TECHNOVA IMAGING SYSTEMS LTD, MUMBAI v. ADDL CIT LTU, MUMBAI

ITA 2043/MUM/2012 | 2001-2002
Pronouncement Date: 09-10-2013 | Result: Allowed

Appeal Details

RSA Number 204319914 RSA 2012
Assessee PAN AAACT2165J
Bench Mumbai
Appeal Number ITA 2043/MUM/2012
Duration Of Justice 1 year(s) 6 month(s) 11 day(s)
Appellant TECHNOVA IMAGING SYSTEMS LTD, MUMBAI
Respondent ADDL CIT LTU, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 09-10-2013
Date Of Final Hearing 30-09-2013
Next Hearing Date 30-09-2013
Assessment Year 2001-2002
Appeal Filed On 28-03-2012
Judgment Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI .. !'# $ $ $ $ % &' ( !'# !) BEFORE SHRI P.M. JAGTAP AM AND SHRI AMIT SHUKLA J M !./ I.T.A. NO. 2043/MUM/2012 ( (+ $- (+ $- (+ $- (+ $- / / / / ASSESSMENT YEAR : 2001-02 TECHNOVA IMAGING SYSTEMS LTD. LAXMI MILLS ESTATE OFF. DR. E. MOSES ROAD MAHALAXMI MUMBAI 400 011. + + + + / VS. ADDITIONAL COMMISSIONER OF INCOME TAX- LTU CENTRE -1 28 TH FLOOR WORLD TRADE CENTRE CUFFE PARADE MUMBAI 400 005. #. !./ PAN : AAACT2165J ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) !./ I.T.A. NO. 2127/MUM/2012 ( (+ $- (+ $- (+ $- (+ $- / / / / ASSESSMENT YEAR : 2001-02 ADDITIONAL COMMISSIONER OF INCOME TAX- LTU CENTRE -1 28 TH FLOOR WORLD TRADE CENTRE CUFFE PARADE MUMBAI 400 005. + + + + / VS. TECHNOVA IMAGING SYSTEMS LTD. LAXMI MILLS ESTATE OFF. DR. E. MOSES ROAD MAHALAXMI MUMBAI 400 011. #. !./ PAN : AAACT2165J ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ASSESSEE BY SHRI P.R. TOPRANI ASSESSEE BY : SHRI J.K. GARG !+$ 2 / // / DATE OF HEARING : 30-09-2013 34- 2 / DATE OF PRONOUNCEMENT : 09-10-2013 [ ITA 2043/M/12 & 2127/M/12 2 '& / O R D E R PER P.M. JAGTAP A.M . : .. !'# THESE TWO APPEALS ONE FILED BY THE ASSESSEE BEING ITA NO. 2043/MUM/2012 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO. 2127/MUM/2012 ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) -24 MUMBAI DATED 12-01-2012. 2. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF TH E ASSESSEE RELATES TO THE DISALLOWANCE OF RS. 3 58 021/ MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST ON THE GROUND THAT TH E BORROWED FUNDS WERE UTILIZED BY THE ASSESSEE FOR PAYMENT OF ADVANCE TAX LIABILITY. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF OFFSET PRINTING PLATES CHEMICALS FILM PRODUCTS ETC. THE RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION WAS FILED BY IT ON 30 TH OCTOBER 2001 DECLARING TOTAL INCOME OF RS. 6 97 9 2 520/-. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE I NCOME TAX ACT ON 31-3- 2004 THE A.O. DISALLOWED INTEREST EXPENDITURE CLAI MED BY THE ASSESSEE TO THE EXTENT OF RS. 3 58 021/- ON THE GROUND THAT THE INT EREST TO THAT EXTENT WAS ATTRIBUTABLE TO THE PAYMENT OF ADVANCE TAX LIABILIT Y BY THE ASSESSEE FROM THE CASH CREDIT ACCOUNT. ON APPEAL THE LD. CIT(A) CONF IRMED THE SAID DISALLOWANCE. ON FURTHER APPEAL THE TRIBUNAL REST ORED THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER VERIFYING THE CONTENTION OF THE ASSESSEE THAT THE ADVANCE TAX LIA BILITY WAS PAID BY IT OUT OF OWN FUNDS AND NOT FROM THE BORROWED FUNDS. SINCE T HE ASSESSEE COULD NOT ESTABLISH TO THE SATISFACTION OF THE A.O. THAT THE ADVANCE TAX LIABILITY WAS PAID OUT OF ITS OWN FUNDS THE DISALLOWANCE ON ACCOUNT O F INTEREST WAS AGAIN MADE BY THE A.O. IN THE ASSESSMENT COMPLETED DURING THE COURSE OF SET ASIDE PROCEEDING U/S 143(3) R.W.S. 254 OF THE ACT. AGAINS T THE SAID ASSESSMENT THE ITA 2043/M/12 & 2127/M/12 3 ASSESSEE AGAIN PREFERRED AN APPEAL BEFORE THE LD. C IT(A) WHO CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT INTEREST R ELYING MAINLY ON THE FINDINGS RECORDED IN THE ORDER OF FIRST APPELLATE A UTHORITY PASSED IN THE FIRST ROUND WHICH ACCORDING TO HIM THE ASSESSEE COULD N OT REBUT OR CONTROVERT DURING THE COURSE OF SET ASIDE PROCEEDINGS. AGGRIE VED BY THE SAME THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTE D BY THE LD. COUNSEL FOR THE ASSESSEE SIMILAR ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS WAS ALSO RESTORED BY THE TRIBUNAL TO THE FILE OF THE A.O. AND IN THE ASSESSMENTS COMPLETED DURING THE SET ASIDE PROCEEDI NGS U/S 143(3) R.W.S. 254 OF THE ACT THE A.O. HAS NOT MADE ANY DISALLOWA NCE ON ACCOUNT OF INTEREST. HE HAS ALSO INVITED OUR ATTENTION TO THE COPY OF RELEVANT BALANCE SHEET OF THE ASSESSEE AS ON 31 ST MARCH 2001 PLACED AT PAGE 97 OF THE ASSESSEES PAPER BOOK WHICH CLEARLY SHOWS THAT SUFF ICIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL AMOUNTING TO RS. 193.98 LACS AND IN THE FORM OF RESERVES AND SURPLUS AMOUNTING TO RS. 1 795.65 LACS WERE AVA ILABLE WITH THE ASSESSEE AT THE RELEVANT TIME TO MAKE THE PAYMENT OF ADVANCE TAX LIABILITY. HE HAS ALSO POINTED OUT THAT THE PROFIT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION BEFORE TAX WAS RS. 891.57 LACS WHICH ITSELF WAS SUF FICIENT TO COVER THE ADVANCE TAX LIABILITY. IN THE CASE OF COMMISSIONER OF INCO ME-TAX V. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM) CITED BY TH E LD. COUNSEL FOR THE ASSESSEE THE HONBLE BOMBAY HIGH COURT HAS HELD TH AT WHEN THE OWN FUNDS AND BORROWED FUNDS ARE MAINTAINED IN A MIXED MANNER A PRESUMPTION CAN BE DRAWN THAT THE OWN FUNDS ARE UTILIZED BY THE ASS ESSEE FOR MAKING THE INVESTMENTS ETC. AS PER ITS OWN WISH. KEEPING IN V IEW THE RATIO OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) AND HAVING REGARD TO THE FACTS O F THE CASE WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE A.O. AND CON FIRMED BY THE LD. CIT(A) ITA 2043/M/12 & 2127/M/12 4 ON ACCOUNT OF INTEREST IS NOT SUSTAINABLE AND DELET ING THE SAME WE ALLOW THE APPEAL OF THE ASSESSEE. 5. THE SOLITARY ISSUE RAISED IN THE APPEAL OF THE R EVENUE RELATES TO THE DISALLOWANCE OF RS. 19.04 LACS MADE BY THE A.O. U/S 14-A READ WITH RULE 8-D WHICH HAS BEEN RESTRICTED BY THE LD. CIT(A) TO 5% O F THE EXEMPT INCOME. 6. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3 ) OF THE ACT DISALLOWANCE OF RS.15.99 LACS WAS MADE BY THE A.O. U/S 14A OF THE ACT ON ACCOUNT OF INTEREST BEING ATTRIBUTABLE TO THE INVES TMENT MADE WHICH FETCHED THE TAX FREE DIVIDEND INCOME. ON APPEAL THE LD. C IT(A) RESTRICTED THE SAID DISALLOWANCE TO 5% OF THE TAX FREE DIVIDEND INCOME RECEIVED BY THE ASSESSEE. ON FURTHER APPEAL THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH IN THE LIGHT OF THE DECISI ON OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. RE PORTED IN 119 TTJ 328. IN THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 254 O F THE ACT THE A.O. APPLIED RULE 8-D OF THE INCOME TAX RULES 1962 FOLL OWING THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL M ANAGEMENT PVT. LTD. (SUPRA) AND MADE A DISALLOWANCE OF RS. 19.04 LACS U /S 14A OF THE ACT. THE ASSESSEE AGAIN PREFERRED AN APPEAL BEFORE THE LD. C IT(A) WHO RESTRICTED THE DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE ACT TO 5% OF THE AMOUNT OF EXEMPT DIVIDEND INCOME FOLLOWING THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT REPORTED IN 328 ITR 81 (BOM) AND THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2000- 01 ON THE SIMILAR ISSUE. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS HELD BY T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SU PRA) RULE 8D IS APPLICABLE ONLY PROSPECTIVELY FROM A.Y. 2008-09. AS FURTHER H ELD BY THE HONBLE BOMBAY ITA 2043/M/12 & 2127/M/12 5 HIGH COURT THE DISALLOWANCE U/S 14A FOR THE YEARS PRIOR TO A.Y. 2008-09 IS REQUIRED TO BE MADE U/S 14A OF THE ACT ON SOME REAS ONABLE BASIS. AS NOTED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER A SIMILAR DISALLOWANCE MADE BY THE A.O. IN A.Y. 2000-01 BY APPLYING RULE 8D HAD BEEN R ESTRICTED BY THE LD. CIT(A) TO 5% OF THE EXEMPT DIVIDEND INCOME AND THE SAME WAS UPHELD BY THE TRIBUNAL BEING FAIR AND REASONABLE. KEEPING IN VIE W THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MFG. CO. LTD. (SUPRA) AND THAT OF THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR A.Y. 2000- 01 WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE ACT TO 5% OF THE EXEMPT DIVIDEND INCOME BEING FAIR AND REASONABLE AND DISMI SS THE APPEAL OF THE REVENUE. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH OCTOBER 2013. . '& 2 34- 5'+6 09-10-2013 4 2 SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP ) ( !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 5'+ DATED 09-10-2013 $.(+.!./ RK SR. PS ITA 2043/M/12 & 2127/M/12 6 '& 2 0(%7 87- '& 2 0(%7 87- '& 2 0(%7 87- '& 2 0(%7 87-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 9 () / THE CIT(A)24 MUMBAI. 4. 9 / CIT (LTU) MUMBAI 5. 7$< 0((+ / DR ITAT MUMBAI E BENCH 6. = > / GUARD FILE. '&+! '&+! '&+! '&+! / BY ORDER !17 0( //TRUE COPY// ? ? ? ?/ // /!@ !@ !@ !@ ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI