BORAX MORARJI LTD, MUMBAI V. DCIT CIR 2(1), MUMBAI

ITA 8539/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84387 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERMPURNA
• Assessee Lawyers: V GINDE
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI , !' $ $ $ $ % & ' , !' ( BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I .T.A. NO. 8539/MUM/2011 ( ) ) ) ) / ASSESSMENT YEAR : 2008-09 M/S. BORAX MORARJI LTD., PROSPECT CHAMBERS, 317/321, DR. D.N. ROAD, FORT, MUMBAI-400 001 / VS. THE DCIT, CIRCLE-2(1), AAYAKAR BHAVAN, MUMBAI-400 020 '* ./ +, ./ PAN/GIR NO. : AAACB 0507E ( *- / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY: SHRI V. GINDE ./*- 1 0 / RESPONDENT BY: SHRI VIVEK PERMPURNA 1 %2 / DATE OF HEARING :09.12.2014 34) 1 %2 / DATE OF PRONOUNCEMENT :09.12.2014 !& / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-4, MUMBAI DT.05.09.2011 PERTAINING TO A.Y.20 08-09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 3,91,058/- OUT O F INTEREST EXPENSE MADE BY THE AO U/S. 14A OF THE ACT R.W. RULE 8D. ITA NO. 8539/M/2011 2 3. RETURN OF INCOME WAS ELECTRONICALLY FILED BY THE ASSESSEE ON 30.9.2008 DECLARING TOTAL INCOME AT RS. 3,73,96,033 /-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DIVIDEND INCOME OF RS. 3,850/- AS EXEMPT. THE AO F URTHER NOTICED THAT NO PARTS OF THE EXPENSES WERE CONSIDERED FOR EARNIN G EXEMPT INCOME. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PROVISI ONS OF SEC. 14A R.W. RULE 8D SHOULD NOT BE MADE APPLICABLE. IN RESPONSE TO THE SAME, THE ASSESSEE WORKED OUT DISALLOWANCE AT RS. 61,486/-. THE AO WAS NOT CONVINCED WITH THE WORKING OF THE ASSESSEE. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD NO SUFFICIENT LIQUIDITY TO MA KE INVESTMENT IN SHARES AND THE ASSESSEE COULD NOT DIFFERENTIATE THE BORROW ED FUNDS/INTEREST FREE FUNDS OUT OF WHICH THE INVESTMENTS HAVE BEEN MADE. THE AO PROCEEDED BY COMPUTING THE DISALLOWANCE U/S. 14A R.W. RULE 8D . THE DISALLOWANCE WAS COMPUTED AT RS. 4,52,544/-. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DETAILS OF THE INVESTMENT MADE SINCE 1981-82. THE LD. COUNSEL POINTED OUT THAT THE SUBSTANTIAL INVESTMENTS WERE M ADE IN THE FINANCIAL YEAR 1991-92 AND THE SAME INVESTMENTS HAVE BEEN CAR RIED OVER THROUGHOUT TILL THE YEAR UNDER CONSIDERATION. IT I S THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVESTMENTS AND THEREFORE THERE IS NO REASON WHY TH ERE SHOULD BE ANY DISALLOWANCE IN RESPECT OF THE INTEREST. IN SUPPOR T, THE LD. COUNSEL RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF BOMB AY IN THE CASE OF HDFC BANK LTD. IN IT APPEAL NO. 330 OF 2012. ITA NO. 8539/M/2011 3 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LD. CIT(A). 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECOR D AND REFERRED TO DURING THE COURSE OF THE PROCEEDINGS. IT IS AN UND ISPUTED FACT THAT THE INVESTMENTS HAVE BEEN BROUGHT FORWARD FROM EARLIER YEARS. THIS CLEARLY PROVES THAT THE INVESTMENTS ARE OLD. WE FIND THAT RS. 199.35 LAKHS WAS THE TOTAL INVESTMENTS IN FINANCIAL YEAR 2005-06 WHI CH REMAIN THE SAME TILL 31.3.2007 AND AS ON 31.3.2008 (THE YEAR UNDER CONSI DERATION). THE TOTAL INVESTMENTS STAND AT RS. 47,37,841/-. THE SHARE CA PITAL AND RESERVES AND SURPLUS OF THE ASSESSEE STAND AT RS. 13.25 CRORES. THIS CLEARLY ESTABLISHES THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS F OR MAKING THE INVESTMENTS. THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF HDFC BANK LTD., HAS HELD AS UNDER: WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SQU ARELY COVERED BY THE JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA). THE FINDING OF FACT GIVEN BY THE ITAT IN THE PRESENT CASE IS THAT THE ASSESSEES OWN FUNDS AND O THER NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. THIS FACTUAL POSITION IS NOT ONE THAT IS DISPUTED. IN THE PRESENT CASE, UNDISPUTEDLY THE ASSESSEES CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER TH AN THE INVESTMENT IN THE TAX-FREE SECURITIES. IN VIEW OF THIS FACTUAL POSITION, AS PER THE JUDGMENT OF THIS COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) , IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE. WE THEREFORE, A RE UNABLE TO AGREE WITH THE SUBMISSION OF MR. SURESH KUMAR THAT THE TRIBUNAL HAD ERRED IN DISMISSING THE APPEAL OF THE REVENUE O N THIS GROUND. WE DO NOT FIND THAT QUESTION (A) GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS THEREFORE REJECTED. ITA NO. 8539/M/2011 4 8. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT O F THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE SET A SIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,91,058/-. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 9 TH DECEMBER, 2014 SD/- SD/- (AMIT SHUKLA ) (N.K. BILLAIYA) !' /JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; 5! DATED : 9 TH DECEMBER, 2014 . . ./ RJ , SR. PS !& !& !& !& 1 11 1 .% .% .% .% 6)% 6)% 6)% 6)% / COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 89 .% , , / DR, ITAT, MUMBAI 6. 9: ; / GUARD FILE. !& !& !& !& / BY ORDER, /% .% //TRUE COPY// < << < / = = = = + + + + (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI