ASST CIT CIR 3, KALYAN v. HERBERT BORWN PHARMACEUTICALS & RESEARCH LABORATORIES, MUMBAI

ITA 218/MUM/2017 | 2013-2014
Pronouncement Date: 21-11-2017 | Result: Dismissed

Appeal Details

RSA Number 21819914 RSA 2017
Bench Mumbai
Appeal Number ITA 218/MUM/2017
Duration Of Justice 10 month(s) 11 day(s)
Appellant ASST CIT CIR 3, KALYAN
Respondent HERBERT BORWN PHARMACEUTICALS & RESEARCH LABORATORIES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 21-11-2017
Assessment Year 2013-2014
Appeal Filed On 10-01-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 5249/MUM/2015 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5074/MUM/2015 (ASSESSMENT YEAR 2011 - 12) I.T.A. NO. 5075/MUM/2015 (ASSESSMENT YEAR 201 2 - 13) I.T.A. NO. 218 /MUM/20 17 (ASSESSMENT YEAR 20 13 - 14 ) ACIT CIRCLE - 3 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN WEST THANE PIN - 421301. VS. M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES W - 258 A MIDC - 11 SHIVAJI UDYOG NAGAR DOMBIVALI EAST PIN - 421203. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 1904/MUM/2015 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 1905/MUM/2015 (ASSESSMENT YEAR 2010 - 11) C.O. NO. 80/MUM/2017 (ASSESSMENT YEAR 2011 - 12) C.O. NO. 240/MUM/2017 (ASSESSMENT YEAR 2012 - 13) C.O. NO. 239/MUM/ 2017 (ASSESSMENT YEAR 2013 - 14) M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES M/S. VMD & CO. AVMS PREMISES 4 TH FLOOR SHREENIWAS HOUSE H.S. MARG FORT MUMBAI - 400 001. VS. ACIT CIRCLE - 3 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN WEST THANE PI N - 421301. ( APPELLANT ) ( RESPONDENT ) PAN : AAFH7347B ASSESSEE BY MS. UMA MAHADEOKAR DEPARTMENT BY S HRI M.C. OMI NINGSHEN DATE OF HEARING 21 . 1 1 . 201 7 DATE OF PRONOUNCEMENT 21 . 11 . 201 7 O R D E R PER B ENCH : - THE ASSESSEE HAS FILED THE APPEALS FOR A.YS. 2 009 - 10 & 2010 - 11 . IT HAS ALSO FILED CROSS OBJECTION S FOR A.Y. 2011 - 12 TO 2013 - 14 . T HE REVENUE HAS FILED M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES 2 APPEALS FOR A.Y. 2010 - 11 TO 2013 - 14. ALL THESE APPEALS ARE DIRECTED AGAINST THE ORDER S PASSED BY THE LEARNED CIT(A) - 1 THANE. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE SHALL FIRST TAKE UP THE APPEALS FILED BY THE ASSESSEE. THE SOLITARY ISSUE URGED IN BOTH THE APPEALS AND CROSS OBJECTIONS FILED BY THE ASS ESSEE RELATES TO DISALLOWANCE MADE U/S. 14A OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED EXEMPT DIVIDEND AND CAPITAL GAINS BUT DID NOT MAKE ANY DISALLOW ANCE U/S. 14A OF THE ACT. HENCE THE ASSESSING OFFICER COMPUTED DISALLOWANCE U/S. 14A OF THE ACT AND ACCORDINGLY DISALLOWED THE INTEREST AND ADMINISTRATIVE EXPENSES BY APPLYING PROVISION S OF RULE 8D OF THE I.T. RULES IN ALL THE YEARS. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 3. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS MADE INVESTMENTS IN MUTUAL FUNDS. IT IS HAVING SUFFICIENT OWN FUNDS WHICH IS IN FAR EXCESS VALUE OF INVESTMENT S MADE IN MUTUAL FUNDS. ACCORDINGLY LEARNED AR SUBMITTED THAT NO DISALLOWANCE IS REQUIRED TO BE MADE OUT OF INTEREST EXPENDITURE AS PER THE DECISION RENDERED BY HON'BLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS. DCIT (366 ITR 505). WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES LEARNED AR SUBMITTED THAT DISALLOWAN CE SHOULD NOT EXCEED THE AMOUNT OF DIVIDEND. HOWEVER SHE DID NOT PRESS THE SAME IN VIEW OF THE SMALLNESS OF THE AMOUNT EXCEPT FOR AY 2011 - 12 WHEREIN THE AO HAD TAKEN INCORRECT FIGURE OF INVESTMENTS . 4. ON THE CONTRARY LEARNED DEPARTMENTAL REP RESENTATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE LEARNED CIT(A). 