SAILEE DEVELOPERS P. LTD, MUMBAI V. ACIT 9(3), MUMBAI

ITA 8204/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6531 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 11-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2011
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K ** BZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI JH TH + ,L + IUUW] YS[KK LNL; ,OA JH VFER KQDYK] U;KF;D LNL; DS LE{KA BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER VK;DJ VIHY LA[;K@ ITA NO 8204 /MUM/201 1 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: - 2008 - 09 ) M/S SAILEE DEVELOPERS PVT. LTD. A/004, PRATHMESH HORIZON, LINK ROAD, NEW MHB COLONY BORIWALI (W), MUMBAI - 400092. VS.` ACIT 9(3), MUMBAI. LFKK;H YS[KK LA[;K@TH VKB VKJ LA[;K@ PAN/GIR NO. AA HCS0854Q APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE CIT(A) DATED 13.09.2011 WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143 (3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS THE ACT) DATED 27.12.2010 PERTAINING TO A SSESSMENT Y EAR 2008 - 09. FU/KZKFJFR FD VKSJ LS @ ASSESSEE BY NONE JKTLO FD VKSJ LS @ REVENUE BY SMT. N.V. NADKARNI LQUOKBZ FD RKJH[K @ DATE OF HEARING 30.04.2015 ?KKSK.KK FD RKJH[K@ DATE OF PRONOUNCEMENT 15 .5.2015 M/S SAILEE DEVELOPERS PVT. LTD. 2 | P A G E THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL: - 1. THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE DOCUMENTS IN THE FORM OF AGREEMENTS ARE COLORABLE DEVICE AND THEREBY AGAIN ERRED IN OUT RIGHTLY REJECTING THE ENTIRE CLAIM OF COMPENSATION OF RS. 7,23,000/ - WITHOUT APPRECIATING THE FACTS OF THE CASE IN THE RIGHT PERSPECTIVE. 2. THE LD. CIT(A) HAS ERRED IN GIVING PART IAL RELIEF WHILE COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D OF THE INCOME TAX ACT, 1961. 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NON E PUT IN APPEARANCE ON BEHALF OF THE APPELLANT AND NO APPLICATION SEEKING ADJOURNMENT HAS ALSO BEEN FILED. IT IS NO TED FROM THE RECORD THAT ON THE PREVIOUS DATE OF HEARING, THE APPEAL WAS ADJOURNED FOR 30.04.2015 AT THE REQUEST OF THE APPELLANT. THEREFORE, HAVING REGARD TO THE PROVISIONS OF RULE 24 OF THE APPELLATE TRIBUNAL RULES 1963, THE APPEAL IS BEING DISPOSED OF EX - PARTE QUA THE APPELLANT AND AFTER HEARING THE RESPONDENT - REVENUE ON MERITS. 3. THE ORDERS OF THE AUTHORITIES BELOW REVEAL THAT THE APPELLANT IS ENGAGED IN THE ACTIVITY OF BUILDERS & DEVELOPERS . IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING O FFICER NOTED THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS. 7,23,000/ - STATED TO BE COMPENSATION PAID ON FLATS AND SHOPS . THE ASSESSING OFFICER HAS NOTED IN PARA 4 OF THE ASSESSMENT ORDER THAT ON BEING SHOW - CAUSED, ASSESSEE DID NOT PROVIDE ANY EXPLANATION FOR THE SAME . THE ASSESSING OFFICER HAS FURTHER NOTED THAT IN THE ASSESSMENT YEAR 2007 - 08, SIMILAR AMOUNT WAS DISALLOWED . FOR THE AFORESAID REASONS, ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS. 7,23,000/ - CLAIMED BY THE ASSESSEE AS COMPENSATION PAID ON FLATS AND SHOPS. M/S SAILEE DEVELOPERS PVT. LTD. 3 | P A G E 4. IN APPEAL, BEFORE THE CIT(A), THE ASSESSEE CLAIMED THAT THE COMPENSATION WAS PAID FOR FAILURE TO MAKE ALLOTMENT OF FLATS AS PER THE CUSTOMERS REQUIREMENT AND THAT MAKING OF SUCH A PAYMENT WAS OF COMMON PRACTICE IN THE CONSTRUCTION BUSINESS. ASSESSEE ALSO FURNISHED DETAILS OF SUCH PAYMENT WHICH WERE CLAIMED TO HAVE BEEN PAID THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAD CONTENDED BEFORE THE CIT(A) THAT IT HAD ENTERED INTO AN AGREEMENT WITH A HOUSING S OCIETY FOR REDEVELOPMENT AND ALLOTMENT OF FLATS TO THE ERSTWHILE FLAT HOLDERS. ASSESSEE COULD NOT ALLOT THE FLATS OF THE CONTRACTED AREA, THUS LEADING TO PAYMENT OF PRESENT COMPENSATION. THE CIT(A) HAS NOTED THE AFORESAID SUBMISSIONS OF THE ASSESSEE BUT FO R LACK OF EVIDENCE TO SUBSTANTIATE THE PLEA, THE CLAIM OF THE ASSESSEE WAS DISMISSED. 5. BEFORE US, THE LD. DR APPEARING FOR THE REVENUE CONTENDED THAT EVEN IN PROCEEDINGS BEFORE THE TRIBUNAL, ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE ITS PL EA AND, THEREFORE, THE ORDER OF THE CIT(A) DESERVES TO BE AFFIRMED. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND FIND THAT THE CLAIM FOR COMPENSATION HAS BEEN DENIED PRIMARILY ON THE GROUND THAT THERE WAS NO EVIDENCE TO SUBSTANTIATE THE SAM E. THE AFORESAID POSITION CONTINUES EVEN BEFORE US AND, THEREFORE, WE HEREBY AFFIRM THE STAND OF LOWER AUTHORITIES. THUS IN SO FAR AS GROUND NO. 1 OF THE APPEAL IS CONCERNED, ASSESSEE FAILS. 7. THE SECOND GROUND RAISED BY THE ASSESSEE IS WITH RESPECT TO A DISALLOWANCE SUSTAINED BY THE CIT(A) ON ACCOUNT OF APPLICATION OF SECTION 14A OF THE ACT., R.W.R 8D OF THE INCOME TAX RULES 1962. THE FACTS IN THIS REGARD ARE THAT ASSESSEE WAS FOUND TO HAVE EARNED DIVIDEND INCOME WHICH WAS EXEMPT FROM TAX. THE ASSESSIN G OFFICER INVOKED SECTION 14A OF THE ACT AND DISALLOWED A SUM OF RS. 6,99,318/ - , BEING EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME. THE CLAIM OF THE ASSESSEE HAS BEEN DEALT WITH BY THE CIT(A) IN THE FOLLOWING MANNER: - M/S SAILEE DEVELOPERS PVT. LTD. 4 | P A G E 5 .2. THE APPELLANT HAS CHALLENGED THIS DISALLOWANCE ON THE GROUND THAT IT HAD EARNED RS.11, 193/ - AS DIVIDEND INCOME FROM SHARES OF JAN SEVA SAHAKARI BANK. THESE SHARES WERE ONLY INCIDENTAL FOR AVAILING A LOAN AND OPENING A BANK ACCOUNT. THE APPELLANT HA S NOT BORROWED ANY FUNDS TO MAKE INVESTMENTS IN THESE SHARES AND UTILIZED THIS SURPLUS FUND FOR THIS PURPOSE . IT WAS ALSO ADDED THAT THE ASSESSING OFFICER HAS FAILED TO RECORD SATISFACTION BEFORE INVOKING RULE 8D. IT WAS ALSO ARGUED THAT ASSESSING OFFICER HAS CONSIDERED ALL THE INVESTMENTS SHOWN IN THE BALANCE SHEET OF ASSESSEE WHILE COMPUTING DISALLOWANCE UNDER RULE 8D WHEREAS SOME OF THE INVESTMENTS YIELDED TAXABLE' INCOME AND SE SHOULD BE EXCLUDED. IT SOUGHT EXCLUSION OF FDR LYING WITH SARASWAT COOP. BA NK FROM WHICH IT CLAIMS TO RECEIVE TAXABLE INCOME. SIMILARLY, IT WAS CLAIMED THAT INVESTMENTS IN PRATHAMESH TOWER WERE IN A BUILDING WHICH GIVES RISE TO EXEMPT INCOME. AFTER EXCLUDING THE TWO, THE APPELLANT WAS OF THE VIEW THAT DISALLOWANCE GETS RESTRICTED TO RS. 1,32,854/ - AND NOT RS.6,99,318/ - AS DISALLOWED BY THE ASSESSING OFFICER. 5.3. I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT. RULE 8D IS APPLICABLE FROM CURRENT ASSESSMENT YEAR AND HAS HELD TO BE VALID BY THE HON'BL E BOMBAY HIGH COURT IN GODREJ & BOYCE LTD. THE APPELLANT IS IN THE BUSINESS OF BUILDING & DEVELOPING AND HAS INVESTMENTS PORTFOLIO IN TERMS OF OWNING SHARES IN VARIOUS SAHAKARI BANKS. THE FACT THAT THESE EQUITY SHARES DO NOT YIELD TAXABLE INCOME IS NOT REL EVANT IN VIEW OF DECISION OF THE HON'BLE SPECIAL BENCH OF DELHI TRIBUNAL IN CHEMIVEST CASE. THE BUSINESS OF APPELLANT IS COMPOSITE AND INDIVISIBLE ONE WHERE IT IS NOT POSSIBLE TO ALLOCATE EXPENDITURE INCURRED IN TAXABLE OR NON - TAXABLE INCOME AS IT BECOMES FUNGIBLE. IT IS BECAUSE OF THIS REASON THAT RULE 8D WAS INTRODUCED WHICH IS A PRESUMPTIVE COMPUTATIONAL MECHANISM. 5.3.1. THE ALTERNATE CLAIM OF THE APPELLANT IS THAT INVESTMENTS IN THE FORM OF FDR WITH SARASWAT COOP BANK AS WELL AS IN PRATHAMESH TOWERS SHOULD BE EXCLUDED FROM WHILE COMPUTING DISALLOWANCE U/S.8D(2)(III). NO PROOF HAS BEEN FURNISHED THAT RENTAL INCOME OF ANY HAS BEEN OFFERED FOR TAXATION FROM THE PRATHAMESH TOWER. AS REGARDS THE REQU EST FOR EXCLUSION OF INTEREST FROM FDRS THE SAME HAS MERIT. THE ASSESSING OFFICER IS DIRECTED TO WORK OUT RULE 8D AFTER EXCLUDING FDRS FROM INVESTMENTS. THE APPELLANT GETS PARTIAL RELIEF ON THIS GROUND. 8. IN THE ABSENCE OF ANY MATERIAL ON RECORD FOR US TO DISTRACT FROM THE FINDING OF THE CIT(A), WE FIND NO REASON TO INTERFERE WITH HIS ULTIMATE CONCLUSION OF DIRECTING THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT., R.W.R 8D OF THE RULES BY EXCLUDING THE INTEREST FROM FDRS. AS A CONSEQUENCE, THE ORDER OF CIT(A) IS HEREBY AFFIRMED . ASSESSEES APPEAL ON THIS ASPECT ALSO FAILS. M/S SAILEE DEVELOPERS PVT. LTD. 5 | P A G E 9 . IN THE RESULT , APPEAL OF THE ASSESSEE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF MAY 2015. SD/ - SD/ - (AMIT SHUKLA) (G.S. PANNU) (JUDICIAL MEMBER/ U;KF;D LNL; ) (ACCOUNTANT MEMBER/ YS[KK LNL; ) MUMBAI DATED 15 - 05 - 2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI