AHA HOLDING P.LTD ( FORMERLY KNOWN AS I DREAM HOLDINGS P. LTD), MUMBAI V. ACIT CEN CIR 22, MUMBAI

ITA 8395/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3350 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Keywords: Earning of tax free income

Judgement Text

,' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ITA/8395/MUM/2011 , / ASSESSMENT YEARS: 2008-09 AHA HOLDINGS PRIVATE LTD. (FORMERLY KNOWN AS IDREAM HOLDING PVT. LTD.), 161 STAR CITY, 2 ND FLOOR, MAHIM(W),MUMBAI-400 016. PAN:AAFCS 6404 E VS. ACIT CENTRAL CIRCLE-22 403, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 026. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.MURLI ASSESSEE BY: SHRI HIRO RAI / DATE OF HEARING: 23.03.2016 / DATE OF PRONOUNCEMENT: 30.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 19/10/2011 OF THE CIT ( A) 39, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF FINANCING AND INVESTMENT, FILED ITS RETURN OF INCOME ON 30/09/2008,DECLARING A LOSS OF RS. 4.22 CRORES. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S.143 (3) O F THE ACT,ON 24/12/2010, DETERMINING THE INCOME OF THE ASSESSEE AT RS.(-) 3.78 CRORES. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMING THE ADDITION OF RS. 43.15 LAKHS ON ACCOUNT OF DISALLOWANCE MADE U/S.14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO NOTICED THAT ASSESSEE HAD BOTH EXEMPT INCOME YEILDING INVES TMENT AS WELL AS BUSINESS ASSETS IN THE BALANCE SHEET,THAT IT HAD EARNED INCOME UNDER BOTH THE HEADS I.E. TAXABLE INCOME AND EXEMPT INCOME, THAT THE ASSESSEE WAS MAINTAINING CONSOLIDA TED ACCOUNTS.HE REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S.14A OF THE AC T READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (RULES) SHOULD NOT BE MADE.THE ASSESSEE ARGUED THAT IT HAD NOT INCURRED ANY INTEREST EXPENDITURE DURING THE YEAR UNDER APPEAL,T HAT NO DISALLOWANCE COULD BE MADE U/S.14A OF THE ACT.HOWEVER,THE AO WAS NOT CONVINCED AND HEL D THAT THE ASSESSEE HAD MAINTAINED CONSOLIDATED ACCOUNTS PRECLUDING POSSIBLE OF ESTABL ISHING ONE TO ONE NEXUS BETWEEN EXPENSES AND EXEMPT INCOME YIELDING INVESTMENTS,THAT IT HAD NOT MAINTAINED SEPARATE ACCOUNTS FOR EXEMPT INCOME,THAT IT COULD NOT ESTABLISH THE CORRE CTNESS OF ITS CLAIM.THE AO INVOKED THE PROVISIONS OF RULE 8D OF THE RULES AND MADE A DISAL LOWANCE OF RS. 43,15, 285/-. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS CONTENDED THAT PRO VISIONS OF DISALLOWANCE U/S.14A AND APPLICATION OF RULE 8D WAS NOT AUTOMATIC,THAT SECTI ON 14 A COULD NOT BE INVOKED UNLESS THERE WAS PROXIMATE CAUSE FOR DISALLOWANCE, THAT THE ACTI ON AND RULE COULD NOT BE APPLIED IN MECHANICAL MANNER.AFTER CONSIDERING THE ORDER OF TH E AO AND THE SUBMISSION OF THE ASSESSEE, THE FW HELD THAT THE ASSESSEE HAD INVESTED IN TAX F REE INVESTMENT TO THE TUNE OF RS. 86.30 CRORES, THAT CERTAIN ADMISSIBLE EXPENSES WERE REQUI RED FOR MAKING AND MAINTAINING THE TAX 8395-AHA HOLDING 2 FREE INVESTMENT AND EARNING TAX FREE INCOME,THAT TH E EXACT AMOUNT OF EXPENDITURE COULD NOT BE FOUND OUT FROM THE ACCOUNTS MAINTAINED BY THE AS SESSEE,THAT DISALLOWANCE MADE BY THE AO UNDER RULE 8D(2) (III) READ WITH SECTION 14 A OF TH E ACT WAS APPROPRIATE. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) STATED THAT THE ASSESSEE HAD MADE INVESTMENT IN THE GROUP COMPANIES,THAT STRATEGIC INVESTMENTS S HOULD HAVE BEEN EXCLUDED WHILE COMPUTING THE DISALLOWANCE U/S.14 A OF THE ACT,THAT WHILE MAKING THE DISALLOWANCE THE AO HAD CONSIDERED THE STOCK IN TRADE ALSO,THAT DISALLO WANCE U/S.14A WAS NOT APPLICABLE TO STOCK IN TRADE,THAT THE PAINTINGS AND PROPERTY APPEARING IN THE BALANCE SHEET OF THE ASSESSEE WERE NOT EXCLUDED WHILE MAKING THE DISALLOWANCE.HE REFER RED TO CASES OF GARWARE WALL ROPES LTD.(65SOT86),JM FINANCIAL LTD.(ITA/4251/M/2012),CC I LTD.(206 TAXMANN 563).THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD MADE THE DISALLOWANCE U/S.14A OF THE ACT R.W .RULE 8D OF THE RULES,THAT WHILE MAKING THE DISALLOWANCE HE HAD INCLUDED THE STRATEG IC INVESTMENTS AS WELL AS STOCK IN TRADE, THAT BOTH THE ITEMS SHOULD HAVE BEEN EXCLUDED FOR M AKING THE DISALLOWANCE.WE FIND THAT ASSESSEE HAD NOT PROVIDED NECESSARY DETAILS IN THAT REGARD TO THE AO/FAA.THEREFORE, WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,MATT ER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH THE N ECESSARY DETAILS TO THE AO.THE EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESS EE,IN PART. APPEAL FILED BY THE ASSESSEE STANDS PARTL Y ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH, 2016. 30 , 2016 SD/- SD/ - /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 30.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , J , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.