CAPRILLOY POLYMERS P. LTD, MUMBAI v. DCIT CEN CIR-36, MUMBAI

ITA 1199/MUM/2009 | 2006-2007
Pronouncement Date: 28-02-2011 | Result: Partly Allowed

Appeal Details

RSA Number 119919914 RSA 2009
Assessee PAN AACCC4001G
Bench Mumbai
Appeal Number ITA 1199/MUM/2009
Duration Of Justice 2 year(s) 7 day(s)
Appellant CAPRILLOY POLYMERS P. LTD, MUMBAI
Respondent DCIT CEN CIR-36, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 28-02-2011
Date Of Final Hearing 15-02-2011
Next Hearing Date 15-02-2011
Assessment Year 2006-2007
Appeal Filed On 20-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI T. R. SOOD AM I.T.A. NO.: 1199/MUM/2009 ASSESSMENT YEAR : 2006-07 M/S. CAPRILLOY POLYMERS P. LTD. 4 TH /5 TH FLOOR MANECKJI WADIA BLDG M.G. ROAD FORT MUMBAI-400 023 PAN NO: AACCC4001G DCIT CEN CIR-36 AAYAKAR BHAVAN MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI APURV GANDHI RESPONDENT BY : SHRI P.N. DEVDASAN ORDER PER T.R. SOOD (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 21.01.2009 OF COMMISSIONER OF INCOME TAX (APPEALS)- XI MUMBAI AND RELATES TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GRO UND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONBLE COMMISSIONER OF INCOME-TAX (APPEAL S) CENTRAL VIII MUMBAI [CIT(A)] ERRED IN CONFIRMING THE ACT ION OF THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 36 MUMBAI (A.O.) IN DISALLOWING RS.2 57 191 UNDER SECTION 1 4A OF THE ACT ON THE GROUNDS THAT THE ASSESEE HAS NOT MAINTAINED SEPARATE BANK ACCOUNTS FOR PURCHASE AND SALE OF SHARES. THE APPELLANT PRAYS THAT THE DISALLOWANCE MADE BY THE A.O. AND FU RTHER CONFIRMED BY THE CIT(A) MAY KINDLY BE DELETED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS DIVIDEND I NCOME OF RS.3 92 100/- WHICH WAS CLAIMED EXEMPTED HOWEVER ASSESSEE HAS NO T DISALLOWED ANY EXPENSES ATTRIBUTABLE TO THIS DIVIDEND INCOME. AFTE R DETAILED DISCUSSION AND FOLLOWING THE DECISION OF SPECIAL BENCH IN CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) HE CALCULAT ED THE AVERAGE 2 INVESTMENT BY DIVIDING THE SAME BY THE AMOUNT TO IN TEREST AND OTHER EXPENSES CALCULATING THE AMOUNT AT RS.2 57 191/- WHICH WAS DISALLOWED U/S.40(A). THE ACTION OF THE AO WAS CONFIRMED BY TH E LEARNED CIT (APPEALS). 4. BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE ST ARTED THE ARGUMENT BY POINTING OUT THAT SINCE HONBLE BOMBAY HIGH COURT I N CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT REPORTED IN 328 ITR 81 HAS ALREADY HELD THAT RULE-8D IS NOT OF RETROSPECTIVE N ATURE AND ONLY REASONABLE DISALLOWANCE COULD BE MADE AND THEN REQUESTED THAT TRIBUNAL ITSELF MAY ESTIMATE THE REASONABLE DISALLOWANCES INSTEAD OF RE MITTING BACK THE MATTER TO THE FILE OF AO BECAUSE ONLY SMALLER AMOUNT OF DI SALLOWANCES WAS INVOLVED. THEN HE REFEREED TO PAGE 1 OF THE PAPER BOOK AND PO INTED OUT THAT UNSECURED LOANS HAVE REDUCED FROM 4.46 CRORES FROM LAST YEAR TO ONLY RS.89 305 IN THIS YEAR. AND MOST OF THE REPAYMENT W AS MADE IN THE MONTH OF APRIL 2007 IT BECOMES CLEAR FROM PAGE 20 OF THE PAPER BOOK WHICH IS OF ANNEXURE II TO FORM NO.3CD FOR THE NEXT YEAR. HE THEN REFERRED TO PAGE 21 OF THE PAPER BOOK AND POINTED OUT THAT MAJORITY OF THE INVESTMENT WERE MADE IN MARCH 2006. THIS MEANS INFACT COMPANIES OW N FUNDS HAS BEEN USED BECAUSE BORROWINGS HAVE BEEN REDUCED TO RS.89 305/-. 5. ON THE OTHER HAND LEARNED DR STRONGLY SUPPORTED THE ORDER OF THE LEARNED CIT (APPEALS) AND SUBMITTED THAT SEPARATE A CCOUNTS HAVE NOT BEEN MAINTAINED TO SHOW THAT INVESTMENT HAS BEEN MADE FR OM ASSESSEES OWN FUNDS. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION CAREFULL Y AND FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESS EE. OUTSTANDING UNSECURED LOAN HAS REDUCED FROM RS.4 46 89 225/- AS ON 31.03.2005 TO ONLY RS.89 305/- AS PER PAGE 1 OF THE PAPER BOOK W HICH IS A COPY OF THE BALANCE SHEET. REPAYMENT OF LOAN WAS MADE FROM 11.0 4.2005 TO 16.04.2005 AS PER ANNEXURE-2 WHICH IS AVAILABLE AT PAGE 2 OF T HE PAPER BOOK. THIS CLEARLY SHOWS THAT INFACT DURING THE YEAR AFTER APR IL 2005 ASSESSEE HAD OUTSTANDING LOAN ONLY OF RS.89 305/-. FURTHER THE I NVESTMENT HAVE BEEN MADE IN MARCH 2006 AS IT BECOMES CLEAR FROM DETAIL S OF INVESTMENT FILED AT PAGE 21 OF THE PAPER BOOK. HOWEVER AT SAME THE TIM E SOME BANK OVERDRAFTS 3 WAS USED AND IT IS NOT CLEAR WHETHER THE SAME WAS F OR THE PURCHASE OF INVESTMENTS OR NOT. AS REQUESTED BY THE LEARNED COU NSEL OF THE ASSESSEE WE ALSO FEEL THAT THIS IS A SMALL ISSUE AND NOT MUCH H ARM WOULD BE CAUSED TO EITHER PARTY IF WE ESTIMATE THE REASONABLE DISALLO WANCES HERE ONLY. CONSIDERING THE OVER ALL CIRCUMSTANCES AND FACTS OF THE CASE WE ARE OF THE VIEW THAT IF A DISALLOWANCES OF RS.75 000/- IS MAD E THAT WOULD MEET THE ENDS OF JUSTICE. THEREFORE WE SET ASIDE THE ORDER OF THE LEARNED CIT(APPEALS) AND DIRECT THE AO TO MAKE ADDITION OF RS.75 000/- ON ACCOUNT OF SECTION 40(A). 8. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF FEBRUARY 2011. SD/- SD/- (D. MANMOHAN) (T. R. SOO D) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DT: 28/02/2011 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR C - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI