HIND FILTERS LTD, MUMBAI v. DCIT (OSD) CIR 3(3), MUMBAI

ITA 1936/MUM/2012 | 2008-2009
Pronouncement Date: 12-07-2013 | Result: Dismissed

Appeal Details

RSA Number 193619914 RSA 2012
Assessee PAN AAACH0397L
Bench Mumbai
Appeal Number ITA 1936/MUM/2012
Duration Of Justice 1 year(s) 3 month(s) 21 day(s)
Appellant HIND FILTERS LTD, MUMBAI
Respondent DCIT (OSD) CIR 3(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-07-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 12-07-2013
Date Of Final Hearing 04-07-2013
Next Hearing Date 04-07-2013
Assessment Year 2008-2009
Appeal Filed On 22-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI .. ! '#$ % % % % &'. '.(.. %) * '#$ '+ BEFORE SHRI P.M. JAGTAP AM AND DR. S.T.M. PAVALAN JM './ I.T.A. NO. 1936/MUM/2012 ( *) - %.- *) - %.- *) - %.- *) - %.- / / / / ASSESSMENT YEAR : 2008-09) HIND FILTERS LIMITED 1521/1522 MAKER CHAMBERS V 221 BACKBAY RECLAMATION MUMBAI 400 021. ) ) ) ) / VS. THE DY. COMMISSIONER OF INCOME TAX (OSD)- CIR.3(3) AAYAKAR BHAVAN M. K. ROAD MUMBAI 400 020. $/ ! './ PAN : AAACH 0397L ( /0 / // / APPELLANT ) .. ( 12/0 / RESPONDENT ) /0 3 4 ' / APPELLANT BY : SHRI DIVYESH SHAH 12/0 3 4 ' / RESPONDENT BY : SHRI AJAY ')% 3 ! / // / DATE OF HEARING : 04-07-2013 56. 3 ! / DATE OF PRONOUNCEMENT : 12-07-2013 # 7 / O R D E R PER P.M. JAGTAP A.M . : .. ! '#$ THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) 7 MUMBAI DTD. 12-12-2010 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS. 15 84 424/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) U/S 14-A READ WITH RULE 8-D OF THE INCOME TAX RULES 1962. ITA 1936/MUM/2012 2 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CIGARETTE FILTER RODS AND GENERATION OF POWER THROUGH WIND ELECTRIC GENERATORS. THE RETURN OF INC OME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 19-09-2008 DECLARI NG TOTAL INCOME OF RS. 4 30 55 067/-. IN THE SAID RETURN DIVIDEND INCOME OF RS. 1 20 58 530/- AND LONG TERM CAPITAL GAIN OF RS. 1 38 57 313/- WAS CLA IMED TO BE EXEMPT BY THE ASSESSEE U/S 10(34) AND 10(38) OF THE ACT RESPECTIV ELY. DISALLOWANCE OF RS. 6 15 137/- WAS ALSO MADE BY THE ASSESSEE SUO MOTU U /S 14A OF THE ACT ON ACCOUNT OF EXPENSES INCURRED FOR EARNING THE SAID E XEMPT INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS CALLED UPON BY THE A.O. TO GIVE THE DETAILS OF THE SAID EXPENSES CLAIMED TO BE INCURRED FOR EARNING EXEMPT INCOME. AS NOTED BY THE A.O. IN THE ASSESSM ENT ORDER THE ASSESSEE HOWEVER FAILED TO BRING ANYTHING ON RECORD TO SUBST ANTIATE ITS CLAIM OF HAVING NOT INCURRED EXPENDITURE OTHER THAN THE EXPENDITURE OF RS. 6 15 137/- FOR EARNING THE EXEMPT INCOME. THE ASSESSEE ALSO FAILE D TO ESTABLISH THAT THE INVESTMENT IN THE CONCERNED SHARES WAS MADE BY IT O UT OF OWN FUNDS. THE A.O. THEREFORE HELD THAT RULE 8-D OF THE INCOME T AX RULES 1962 WAS APPLICABLE IN THE CASE OF THE ASSESSEE AND COMPUTED THE DISALLOWANCE TO BE MADE U/S 14-A BY APPLYING RULE 8-D AT RS. 21 99 561 /-. SINCE THE ASSESSEE HAD ALREADY MADE A DISALLOWANCE OF RS. 6 15 137/- U /S 14A OF THE ACT BALANCE AMOUNT OF RS. 15 84 424/- WAS DISALLOWED BY THE A.O. U/S 14A READ WITH RULE 8-D OF THE INCOME TAX RULES 1962. 