SARANG R WADHAWAN, MUMBAI V. ACIT CEN CIR 5(4), MUMBAI

ITA 851/MUM/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0454 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-10-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 11-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Earning of tax free income; Rule 8D; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 851/MUM/2018 Assessment Year: 2013-14 Shri Sarang R. Wadhawan, M/s Thar & Co. 203, Capri, Opposite HDIL Towers, Anant Kanekar Marg, Bandra East, Mumbai-400051. Vs. Asst. CIT, Central Circle-5(4), Room No. 1927, 19 th floor, Air India Building, Nariman Point, Mumbai-400021. PAN No. AAAPW 2530 R Appellant Respondent Assessee by : None Revenue by : Mr. Sanyam Suresh Joshi, DR Date of Hearing : 11/10/2022 Date of pronouncement : 18/10/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against the order dated 18.10.2017 passed by the Ld. Commissioner of Income-tax (Appeals)-53, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds : 1) The Learned CIT (A) has erred in law & on facts in directing the learned A.O to disallow the business loss & not allowing i carried forward as claimed by the appellant as business loss to the tune of Rs.4,44,77,362/ 2) 2) The Learned CIT (A) erred has erred in law & on facts in not upholding the learned A.O's action of taking interest expenditure as Nil/-, as in the order of Income Tax passed by the Assessing Officer us. 143 (3) of the Income Tax Act, 1961 & directed the learned AO to recompute disallowance us 14A r.w.r 8D by considering the interest expenditure 2. Briefly stated, return of income for the year under consideration on 28.09.2013 declaring Nil income. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income 1961 (in short ‘the Act’) and were issued and complied with. In the assessment completed u/s 143 Assessing Officer invoked Rules, 1961 (in short ‘the Rules’) ₹1,98,87,499/-. The Assessing Officer also made addition of Shri Sarang R. Wadhawan The Learned CIT (A) has erred in law & on facts in directing the learned A.O to disallow the business loss & not allowing i carried forward as claimed by the appellant as business loss to the tune of Rs.4,44,77,362/-, which is bad in law. 2) The Learned CIT (A) erred has erred in law & on facts in not upholding the learned A.O's action of taking interest expenditure as , as in the order of Income Tax passed by the Assessing Officer us. 143 (3) of the Income Tax Act, 1961 & directed the learned AO to recompute disallowance us 14A r.w.r 8D by considering the interest expenditure of Rs.3,56,18,156/- Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 28.09.2013 declaring Nil income. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income n short ‘the Act’) and were issued and complied with. In the assessment completed u/s 143(3) of the Act dated 28.03.2016, t invoked section 14A r.w.s. 8D of the Income Rules, 1961 (in short ‘the Rules’) and made disallowance of . The Assessing Officer also made addition of Shri Sarang R. Wadhawan ITA No. 851/M/2018 2 The Learned CIT (A) has erred in law & on facts in directing the learned A.O to disallow the business loss & not allowing it to be carried forward as claimed by the appellant as business loss to the 2) The Learned CIT (A) erred has erred in law & on facts in not upholding the learned A.O's action of taking interest expenditure as , as in the order of Income Tax passed by the Assessing Officer us. 143 (3) of the Income Tax Act, 1961 & directed the learned AO to recompute disallowance us 14A r.w.r 8D by considering the interest facts of the case are that the assessee filed return of income for the year under consideration on 28.09.2013 declaring Nil income. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, n short ‘the Act’) and were issued and complied with. In the (3) of the Act dated 28.03.2016, the section 14A r.w.s. 8D of the Income-tax made disallowance of . The Assessing Officer also made addition of interest income of ₹21,646/- data. 3. Aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the submission of th disallowed the claim of bogus loss of the AO for not to carry the Assessing Officer to consider disallowance under Rule 8D(2)(ii) of the Rules. Aggr Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4. At the outset, we may like to mention that notice for hearing sent at the address provided in Form No. 36 has returned back the comment of the postal authority that party left. On earlier occasion i.e. hearing dated 11.08.2022 also with the identical comment of postal authority. Shri Sarang R. Wadhawan which was reflected in Income- Aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the submission of th disallowed the claim of bogus loss of ₹4,44,77,362/ carry forward the loss. The Ld. CIT(A) also directed the Assessing Officer to consider disallowance of interest expenses under Rule 8D(2)(ii) of the Rules. Aggrieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above. At the outset, we may like to mention that notice for hearing sent at the address provided in Form No. 36 has returned back the comment of the postal authority that party left. On earlier hearing dated 11.08.2022 also notice with the identical comment of postal authority. Shri Sarang R. Wadhawan ITA No. 851/M/2018 3 -tax Department Aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the submission of the assessee, 4,44,77,362/- and directed he Ld. CIT(A) also directed interest expenses ieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the At the outset, we may like to mention that notice for hearing sent at the address provided in Form No. 36 has returned back with the comment of the postal authority that party left. On earlier notice returned back 5. Before us, neither anyone appeared on behalf of the assessee nor any adjournment was sought. In the cir the opinion that the assessee appeal and therefore, same was heard after hearing the arguments of the Ld. DR. 6. The Ld. CIT(A) has adj 5.3.9 of the impugned order “5.3.9. There is merit in the contention that since demat charges has not be claimed as expenditure against any taxable income, the same cannot be disallowed u/ Rs 108,581/-is claimed against income from other sources. There are no admin expenses claimed at all except interest expenses and depreciation and hence such expenses cannot be disallowed by applying Rule 8D appellant has claimed loss from business at Rs 4,44,77.362/ details seen in the copy of accounts filed, the busine of Rs 4,44,77,362/ Industrial Dev Corporation against which interest of Rs 3,56,18,156 is claimed as loan from future and option, interest on vehicle loan Rs 135860/- and depreciation Rs 88,89,95 Future and Option nor is there any link or basis to claim such interest and depreciation expenses against any such income. In fact the Shri Sarang R. Wadhawan Before us, neither anyone appeared on behalf of the assessee adjournment was sought. In the circumstances, we the opinion that the assessee was not interested in prosecuting the appeal and therefore, same was heard ex-parte qua the assessee after hearing the arguments of the Ld. DR. The Ld. CIT(A) has adjudicated the issue-in-dispute in p 5.3.9 of the impugned order which is reproduced as under: 5.3.9. There is merit in the contention that since demat charges has not be claimed as expenditure against any taxable income, the same cannot be disallowed u/s 144. Further. it is noted that bank charges of is claimed against income from other sources. There are no admin expenses claimed at all except interest expenses and depreciation and hence such expenses cannot be disallowed by applying Rule 8D mechanically. It is however also noted that the appellant has claimed loss from business at Rs 4,44,77.362/ details seen in the copy of accounts filed, the business loss as per books of Rs 4,44,77,362/- is computed as remuneration from Bassein Industrial Dev Corporation against which interest of Rs 3,56,18,156 is claimed as loan from future and option, interest on vehicle loan Rs and depreciation Rs 88,89,950/- There is no trading in Future and Option nor is there any link or basis to claim such interest and depreciation expenses against any such income. In fact the Shri Sarang R. Wadhawan ITA No. 851/M/2018 4 Before us, neither anyone appeared on behalf of the assessee cumstances, we were of not interested in prosecuting the qua the assessee dispute in para hich is reproduced as under: 5.3.9. There is merit in the contention that since demat charges has not be claimed as expenditure against any taxable income, the same s 144. Further. it is noted that bank charges of is claimed against income from other sources. There are no admin expenses claimed at all except interest expenses and depreciation and hence such expenses cannot be disallowed by mechanically. It is however also noted that the appellant has claimed loss from business at Rs 4,44,77.362/- From the loss as per books is computed as remuneration from Bassein Industrial Dev Corporation against which interest of Rs 3,56,18,156 is claimed as loan from future and option, interest on vehicle loan Rs There is no trading in Future and Option nor is there any link or basis to claim such interest and depreciation expenses against any such income. In fact the remuneration of Rs 166605 is considered under the head Income from firms. The only major incom books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed as business loss of Rs 4,44,77,362/ extent loss should not be allowed to be carried forward. Further, th balance sheet on the liability side shows a total of Rs 455 crores of which own capital is only Rs 91.86 crores and almost the entire balance amount Rs 363 crores is in form of loans. On the asset side the investment in shares is R 4 crores in capital of firms in which appellant is partner. Thus some interest expenses are clearly allocable against the various investments from sale of which exempt income is claimed. The assessing officer has not considered and 8D nor under the business income. In light of the above, the Assessing Officer is directed to re No.2 is partly allowed as above. 6.1 The Ld. CIT(A) has noted tha Option huge amount of interest expenses of claimed by the assessee expenses under Rule 8D(2)(ii), investment in shares has bee us, no explanation or evidence in support of claim of the assessee challenging the additions by way of the grounds Shri Sarang R. Wadhawan remuneration of Rs 166605 is considered under the head Income from firms. The only major income in the year is capital gains which as per books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed business loss of Rs 4,44,77,362/- which is not correct and to that extent loss should not be allowed to be carried forward. Further, th balance sheet on the liability side shows a total of Rs 455 crores of which own capital is only Rs 91.86 crores and almost the entire balance amount Rs 363 crores is in form of loans. On the asset side the investment in shares is Rs 380 crores and Rs 54 crores in properties Rs 4 crores in capital of firms in which appellant is partner. Thus some interest expenses are clearly allocable against the various investments from sale of which exempt income is claimed. The assessing officer has not considered and interest expenditure for disallowance under Rule 8D nor under the business income. In light of the above, the Assessing Officer is directed to re-compute the disallowances. Ground of Appeal No.2 is partly allowed as above.” The Ld. CIT(A) has noted that despite no trading in Future & Option huge amount of interest expenses of ₹3,56,18,156/ claimed by the assessee. As regard to the disallowance of interes expenses under Rule 8D(2)(ii), the Ld. CIT(A) has noted that shares has been made out of borrowed funds. Before us, no explanation or evidence in support of claim of the assessee challenging the additions by way of the grounds, has been filed and Shri Sarang R. Wadhawan ITA No. 851/M/2018 5 remuneration of Rs 166605 is considered under the head Income from e in the year is capital gains which as per books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed which is not correct and to that extent loss should not be allowed to be carried forward. Further, the balance sheet on the liability side shows a total of Rs 455 crores of which own capital is only Rs 91.86 crores and almost the entire balance amount Rs 363 crores is in form of loans. On the asset side the crores in properties Rs 4 crores in capital of firms in which appellant is partner. Thus some interest expenses are clearly allocable against the various investments from sale of which exempt income is claimed. The assessing officer has interest expenditure for disallowance under Rule 8D nor under the business income. In light of the above, the Assessing Ground of Appeal t despite no trading in Future & 3,56,18,156/- has been s regard to the disallowance of interest he Ld. CIT(A) has noted that n made out of borrowed funds. Before us, no explanation or evidence in support of claim of the assessee has been filed and therefore in absence of any material contrary t Ld. CIT(A), we are constraint to uphold the finding the Ld. CIT(A) on the issue-in-dispute. Accordingly, the grounds raised by the assessee are dismissed. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court in 18 Sd/- (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 18/10/2022 Dragon Legal/Rahul Sharma, Sr. P.S. 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. //True Copy// Shri Sarang R. Wadhawan therefore in absence of any material contrary to the finding of the re constraint to uphold the finding the Ld. CIT(A) on dispute. Accordingly, the grounds raised by the assessee In the result, the appeal filed by the assessee is dismissed. nounced in the open Court in 18/10/2022. Sd/- RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai Shri Sarang R. Wadhawan ITA No. 851/M/2018 6 o the finding of the re constraint to uphold the finding the Ld. CIT(A) on dispute. Accordingly, the grounds raised by the assessee In the result, the appeal filed by the assessee is dismissed. /10/2022. OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai