DCIT 2(2), MUMBAI v. MAHINDRA INTERTRADE LTD, MUMBAI

ITA 1566/MUM/2013 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 156619914 RSA 2013
Assessee PAN AAACM4745P
Bench Mumbai
Appeal Number ITA 1566/MUM/2013
Duration Of Justice 2 year(s) 5 month(s) 3 day(s)
Appellant DCIT 2(2), MUMBAI
Respondent MAHINDRA INTERTRADE LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-07-2015
Date Of Final Hearing 09-06-2015
Next Hearing Date 09-06-2015
Assessment Year 2009-2010
Appeal Filed On 25-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . BEFORE SHRI G.S.PANNU ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 MAHINDRA INTERTRADE LTD. MAHINDRA TOWERS 6 TH FLOOR WORLI MUMBAI 400 018 / VS. THE JCIT CIR.2(2) AAYKAR BHAVAN MK ROAD MUMBAI 400020 ./ ./ PAN/GIR NO. :AAACM 4745P ( / APPELLANT ) .. ( / RESPONDENT ) . / ITA NO.1566/MUM/2013 / ASSESSMENT YEAR 2009-10 THE DY.COMM. OF INCOME TAX 2(2) ROOM NO.545 AAYKAR BHAVAN MK ROAD MUMBAI 400020 / VS. MAHINDRA INTERTRADE LTD. MAHINDRA TOWERS 6 TH FLOOR WORLI MUMBAI 400 018 ./ ./ PAN/GIR NO. : AAACM 4745P ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI BHAVIN SHAH REVENUE BY SHRI YOGESH KAMAT ' #$ / DATE OF HEARING : 09/06/2015 ' #$ / DATE OF PRONOUNCEMENT : 31/07/2015 / O R D E R PER G.S.PANNU A.M: THE CAPTIONED CROSS-APPEALS FILED BY THE ASSESS EE AND REVENUE PERTAINING TO A.Y. 2009-10 ARE DIRECTED AGAINST AN ORDER PASSED BY LD. CIT(A)- 5 MUMBAI DATED 29/11/2012 WHICH IN TURN ARISES OU T OF AN ORDER PASSED BY . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 2 AO UNDER SECTION 143(3) OF THE INCOME TAX ACT 19 61 (THE ACT) DATED 19/12/2011. 2. FIRST WE MAY TAKE UP THE APPEAL OF THE ASSESSEE WHEREIN EACH OF THE GROUND OF APPEAL IS BEING DEALT WITH IN SERIATIM. 3. IN SO FAR AS THE FIRST ISSUE IS CONCERNED THE S AME RELATES TO A CLAIM OF DEPRECATION AMOUNTING TO RS.8 92 714/- ON INTANGIBL E ASSETS ACQUIRED IN THE PAST YEARS. THE AO AND THEREAFTER THE LD. CIT(A) HAVE DECLINED THE ASSESSEES CLAIM FOR DEPRECIATION ON THE BASIS OF THE EARLIER YEARS. AT THE TIME OF HEARING BEFORE US LD. REPRESENTATIVE OF THE ASSESSEE FAIR LY CONCEDED THAT FOR ASSESSMENT YEAR 2000-2001 THE TRIBUNAL VIDE ITS ORD ER IN ITA NO.8276/MUM/2004 DATED 9/5/2008 HAS DECIDED THE ISS UE AGAINST THE ASSESSEE. NOTABLY IN THE PAST YEARS ASSESSEE HAD PURCHASED INTER TRADE DIVISION OF MAHINDRA & MAHINDRA LTD. ON A GOING C ONCERN BASIS AND THE EXCESS OF PURCHASE CONSIDERATION OVER THE BOOK VALU E OF THE ASSETS AND LIABILITIES TAKEN OVER WAS CONSIDERED AS COST ACQUI SITION OF VARIOUS INTANGIBLES. THE DEPRECIATION CLAIMED ON THE ACQUISITION OF SUCH INTANGIBLES WAS DENIED BY THE TRIBUNAL VIDE ITS ORDER DATED 9/5/2008(SUPRA) F OR THE ASSESSMENT YEAR 2000-01. FOLLOWING THE AFORESAID PRECEDENT IN THIS YEAR ALSO THE CLAIM OF DEPRECIATION OF RS.8 92 714/- ON THE INTANGIBLE ASS ET IS HEREBY REJECTED. THUS ASSESSEE FAILS ON THIS GROUND OF APPEAL. 4. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH RE GARD TO A DISALLOWANCE OF RS.10 31 252/- SUSTAINED BY LD. CIT(A) UNDER SECTIO N 14A OF THE ACT BASED ON CLAUSE (III) OF RULE 8D(2) OF THE RULES. 5. NOTABLY THE ASSESSEE WAS FOUND TO HAVE MADE INV ESTMENTS WHICH YIELDED EXEMPTED DIVIDEND INCOME TO THE TUNE OF RS. 1 42 73 000/-. THE AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AN D DISALLOWED A SUM OF RS. . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 3 10 31 252/- BEING ADMINISTRATIVE EXPENSES RELATABLE TO THE EARNING OF EXEMPT INCOME; AND SUCH DISALLOWANCE WAS WORKED OUT BY TH E APPLICATION OF CLAUSE (III) OF RULE 8D(2). LD. CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE BY NOTICING THAT ASSESSE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW AS TO HOW THE DISALLOWANCE WAS NOT REASONABLE. 5.1 BEFORE US THE INABILITY OF THE ASSESSEE TO PRO VE UNREASONABLENESS OF THE DISALLOWANCE CONTINUES AS NOTICED BY THE LD. CIT(A ); AND THEREFORE WE HEREBY AFFIRM THE DISALLOWANCE OF RS.10 51 252/- AS ABOVE. THUS ON THIS ASPECT ALSO THE ASSESSEE FAILS. 6. THE THIRD ISSUE IN THIS APPEAL IS WITH REGARD TO AN AMOUNT OF RS.9 46 480/- WHICH REPRESENTED LIABILITY TOWARDS P OST RETIREMENT MEDICAL CLAIM FOR THE EMPLOYEES. THE AO AS WELL AS THE LD. CIT(A) DECLINED THE CLAIM FOR DEDUCTION ON THE GROUND THAT IT WAS A CONTINGEN T LIABILITY WHOSE OUTCOME WAS DEPENDENT ON CONTINGENT FACTORS OF FUTURE OBL IGATIONS. THE LD. CIT(A) FURTHER NOTICED THAT THE IMPUGNED AMOUNT WAS NEITHE R PAID TO THE EMPLOYEES DURING THE YEAR AND NOR IT WAS SET APART IN A SEPAR ATE FUND AND THEREFORE IT WAS AN UNASCERTAINED LIABILITY. 6.1 BEFORE US THE LD. REPRESENTATIVE FOR THE ASSESS EE FAIRLY CONCEDED THAT SIMILAR ISSUE CAME BEFORE THE TRIBUNAL IN THE CASE OF THE GROUP CONCERN M/S. MAHINDRA &MAHINDRA LTD. FOR ASSESSMENT YEAR 2007-08 AND VIDE ORDER DATED 8/6/2012 IN ITA NO.7999/MUM/2011 SIMILAR LIABILIT Y HAS BEEN HELD TO BE AN UNASCERTAINED LIABILITY WHICH WAS NOT ALLOWABLE AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT. FOLLOWING THE AFORESAID PRECEDENT WE HEREBY AFFIRM THE STAND OF THE LOWER AUTHORITIES IN DECIDING THE ISSUE AGAI NST THE ASSESSEE. THUS ON THIS ASPECT ALSO ASSESSEE FAILS. 7. THE NEXT ISSUE IS WITH RESPECT TO AN ADDITION OF RS.65 751/- MADE BY THE AO ON ACCOUNT OF DISCREPANCY IN THE AIR REPORT. L D. CIT(A) HAS DIRECTED THE . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 4 AO TO GIVE FURTHER OPPORTUNITY TO THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH. WE FIND NO REASON FOR ANY GRIEVANCE ON THE PART OF THE ASSESSEE AS THE LD. CIT(A) HAS DIRECTED THE AO TO GIVE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND THEREAFTER PASS AN ORDER AFRESH. THE SAI D DIRECTION TO THE AO IS HEREBY AFFIRMED AND ACCORDINGLY THE SAID GROUND IS DISPOSED OF. 8. THE LAST ISSUE IN THE APPEAL OF THE ASSESSEE IS GRANT OF SHORT CREDIT FOR THE TDS AT RS.1 69 32 633/- AS AGAINST RS.1 73 03 807/- CLAIMED IN THE RETURN OF INCOME. 8.1 ON THIS ASPECT WE FIND THAT THE LD. CIT(A) HAS DIRECTED THE AO TO GRANT CREDIT FOR TDS UNDER SECTION199 OF THE ACT IN ACCOR DANCE WITH LAW. WE FIND NO INFIRMITY IN THE SAID DIRECTION OF LD. CIT(A) WHIC H IS HEREBY AFFIRMED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 10. IN THE CROSS APPEAL OF THE REVENUE THE ONLY ISS UE RAISED IS AGAINST THE DECISION OF LD. CIT(A) IN DELETING AN ADDITION OF R S.84 16 188/- MADE BY THE AO UNDER SECTION 14A OF THE ACT ON THE BASIS OF CLAUSE (II) OF RULE 8D(2) OF THE RULES. 10.1 IN THIS CONTEXT BRIEF FACTS ARE THAT THE AO OB SERVED THAT INTEREST EXPENDITURE RELATABLE TO THE EARNING OF EXEMPT INCO ME WAS LIABLE TO BE DISALLOWED UNDER SECTION 14A OF THE ACT. THE AO WO RKED OUT SUCH DISALLOWANCE BY APPLYING CLAUSE(II) OF RULE 8D(2) OF THE RULES. 10.2 LD. CIT(A) NOTICED THAT THE INVESTMENTS WHICH YIELDED EXEMPT INCOME WERE MADE DURING THE YEAR UNDER CONSIDERATION AND T HAT NO INTEREST COST COULD BE ATTRIBUTABLE TO THE SAME FOLLOWING THE RATIO OF THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES AND POWER LTD. . 313 ITR 340 (BOM). AS PER LD. CIT(A) ASSESSEE HAS S UFFICIENT OWN INTEREST FREE . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 5 FUNDS TO COVER THE INVESTMENTS IN EXEMPTED SECURIT IES AND THEREFORE NO INTEREST COST WOULD BE ATTRIBUTABLE TO SUCH INVESTM ENTS. 10.3 AT THE TIME OF HEARING LD. REPRESENTATIVE FOR THE ASSESSEE HAS FURNISHED THE AUDITED FINANCIAL STATEMENT FOR THE RELEVANT P ERIOD WHICH CLEARLY SUPPORTS THE INFERENCE DRAWN BY THE LD. CIT(A). ON THE BASI S OF THE BALANCE SHEET AS ON 31/3/2009 IT IS QUITE CLEAR THAT THE LOAN FUNDS IN THIS YEAR HAVE SUBSTANTIALLY DECREASED THAN THE PRECEDING YEAR. FURTHER THE ENTIRE INVESTMENT WHICH YIELDED EXEMPT INCOME HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION. FURTHER THE ASSESSEE HAS EARNED PROFIT AFTER TAX OF RS.4471.11 LACS AND THE SHARE CAPITAL PLUS RESERVES AND SURPLUS OF THE ASSE SSEE COMPANY STAND AT RS.13332.50 LACS. THE AFORESAID ANALYSIS OF THE FI NANCIAL STATEMENT CLEARLY SUPPORTS THE INFERENCE OF THE LD. CIT(A) THAT THE R ATIO OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD.(SUPRA) IS APPLICABLE. THE INTEREST FREE FUNDS AVAILABLE WIT H THE ASSESSEE ARE SUFFICIENT TO COVER IMPUGNED INVESTMENTS AND THEREFORE IT COU LD BE PRESUMED THAT THE INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FREE FUN DS. 10.4 IN THE COURSE OF HEARING BEFORE US THE LD. DR HAS NOT BROUGHT OUT ANY COGENT REASONING OR MATERIAL WHICH WOULD ENABLE US TO TAKE A VIEW DIFFERENT THAN OF THE LD. CIT(A). THEREFORE WE HEREBY AFFIR M THE ORDER OF LD. CIT(A) ON THIS ASPECT. 11. RESULTANTLY THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/7/2015 ' *+ - 31/07/2015 ' SD/- SD/- ( / SANJAY GARG ) ( . . / G.S.PANNU ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * MUMBAI; DATED 31/07/2015 . / ITA NO.1822/MUM/2013 / ASSESSMENT YEAR 2009-10 6 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 $ 34 * / DR ITAT MUMBAI 6. 5 / GUARD FILE. / BY ORDER 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) * / ITAT MUMBAI . . ./ VM SR. PS