3. THE DISALLOWANCE MADE BY THE A.O. U/S 14A READ W ITH RULE 8-D WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE ON THIS ISSUE AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LD. C IT(A) DECIDED THIS ISSUE VIDE PARA NO. 4.3 OF HIS IMPUGNED ORDER AS UNDER:- ITA 1936/MUM/2012 3 4.3 HAVING CONSIDERED THE APPELLANTS SUBMISSION A S DEPICTED ABOVE IT IS EVIDENT THAT THE APPELLANT COMPANY INADVERTENTLY INCLUDES FINANCE AND OTHER CHARGES UNDER THE HEAD INTEREST EXPENSES. HENCE THE A.O. WHILE WORKING OUT THE DISALLOWANCE UNDER RULE 8D OF THE IT RULES HAS TAKEN INTEREST EXPENSES FOR DISALLOWANCE U/R 8D(2)( II) AT RS.25 64 773/- WHEREAS THE APPELLANTS SUBMISSION THE SAME SHOU LD BE RS. 11 89 229/- AS THE FINANCE AND OTHER CHARGES OF RS .13 LS 654/- CANNOT BE TAKEN FOR DISALLOWANCE. I FIND FORCE IN THE APPE LLANTS CONTENTION AS THE DISALLOWANCE U/R 8D R.W.S 14A HAS TO BE TAKEN O N INTEREST EXPENSES ONLY. FURTHER TO THAT I FIND THAT THE APPELLANT HA S ALSO CONTENDED THAT THE A.O. HAS WRONGLY TAKEN VALUE OF AVERAGE ASSETS AT RS.34 63 56 1451- AGAINST RS.42 40 57 69L/- AS DEPI CTED IN THE APPELLANTS SUBMISSION. I FIND THAT THE CLAIM OF TH E APPELLANT ON BOTH ACCOUNT APPEARS TO BE JUSTIFIED. HOWEVER I DIRECT T HE A.O. TO VERIFY THE AFORESAID CLAIM OF THE APPELLANT WHILE GIVING EFFE CT TO THIS ORDER AND IF THE CONTENTION OF THE APPELLANT IS IN ORDER AFTER V ERIFICATION OF THE RECORDS THE A.O. SHOULD MODIFY THE DISALLOWANCE U/ S L4A R.W.R 8D OF THE IT RULES ACCORDINGLY. HOWEVER IT IS ALSO HELD T HAT APPLICATION OF RULE 8D IS JUSTIFIED AND CORRECT AND HENCE THE A.O.S AC TION IS CONFIRMED TO THIS EXTENT. WITH THE AFORESAID OBSERVATION THE AP PELLANTS THIS GROUND OF APPEAL IS ACCORDINGLY ADJUDICATED. THE LD. CIT(A) THUS UPHELD THE ACTION OF THE A.O. I N MAKING THE DISALLOWANCE U/S 14A READ WITH RULE 8-D SUBJECT TO THE VERIFICAT ION OF CERTAIN MISTAKES POINTED OUT BY THE ASSESSEE IN THE QUANTUM OF DISAL LOWANCE WORKED OUT AS PER RULE 8-D OF THE INCOME TAX RULES 1962. AGGRIE VED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFO RE THE TRIBUNAL 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONLY CON TENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US IS THAT THE CORR ECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELA TION TO EXEMPT INCOME WAS NOT DOUBTED BY THE A.O. AND THERE WAS NO SATISFACTI ON RECORDED BY HIM IN THE ORDER OF HAVING NOT SATISFIED WITH THE CORRECTNESS OF THE SAID CLAIM OF THE ASSESSEE. HE CONTENDED THAT IN THE ABSENCE OF SUCH SATISFACTION RECORDED BY THE A.O. THE APPLICATION OF RULE 8-D BY HIM TO REC OMPUTE THE DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT WAS NOT JUSTIFIED AN D THE LD. CIT(A) WAS NOT CORRECT IN UPHOLDING THE ACTION OF THE A.O. ON THIS ISSUE. IN THIS REGARD THE ITA 1936/MUM/2012 4 LD. D.R. HAS INVITED OUR ATTENTION TO PARA 4.4 TO 4 .6 OF THE ASSESSMENT ORDER TO SHOW THAT THE SATISFACTION AS REQUIRED WAS RECORDED BY THE A.O. THE RELEVANT PORTION OF THE ASSESSMENT ORDER AS CONTAINED IN PAR A 4.4 TO 4.6 BEING RELEVANT IN THE PRESENT CONTENT IS REPRODUCED HEREUNDER:- 4.