SHARYANS RESOURCES LTD, MUMBAI V. ADDL CIT 2(3), MUMBAI

ITA 8591/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3071 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Business income; Earning of tax free income; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.8591/M/2011 ASSESSMENT YEAR: 2008-09 M/S. SHARYANS RESOURCES LTD., 4 TH FLOOR, KALPATARU HERITAGE, 127, M.G. ROAD, FORT, MUMBAI 400 001 PAN: AABCS 8634C VS. ADDL. CIT 2(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI (APPELLANT) (RESPONDENT) ITA NO.8643/M/2011 ASSESSMENT YEAR: 2008-09 ACIT 2(3), R.NO.552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. SHARYANS RESOURCES LTD., ORACLE POINT, 3, GURUNANAK ROAD, OPP. BANDRA STATION, BANDRA (WEST), MUMBAI 400 050 PAN: AABCS 8634C (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIJAY MEHTA, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 07.10.2015 DATE OF PRONOUNCEMENT : 16.10.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] DATED 25.10.2011 RELEVANT TO ASSESSMENT YEAR 2008-09 AND THE SAME AR E TAKEN TOGETHER FOR DISPOSAL BY THIS COMMON ORDER. FIRST WE TAKE UP TH E APPEAL OF THE ASSESSEE ITA NO.8591/M/2011. ITA NO.8591/M/2011 & ITA NO.8643/M/2011 M/S. SHARYANS RESOURCES LTD. 2 ITA NO.8591/M/2011 2. THE SOLE ISSUE TAKEN BY THE ASSESSEE IN ITS APPE AL IS RELATING TO THE DISALLOWANCE OF RS.4,25,669/- TOWARDS REPAIR AND MA INTENANCES TREATED AS CAPITAL EXPENDITURE BY THE LOWER AUTHORITIES. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SU BMITTED THAT THE ABOVE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESS MENT YEAR 2003-04 VIDE ITA NO.44/M/2007 DATED 21.11.2008 WHEREIN THE TRIBUNAL HAS OBSERVED THAT SINCE THE ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF PR OJECT MANAGEMENT, LEASING AND FINANCING AND REAL ESTATE AND THE PROPERTIES IN QUESTION WERE TAKEN ON LEASE WITH MUTUAL UNDERSTANDING WITH THE LESSER THAT THE ASSESSEE WOULD HAVE THE RIGHT TO SUB LEASE THE PREMISES AND ALSO TO MAKE AL TERATIONS AND CHANGES IN THE PREMISES AS PER THE REQUIREMENT OF THE SUBTENANT/OC CUPIER AND WHEREAS THE ASSESSEE HAD RECEIVED MUCH HIGHER RENT THAN THAT WA S PAID BY THE ASSESSEE TO THE OWNER AND FURTHER THAT THE RENTS RECEIVED BY TH E ASSESSEE HAVE BEEN ASSESSED AS BUSINESS INCOME, THEREFORE ANY EXPENDIT URE INCURRED FOR EARNING OF THE ABOVE INCOME WAS ALLOWABLE EXPENDITURE. THE FA CTS AND CIRCUMSTANCES FOR THE YEAR UNDER CONSIDERATION BEING IDENTICAL AND TH E EXPENDITURE INCURRED BEING ALSO ON THE SAME PROPERTIES, WE DO NOT FIND ANY REA SON TO DEPART FROM THE EARLIER DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE. THIS ISSUE IS THUS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE STATED DECISION OF THE TRIBUNAL AND THE SAME IS ACCORDINGLY ALLOWED IN FAV OUR OF THE ASSESSEE. THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES ON THIS ISSUE IS ORDERED TO BE DELETED. NOW COMING TO THE APPEAL OF THE REVENUE ITA NO.8643 /M/2011. ITA NO.8643/M/2011 3. THE REVENUE VIDE ITS GROUNDS OF APPEAL HAS AGITA TED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER (HEREINAF TER REFERRED TO AS THE AO) TO ITA NO.8591/M/2011 & ITA NO.8643/M/2011 M/S. SHARYANS RESOURCES LTD. 3 EXCLUDE THE AVERAGE VALUE OF INVESTMENT MADE IN REL ATION TO UNQUOTED SHARES WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III) OF THE INCOME TAX ACT. 4. THE LD. D.R. HAS SUBMITTED THAT THERE IS NO PROV ISION UNDER THE INCOME TAX ACT PROVIDING THAT THE AVERAGE VALUE OF INVESTM ENT IN RELATION TO UNQUOTED SHARES IS TO BE EXCLUDED WHILE COMPUTING THE DISALL OWANCE UNDER RULE 8D(2)(III). 5. THE LD. A.R. OF THE ASSESSEE, ON THE OTHER HAND, HAS CONTENDED THAT IN FACT THE INVESTMENT IN UNQUOTED SHARES WAS IN RELAT ION TO THE OWN SUBSIDIARIES AND THE GROUP COMPANIES OF THE ASSESSEE. THE INVES TMENT MADE IN THOSE SUBSIDIARIES AND GROUP COMPANIES WERE STRATEGIC INV ESTMENTS AND NOT FOR THE PURPOSE OF EARNING OF ANY EXEMPT INCOME. HE HAS FU RTHER SUBMITTED THAT THE ASSESSEE HAD SUO-MOTO DISALLOWED A SUM OF RS.2,69,7 11/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES AND THAT THE AO WHILE APPLY ING RULE 8D HAS NOT RECORDED HIS SATISFACTION TO THE EFFECT THAT THE SU O-MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS NOT CORRECT. THE LD. A.R. HAS FUR THER STATED THAT EVEN NO DIVIDEND HAS BEEN EARNED BY THE ASSESSEE FROM THE A BOVE STATED INVESTMENTS. THE LD. A.R. HAS RELIED UPON THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LTD. VS. ACIT DATED 24.03.20 15 IN ITA NO.615/2014, OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. DELIGHT ENTERPRISES DATED 26.02.2009 IN ITA NO.110/2009 AN D FURTHER OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHIVAM MOTORS PVT. LTD. DATED 05.05.2014 IN ITA NO.88/2014. THE LD. A.R. HAS FUR THER SUBMITTED THAT THE STRATEGIC INVESTMENTS CANNOT BE ADDED IN THE AVERAG E VALUE OF INVESTMENT FOR THE PURPOSE OF COMPUTING THE DISALLOWANCE UNDER RUL E 8D. HE, IN THIS RESPECT, HAS RELIED UPON THE DECISION OF THE HONBLE DELHI H IGH COURT IN THE CASE OF ITA NO.8591/M/2011 & ITA NO.8643/M/2011 M/S. SHARYANS RESOURCES LTD. 4 CIT VS. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. D ATED 15.01.2013 IN ITA NO.605/2012. 6. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. REP RESENTATIVES OF THE PARTIES, IN OUR VIEW, THE ISSUE REQUIRES A FRESH EX AMINATION AT HANDS OF THE AO. WE THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO WILL CONSIDER THE CORRECTNESS OF THE SUO-MOTO DI SALLOWANCE MADE BY THE ASSESSEE AND WILL RECORD AN OBJECTIVE SATISFACTION IN THIS REGARD. HE IS ALSO DIRECTED TO CONSIDER THE ABOVE STATED PROPOSITIONS AND THE RELEVANT CASE LAWS PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTI ONS AND TO PASS A SPEAKING ORDER THEREAFTER IN ACCORDANCE WITH LAW. THIS APPE AL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED IN THE TERMS INDICATED ABOV E. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.