FEDEX FINANCE P.LTD, MUMBAI V. DCIT 9(3)(1), MUMBAI

ITA 834/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8035 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 834 /MUM/20 1 6 ASSESSMENT YEAR: 2012 - 13 M/S FEDEX FINANCE PVT. LTD., 305, ENTERPRISES CENTRE, NEAR ORCHID HOTEL, NEHRU ROAD, VILE PARLE (EAST), MUMBAI - 400099 PAN: AAACF2216J VS. THE DCIT 9 (3) (1) , AAYAKAR BHAVAN, M AHARSHI KARVE ROAD, CHURCHGATE, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KIRIT SHETH ( AR ) REVENUE BY : SHRI SAURABH DESHPANDE ( D R) DATE OF HEARING: 11/12 /201 7 DATE OF PRONOUNCEMENT: 11 / 12 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 08/01/2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 6 , MUMBAI , FOR THE A S S ESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCIAL SERVICES FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 1,79,28,289/ - . THE ASSESSEE HAD SHOWN REVENUE FROM OPERATION S AT RS. 2,58,56,739/ - OTHER INCOME AT RS. 36,38,893/ - AND COMPUTED THE NET 2 ITA NO. 834 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 PROFIT AT RS. 1,96,80,190/ - . IT WAS SEEN FROM THE BALANCE SHEET THAT THE ASSESSEE WAS HAVING NON - CURRENT INVESTMENT OF RS. 14,12,13,100/ - IN THE EQUITY SHARES AND PARTNERSHIP FIRMS . DURING THE YEAR, THE ASSESSEE EARNED DIVIDEND OF RS. 1,56,472/ - AND SHARES PROFIT FROM PARTNERSHIP FIRM OF RS. 21,83,339/ - AND HAD CLAIMED INCOME FROM SHARE OF PROFIT AS EXEMPT U/S 10 OF THE ACT. HOWEVER, THE ASSESSEE HAD NOT DISALLOWED ANY EXPENDITURE U /S 14A RELATABLE TO EXEMPT INCOME IN COMPUTATION OF TOTAL INCOME. ACCORDINGLY , NOTICE U/S 142 (1) WAS ISSUED AND THE ASSESSEE WAS ASKED TO EXPLAIN AS TO HOW THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AND WHY DISALLOWANCE U/S 14A OF THE ACT SHOULD NOT BE MADE. IN RESPONSE THEREOF THE ASSESSEE SUBMITTED THAT THE COMPANY HAD EXEMPT INCOME UNDER THE CATEGORY SHARE OF PROFIT FROM PARTNERSHIP FIRMS AND ALL OTHER INCOME FROM INVESTMENTS HAS BEEN OFFERED FOR TAXATION AS PER THE PROVISIONS OF LAW. THE INVESTME NTS FROM WHICH THE COMPANY HAD DERIVED SHARES OF PROFIT FROM PARTNERSHIP FIRM ARE FROM INVESTMENTS AND NO INTEREST BEARING BORROWED FUNDS HAS BEEN UTILIZED FOR THIS PURPOSE. THE AO HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AND WORKED OUT THE DISALLOW ANCE U/S 14A READ WITH RULE 8D (2)(II) OF THE INCOME TAX RULES AT RS. 12,57,533/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS. 1,91,85,820/ - . 3 . AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DIRECTED THE AO TO RE - COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D AS DECIDED BY THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 2008 - 09, I TA NO. 8678/MUM/2011 DATED 21/01/2014. 3 ITA NO. 834 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 4. STILL AGGRIEVED, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS: - THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING RS. 12,57,533/ - U/S 14A READ WITH RULE 8D. YOUR APPELLANT RESPECTFULLY SUBMITS THAT ON FACTS AND IN LAW THE DISALLOWANCE U/S 14A READ WITH RULE 8D IS UNCALLED FOR AND SHOULD THEREFORE BE DELETED. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE DISALLOWANCE OF RS. 12 ,57,533/ - IS EXCESSIVE. 5 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS COMPUTED THE DISALLOWANCE AT RS. 1,07,876/ - AS DIRECTED BY THE ITAT IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2008 - 09. THE LD. COUNSEL FURTHER SUBMI TTED THAT THE LD. CIT(A) HAS WORKED OUT THE INTEREST DISALLOWANCE AT RS. 58,328/ - BY TAKING GROSS INTEREST EXPENDITURE. THE LD. COUNSEL FURTHER CONTENDED THAT THE ASSESSEE HAS ALSO RECEIVED INTEREST INCOME AND HENCE NET INTEREST SHOULD HAVE BEEN CONSIDERED BY THE LD. CIT(A) FOR WORKING OUT THE DISALLOWANCE. 6 . WHEN IT WAS ASKED AS TO WHETHER THERE WAS NEXUS BETWEEN THE INTEREST BEARING FUNDS AND INVESTMENTS, BUSINESS COMPULSIONS IN MAKING INVESTMENTS ETC., SO AS TO ALLOW NETTING OF INTEREST INCOME AGAINST INTEREST EXPENDITURE, THE LD. COUNSEL SUBMITTED THAT THESE ASPECTS MAY BE ESTABLISHED BY THE ASSESSEE IF THE ASSESSEE IS GIVEN A CHANCE. 7 . THE LD. DR, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE IS PUTTING FORTH A NEW CLAIM AND THE SAME REQUIRES EXAMIN ATION AT THE END OF THE AO. 8 . SINCE THE ASSESSEE IS PUTTING FORTH A NEW CLAIM REGARDING NETTING OF INTEREST EXPENDITURE, WE AGREE WITH THE LD. DR THAT THIS CLAIM OF THE 4 ITA NO. 834 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 ASSESSEE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 2012 - 2013 IS TREATED AS ALLOWED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DECEMBER , 2017 . SD/ - SD/ - (B.R. BASKARAN ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMB AI ; DATED: 11 / 1 2 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY. / ASSTT. REGISTRAR) , / ITAT, MUMBAI