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSEE COMPANY WAS ASKED TO GIVE DETAILS OF EXPENSES INCUR RED FOR EARNING EXEMPT INCOME AND ALSO REQUESTED TO SHOW CAUSE AS T O WHY THE EXPENSES INCURRED AND CLAIMED IN RESPECT OF EXEMPT INCOME SHOULD NOT BE DISALLOWED. 4.5 IN RESPONSE THE AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE HAS AGREED TO THE CONTENTION THAT THERE MAY BE A POSSIB ILITY FOR INCURRING SOME EXPENSES FOR EARNING THE EXEMPTED INCOME WITHI N THE MEANING OF SECTION 10(34) OF THE I.T. ACT 1961. 4.6. THE ASSESSEE COMPANY HAS FAILED TO BRING ANYTH ING ON RECORD TO SUBSTANTIATE THEIR CLAIM OF NOT INCURRING EXPENDITU RE IN EARNING THE EXEMPT INCOME. IN SPITE OF OPPORTUNITIES GIVEN TO T HEM ASSESSEE COMPANY HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THE SOURCE OF INVESTMENTS IN STOCKS AND SHARES WAS MADE WITH THE OWN FUND. AS SUCH I AM SATISFIED DISALLOWANCE U/S 14 A READ WITH RULE 8- D IS APPLICABLE IN THE CASE OF THE ASSESSEE. 5. IT IS MANIFEST FROM THE RELEVANT PORTION OF THE ASSESSMENT ORDER REPRODUCED ABOVE THAT THE DETAILS OF EXPENSES CLAIM ED TO BE INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME WERE CALLED FOR BY THE A.O. WHICH THE ASSESSEE FAILED TO PRODUCE. THE ASSESSEE ALSO FAIL ED TO SUBSTANTIATE ITS CLAIM OF NOT HAVING INCURRED ANY EXPENDITURE OTHER THAN T HE EXPENDITURE OF RS. 6 15 137/- IN RELATION TO THE EARNING OF EXEMPT INC OME. THERE WAS ALSO A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH TH AT THE INVESTMENT IN CONCERNED SHARES WAS MADE BY IT OUT OF OWN FUNDS. HAVING REGARD TO ALL THESE FACTS OF THE CASE THE A.O. WAS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEES CLAIM IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME AND THE SAID SATISFACTION WAS INDEED RECORDE D BY HIM BY SPECIFICALLY MENTIONING THAT HE WAS SATISFIED THAT THE DISALLOWA NCE U/S 14A OF THE ACT WAS REQUIRED TO BE MADE BY APPLYING RULE 8-D IN THE CAS E OF THE ASSESSEE. WE ITA 1936/MUM/2012 5 THEREFORE FIND NO MERIT IN THE CONTENTION OF THE L D. COUNSEL FOR THE ASSESSEE THAT THE REQUIRED SATISFACTION WAS NOT RECORDED BY THE A.O. BEFORE APPLYING RULE 8D AND REJECTING THE SAME WE UPHOLD THE IMPUG NED ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. U/S 14A R.W.R. 8-D SUBJECT TO VERIFICATION OF THE FACTUAL MISTAKES POI NTED OUT BY THE ASSESSEE IN THE WORKING OF DISALLOWANCE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. 8 9 *) -8 3 !8 3 :; ORDER PRONOUNCED IN THE OPEN COURT ON 12-7-2013. . # 7 3 56. ! <#)9 12-7-2013 6 3 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) * '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; <#) DATED 12-7-2013 %.*).'./ RK SR. PS # 7 3 1*=> ? >. # 7 3 1*=> ? >. # 7 3 1*=> ? >. # 7 3 1*=> ? >./ COPY OF THE ORDER FORWARDED TO : 1. /0 / THE APPELLANT 2. 12/0 / THE RESPONDENT. 3. @ () / THE CIT(A)7 MUMBAI. 4. @ / CIT 3 MUMBAI 5. >%C 1**) / DR ITAT MUMBAI D BENCH 6. &- D / GUARD FILE. # 7)' # 7)' # 7)' # 7)' / BY ORDER '2> 1* //TRUE COPY// E E E E/ // /': ': ': ': ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI