK PROFIT ALSO,CITING CLAUSE( F) OF SECTION 115JB OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSION O F THE ASSESSEE AND THE ASSESSMENT ORDER, SHE REFERRED TO THE ORDER FOR THE AY. 2008-09. FOLL OWING THE SAME,SHE DELETED THE INTEREST DIS -ALLOWANCE OF RS. 1.03 CRORES. HOWEVER, DISALLOWANC E FOR ADMINISTRATIVE EXPENSES (0.5% OF THE AVERAGE INVESTMENT) WAS UPHELD. 5. DURING THE COURSE OF HEARING BEFORE US,THE AR CONTE NDED THAT INVESTMENT WAS MADE IN SUBSIDIARIES COMPANIES OF THE GROUP OR IN THE JBCS, THAT ASSESSEE HAD CLAIMED NO EXPENDITURE AGAINST THE EXEMPT INCOME,THAT IN THE AY.2009-10,EN TIRE ADDITION MADE BY THE AO, INCLUDING THE ADDITION ON ACCOUNT OF AVERAGE INVESTMENT,WAS D ELETED BY THE FAA, THAT THE AO HAD NOT CHALLENGED DELETION,THAT THE INVESTMENT IN THE JVC. S WAS MADE FOR HAVING A CONTROL OVER THE ACTIVITIES OF THE SAID ENTITIES.THE DR SUPPORTED TH E ORDER OF THE FAA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD MADE DISALLOWANCE UNDER THE HEAD ADMINISTRAT IVE EXPENSES,THAT THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE FOR EARNING EXEMPT INCOME,T HAT THE INVESTMENT WAS MADE IN SUBSIDIA -RY COMPANIES OR THE JVC.S,WHERE THE ASSESSEE WAS T HE PARTNER.CONSIDERING THESE FACTS, WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED I N UPHOLDING THE ADDITION MADE BY THE AO UNDER SECTION 14A R.W.R.8D.THE EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO.7677 /MUM/2014 (A.Y. 2010-11) 3 7. NOW,WE WILL TAKE THE FIRST ADDITIONAL GROUND.THE AR ARGUED THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME QUA BOOK PROFIT,THAT THE F AA HAD NOT ADJUDICATED THE ISSUE.WITH REFERENCE TO THE ADDITIONAL GROUND NO.2, HE CONTEND ED THAT AO HAD APPLIED THE RATE OF TAXATION AT 18% AS AGAINST THE CORRECT RATE OF 15%. THE DR LEFT THE ISSUES TO THE DISCRETION OF THE BENCH.AFTER CONSIDERING THE ABOVE SUBMISSION,WE ARE OF THE OPINION THAT BOTH THE ISSUES SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR F RESH ADJUDICATION/VERIFICATION. ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED IN ITS F AVOUR,IN PART. ITA 82/MUM/2015 8. THE SOLITARY GROUND OF APPEAL RAISED BY THE AO IS A BOUT DELETING THE ADDITION OF RS. 1.03 CRORES UNDER THE INTEREST EXPENDITURE.THE DR RELIED UPON THE ORDER OF THE AO. THE AR STATED THAT IN EARLIER ASSESSMENT YEARS, THE ASSESSEE HAD SUFFICIENT OWN FUNDS AND RESERVE/SURPLUS TO MAKE INVESTMENT. HE REFERRED TO PAGE NO.3 OF THE PA PER BOOK.WE FIND THAT INVESTMENT MADE BY THE ASSESSEE WAS MINUSCULE OF THE FUNDS AVAILABL E TO IT FOR THE YEAR UNDER CONSIDERATION. IN OUR OPINION,THE ORDER OF THE FAA DOES NOT SUFFER FR OM ANY LEGAL OR FACTUAL INFIRMITY. SO, CONCERNING HER ORDER, WE DECIDE THE EFFECTIVE GROUN D OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D AND APPEAL OF THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2017. 04 , 2017 SD/- SD/- ( . . . . . . . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04 /01/2017. VR/-/JV.-SRPS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.