DCIT 5(2)(2), V. PERFECT CIECLE INDIA LTD,

MA 86/MUM/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3631 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 25-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SENTHIL KUMAR
• Assessee Lawyers: PRASAD BAPATAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI- C,BENCH , , BEFORE S/SH. SHAILENDRA KUMAR YADAV,JUDICIAL MEMBER& RAJENDRA,ACCOUNTANT MEMBER MA NO.86/MUM/2015(ARISING OUT OF ITA/1618/MUM/2012) -ASSESSMENT YEAR 2002-03 DCIT-5(2)(2) ROOM NO.571, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400020. VS M/S. PERFECT CIRCLE INDIA LTD. 10, PRASAD CHAMBERS OPERA HOUSE MUMBAI-400004. PAN: AAACP 0482 E ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY :SH.PRASAD BAPAT-AR / REVENUE BY :SH.S. SENTHIL KUMAR (DR) / DATE OF HEARING : 18 - 09-2015 / DATE OF PRONOUNCEMENT : 18-11- 2015 / O R D E R PER RAJENDRA, A.M. : VIDE THIS APPLICATION DATED 25/03/2015, THE ASSESSI NG OFFICER(AO) HAS STATED THAT CERTAIN MISTAKES WERE APPARENT IN THE ORDER OF THE TRIBUNAL DATED 17/10/2014, THAT THE SAME WERE TO BE RECTIFIED AS PER THE PROVISIONS OF SECTI ON 254(2) OF THE ACT, THAT THE TRIBUNAL HAD UPHELD THE ORDER OF THE FIRST APPELLATE AUTHORITY (FAA) WITH REGARD TO DISALLOWANCE OF INTEREST EXPENDITURE, THAT THE ASSESSEE USED BORROW ED FUNDS FOR THE PURPOSE OF INVESTMENT, THAT IN THE EARLIER ASSESSMENT YEAR (AY.) SIMILAR D ISALLOWANCE WAS MADE BY THE AO. 2. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) REITERATED THE ARGUMENTS APPEARING IN THE MISCELLANEOUS APPLICATIO N. THE AUTHORISED REPRESENTATIVE (AR) CONTENDED THAT THE AO IN THE NAME OF MISTAKE APPARE NT FROM THE RECORD WANTED REVIEW OF THE ORDER PASSED BY THE TRIBUNAL, THAT UNDER RECTIFICAT ION ORDER REVIEW WAS NOT POSSIBLE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE TRIBUNAL ORDE R (ITA NO.1616/M/12 AY 2002-03 PARA 8- 8.2 DATED 17.10.14) WHICH READS AS UNDER : 8 .THE ONLY EFFECTIVE GROUND OF APPEAL FILED BY THE A O IS ABOUT DISALLOWANCE OF INTEREST EXPENSES ON INVESTMENT. DURING THE ASSESSMENT PROCE EDING, THE AO FOUND THAT THE ASSESSEE HAD SHOWN TOTAL INVESTMENT OF RS. 11,12,91,000/-. A S PER SCHEDULE 6 OF THE BALANCE-SHEET, THAT IT HAD DEBITED RS. 4,64,53,000/- AS FINANCIAL CHARG ES IN THE P&L A/C, THAT THE INTEREST BEARING FUND HAD BEEN USED FOR NON-BUSINESS PURPOSES IN THE FORM OF INVESTMENT. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROPORTIONATE INT EREST RELATABLE TO INVESTMENT SHOULD NOT BE DISALLOWED FOR THE YEAR UNDER CONSIDERATION. THE AS SESSEE FILED ITS SUBMISSION ON 28.12.2004. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE T HE AO HELD THAT IT HAD MADE HUGE INVESTMENT OF RS. 11.12 CRORES IN THE FY 2000- 01 W HICH CONTINUED TO BE IN FORCE DURING THE WHOLE FY 2001-02 ALSO, THAT ASSESSEE HAD MADE NO AT TEMPT TO ESTABLISH THE FACT THAT INVESTMENT WAS MADE THROUGH INTERNAL APPROVALS, THA T IN THE ABSENCE OF TRANSACTION WISE NARRATION IT WAS DIFFICULT TO BELIEVE THAT NO BORRO WED FUNDS HAD BEEN USED FOR INVESTMENT PURPOSES, THAT IN THE EARLIER YEAR PROPORTIONATE DI SALLOWANCE WAS MADE, THAT THE THEN FAA HAD UPHELD THE ORDER OF THE AO. FINALLY, THE AO MADE A DISALLOWANCE OF RS. 72.56 LAKHS ON PROPORTIONATE BASIS. MA:86/M/15 PERFECT CIRCLE INDIA LTD. A.Y.02-03 2 8.1 .IN THE APPELLATE PROCEEDINGS,AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE RULE 8D CANNOT B E APPLIED PRIOR TO ASSESSMENT YEAR 2008- 09 AS DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF GODREJ & BOYCE MFG CO.LTD. (328ITR81).REFERRING TO THE DECISION OF VIP INDUSTR IES(ITA/7242/MUM/08 AND 1004/ MUM/08) HE HELD THAT DISALLOWANCE SHOULD BE RESTRICTED TO 5 % OF THE AMOUNT OF THE EXEMPTED INCOME RECEIVED BY THE ASSESSEE. 8.2. BEFORE US,DR LEFT THE ISSUE TO THE DISCRETION OF TH E BENCH AND AR SUPPORTED THE ORDER OF THE FAA.WE FIND THAT THE AY.INVOLVED IS PRIOR TO 2008-0 9 AND AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT THE PROVISIONS OF SECTION 14A R.W.R.8D CANNOT BE INVOKED FOR MAKING PROPORTIONATE DISALLOWANCE.WE ARE AWARE THAT THE HO NBLE COURT ALSO HAD HELD IN THE CASE OF GODREJ & BOYCE MFG CO.LTD. THAT REASONABLE DISALLOW ANCE COULD BE MADE IN EARLIER AYS.IN OUR OPINION DISALLOWANCE SUSTAINED BY THE FAA I.E.5% OF THE EXEMPT INCOME IS REASONABLE AND DOES NOT NEED INTERFERENCE FROM OUR SIDE. EFFECTIVE GROU ND OF APPEAL,FILED BY THE AO,IS REJECTED. 4. WE FIND THAT THE FAA HAD UPHELD THE DISALLOWANCE TO 5% OF THE AMOUNT OF EXEMPT INCOME RECEIVED BY THE ASSESSEE. IN OUR OPINION, THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL. WE ARE UNABLE TO FIND ANY JUSTIFICATION FOR FILING SUC H A FRIVOLOUS MISCELLANEOUS APPLICATION, WHEREIN THE DECISION HAS BEEN GIVEN FOLLOWING THE J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT. WE WOULD LIKE THE CONCERNED COMMISSIONE R TO DIRECT THE AO NOT TO FILE SUCH APPLICATIONS IN FUTURE. AS A RESULT, MISCELLANEOUS APPLICATION FILED BY THE AO IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2015. SD/- SD/- ( / SHAILENDRA KUMAR YADAV ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 18.11.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR C BENCH, ITAT, MUMBAI / , C , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.