5. HAVING HEARD THE RIVAL SUBMISSIONS WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE WE HAVE TABULATED THE FACTS WHICH ARE RELEVANT TO DISPOSE OF THIS ISSUE : - M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES 3 ASSESSMENT YEAR EXEMPT INCOME DISALLOWANCE U/S. 14A INTEREST EXPENSES OWN FUNDS ( ` IN LAKHS) INVESTMENT IN MUTUAL FUNDS 2009 - 10 6.33 18.99 1.58 2345.54 263.05 2010 - 11 19.34 15.85 1.00 2403.00 137.57 2011 - 12 3.23 171.79 9.87 2436.92 21.26 2012 - 13 0.95 1.47 0.10 978.06 21.26 2013 - 14 0.05 2.26 0.10 797.79 18.98 6. PERUSAL OF THE ABOVE SAID TABLE WOULD SHOW THAT THE OWN FUNDS AVAILABLE WITH THE ASSESSEE IS IN EXCESS VALUE OF MUTUAL FUNDS HELD BY THE ASSESSEE. OTHER INVESTMENT S MADE BY THE ASSESSEE CONSIST ED OF FIXED DEPOSITS MADE WITH THE BANK AND INVESTMENT MADE IN SHARES OF COOPERATIVE BANK INCOME FROM BOT H OF WHICH IS NOT EXEMPT. SINCE OWN FUNDS AVAILABLE WITH THE ASSESSEE IS IN FAR EXCESS OF VALUE OF INVESTMENT MADE IN MUTU AL FUNDS THERE IS MERIT IN THE CONTENTION S OF THE ASSESSEE THAT THE DISALLOWANCE OF INTEREST EXPENDITURE IS NOT CALLED FOR IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF HDFC BANK LTD. (SUPRA). ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE IN ALL FIVE YEARS AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE MADE U/S. 14A OF THE ACT. FOR ASSESSMENT YEAR 2011 - 12 THE AO IS DIRECTED TO COMPUTE THE DISALLOWANCE UN DER RULE 8D(2)(III) BY ADOPTING CORRECT FIGURES. 7. WE SHALL NOW TAKE UP THE APPEALS FILED BY THE REVENUE. THE S OLITARY ISSUE URGED IN ALL THE FOUR YEARS RELATES TO RELIEF GRANTED BY THE LEARNED CIT(A) IN RESPECT OF DEEMED DIVIDEND ASSESSED U/S. 2(22)(E) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE PARTNERS OF THE ASSESSEE - CONCERN ARE ALSO DIRECTORS IN A CLOSELY HELD COMPANY NAME D M/S. SHIRDI CHEMICALS PVT. LIMITED. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE COMPANY HAS BORROWED FUNDS FR OM THE ABOVE SAID CLOSELY HELD COMPANY. ACCORDINGLY THE ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND ASSESSED BORROWINGS AS DEEMED DIVIDEND. BEFORE THE LEARNED CIT(A) THE ASSESSEE CONTENDED THAT THE ADVANCES WERE RECEIVED IN THE COURSE OF CARRYING ON M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES 4 BUSINESS. IT WAS ALSO CONTENDED THAT THE ASSESSEE IS NOT A SHAREHOLDER OF THE ABOVE SAID CLOSELY HELD COMPANY AND HENCE IT CANNOT BE SUBJECTED TO TAX U/S. 2(22)(E) OF THE ACT. IN SUPPORT OF THIS LEGAL PROPOSITION ASSESSEE PLACED R ELIANCE ON THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IMPACT CONTAINERS PVT. LTD. & OTHERS ( INCOME TAX APPEAL NO. 114 OF 2012 ). THE LEARNED CIT(A) WAS CONVINCED WITH CONTENTION S OF THE ASSESSEE AND ACCORDINGLY DELETED THE ADD ITIONS MADE U/S. 2(22)(E) OF THE ACT . THE REVENUE I S AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A). 8. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT HAS SINCE BEEN CHALLENGED BY THE REVENUE BY FIL ING SLP BEFORE HON'BLE SUPREME COURT. 9. ON THE CONTRARY LEARNED AR SUBMITTED THAT HON'BLE SUPREME COURT HAS SINCE DECIDED IDENTICAL ISSUE IN THE CASE OF CIT VS. MADHUR HOUSING AND DEVELOPMENT COMPANY (CIVIL APPEAL NO. 3196 OF 2013) HAS HELD THAT ADDITIO N OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT CAN BE MADE ONLY IN THE HANDS OF SHAREHOLDER S MEANING THEREBY THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF IMPACT CONTAINERS P LTD (SUPRA) HAS BEEN UPHELD BY HONBLE SUPREME COURT. SINCE THE ASSESSEE IS NOT A SHARE HOLDER OF M/S SHIRDI CHEMICALS P LTD THE ASSESSING OFFICER WAS NOT RIGHT IN LAW IN INVOKING THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT IN ITS HANDS. ACCORDINGLY WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEAR NED CIT(A) ON THE LEGAL ISSUE. SINCE WE HAVE UPHELD THE DECISION OF LD CIT(A) ON THE BASIS OF LEGAL GROUND WE DO NOT FIND IT NECESSARY TO DEAL WITH THE ISSUE ON MERITS. 10. IN THE RESULT APPEALS /CROSS OBJECTIONS FILED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED AND APPEALS OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 21 . 1 1 .201 7. SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 21 / 11 / 20 1 7 M/S. HERBERT BROWN PHARMACEUTICALS & RESEARCH LABORATORIES 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// ( ASSTT. REGISTRAR /SENIOR PS ) PS ITAT MUMBAI