ITO, New Delhi v. M/s. Mansarover Investment Ltd., Delhi

ITA 2395/DEL/2013 | 2009-2010
Pronouncement Date: 29-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 239520114 RSA 2013
Assessee PAN AAACM0211C
Bench Delhi
Appeal Number ITA 2395/DEL/2013
Duration Of Justice 6 month(s) 5 day(s)
Appellant ITO, New Delhi
Respondent M/s. Mansarover Investment Ltd., Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-10-2013
Assessment Year 2009-2010
Appeal Filed On 23-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E: NEW DELHI) BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.2306/DEL/ 2013 (ASSESSMENT YEAR : 2009-10) M/S. MANSAROVER INVESTMENT LTD. VS. ITO WARD 6 ( 4) 26 NAJAF GARH ROAD NEW DELHI. NEW DELHI 110 015. (PAN : AAACM0211C) ITA NO.2395/DEL/ 2013 (ASSESSMENT YEAR : 2009-10) ITO WARD 6 (4) VS. M/S. MANSAROVER INVESTMENT L TD. NEW DELHI. 26 NAJAF GARH ROAD NEW DELHI 110 015. (PAN : AAACM0211C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH ADVOCATE RESPONDENT BY : MRS. REN UKA JAIN GUPTA SENIOR DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : BOTH THESE CROSS APPEALS EMANATE FROM THE ORDER OF THE CIT (APPEALS)-IX NEW DELHI DATED 07.02.2013. 2. THE GROUNDS IN ASSESSEES APPEAL READ AS UNDER : - 1. THE ORDERS OF LOWER AUTHORITIES ARE BAD AND WRO NG IN LAW. ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 2 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE. T HE LD. COMMISSIONER OF INCOME TAX (APPEALS)(CIT (A)) ERRED IN NOT DELETING ENTIRE DISALLOWANCE OF RS.45 95 677/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT.1961. 3. THAT THE ID. CIT(A) ERRED ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE IN CONFIRMING THE COMPUTA TION OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2) (III) TO RS.35 45.959/- BEING 0.5% OF THE AVERAGE INVESTMENT . HE FURTHER ERRED IN NOT RESTRICTING THE SAME TO RS.19 81 276/- AS OFFERED BY THE APPELLANT. 4. WITHOUT PREJUDICE THE DISALLOWANCE AS PER THIRD LIMB AS CONTAINED IN RULE 8D(2)(III) COULD NOT HAVE BEEN COMPUTED AT RS.35 45.959/- WHEN THE TOTAL EXPENSES INCURRED BY THE APPELLANT (OTHER THAN THE AMOUNT COVERED BY RULE 8D (2)(I) & 8D(2)(II) ) WERE TO THE TUNE OF RS.23 19 542/- ONLY . THUS THE AUTHORITIES BELOW ERRED IN DISALLOWING WHAT THE APP ELLANT HAS NOT EVEN CLAIMED. 5. THAT THE AUTHORITIES BELOW ERRED IN APPLYING RUL E 80 OF INCOME TAX RULES 1962 MECHANICALLY TO FACTS OF THE CASE THE APPLICATION OF WHICH RESULTED IN ABSURD RESULTS . 6. THAT THE CIT(A) ERRED IN NOT FOLLOWING THE DECIS ION OF ITAT DELHI ON THE SAME ISSUE WHICH DECISION WAS BIN DING UPON HIM. 7. THE APPELLANT CRAVES LEAVE TO ADD AMEND AND MO DIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. THE GROUNDS IN REVENUES APPEAL READ AS UNDER :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) ERRED IN DIRECTING THE A.O. TO COMPUTE DISALLOWANCE U/S 14A READ WITH RULE 8D IN ACCORDANC E WITH THE FORMULA LAID DOWN UNDER RULE 8D(2)(I) UNDER WHI CH DISALLOWANCE HAS BEEN COMPUTED BY THE A.O. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) ERRED IN HOLDING THAT THE INTEREST EXPEN SES ARE NOT ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 3 DIRECTLY ATTRIBUTABLE AS THE A.O. WORKED OUT THE AB OVE EXPENSES AFTER ADOPTING ELABORATE COMPUTATION. 3. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 5. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUND OF THE APPEAL RAISED ABOVE AT THE TIME O F THE HEARING. 3. THE ASSESSEE IS A NON BANKING FINANCIAL COMPANY (NBFC) BELONGING TO JINDAL GROUP AND ITS PRIMARILY FUNCTIO N WAS AS HOLDING COMPANIES OF THE GROUP COMPANIES. THE INCOME AND EX PENDITURE ACCOUNT FOR THE FINANCIAL YEAR ENDING ON 31.03.2009 SHOWS T HAT ASSESSEE HAS INCOME ONLY FROM DIVIDEND OF RS.4 50 38 009/- AND I NTEREST ON LOAN OF RS.76 89 395/-. THE TOTAL EXPENDITURE UNDER THE INT EREST AND BANK CHARGES DEBITED IN THE BOOKS OF ACCOUNT OF RS.4 42 93 102/- . THE MAJORITY OF THE INVESTMENTS WERE IN THE QUOTED SHARES AND THE LOAN WAS AROUND RS.10 CRORES. THE ASSESSEES COMPANY SUO MOTO DISALLOWED RS.3 57 89 023/- U/S 14A OF THE INCOME-TAX ACT 1961. 4. GROUND NOS.1 6 & 7 ARE GENERAL IN NATURE AND DO NOT REQUIRE ADJUDICATION HENCE DISMISSED. 5. IN THE GROUND NO.2 OF THE ASSESSEES APPEAL THE ASSESSEE HAS RAISED THAT THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DISALLOWANCE OF ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 4 RS.45 95 677/- MADE U/S 14A OF THE INCOME-TAX ACT 1961 AND THE REVENUE IS ALSO IN APPEAL BY TAKING THE GROUND NO.1 TO COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D IN ACCORDANC E WITH RULE 8D(2)(I). 6. THE ASSESSEES CONTENTION IS THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE ACTIVITIE S. THE ASSESSEE HAS ITS OWN FUNDS AND BORROWED FUNDS. THESE FUNDS WERE EITH ER UTILIZED IN INVESTMENT OF SHARES OR MAKING AN ADVANCE OF LOANS. DURING THE YEAR THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS.4.50 CRORES AND ALSO INTEREST INCOME OF RS.76.89 LACS ON ADVANCES. THE ASSESSEE I TSELF ADDED BACK A SUM OF RS.3 57 89 023/- ON ACCOUNT OF EXPENSES INCU RRED IN RELATION TO THE EARNING OF DIVIDEND INCOME U/S 14A. THE ASSESSING O FFICER WORKED OUT DISALLOWANCE AT RS.4 03 84 700/- AND THUS INCREASED THE SAME BY RS.45 95 677/-. THE ASSESSING OFFICER WAS NOT JUSTI FIED IN HOLDING THAT INTEREST EXPENSES DIRECTLY RELATABLE TO INVESTMENTS ONLY. THE INVESTMENTS WERE FROM A COMMON POOL OF FUNDS. LD. AR SUBMITTED THAT SINCE THERE WAS A COMMON POOL OF FUNDS RESULTED INTO TWO TYPES OF INCOME THEREFORE IT CANNOT BE SAID THAT WHOLE OF THE INTEREST EXPEND ITURE WAS INCURRED FOR INVESTMENT PURPOSES ONLY. THEREFORE THE DISALLOWAB LE INTEREST UNDER RULE 8D IS TO BE CALCULATED AS PER THE RATIO GIVEN IN TH E RULE WHERE INTEREST IS NOT DIRECTLY ATTRIBUTABLE ANY PARTICULAR INCOME OR RECEIPT AND ASSESSEES ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 5 CASE FALLS UNDER THIS CATEGORY AND KEEPING THESE FA CTS IN VIEW THE ASSESSEE HIMSELF HAS DISALLOWED RS.3 38 05 725/- OU T OF INTEREST. 7. ON THE OTHER HAND LD. DR SUBMITTED THAT SINCE T HE MAJORITY OF THE INCOME IS FROM DIVIDEND AND MAJORITY OF THE INVESTM ENTS IS IN THE SHARES WHICH GENERATE TAX FREE INCOME THE ADVANCES AS A L OAN WERE A VERY SMALL AMOUNT THEREFORE THE WHOLE OF THE INTEREST EXPENS ES ARE TO BE DISALLOWED AS PER RULE 8D(2)(I) WHERE THE WHOLE OF THE AMOUNT DIRECTLY RELATED TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME HAS TO BE TREATED AS EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN TO THE TOTAL INCOME. 8. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE H AVE ALSO PERUSED THE DOCUMENTS FIELD BEFORE US IN THE PAPER BOOK. TH E ASSESSING OFFICER HAS TAKEN INTEREST EXPENDITURE DIRECTLY RELATED TO THE INVESTMENTS AT RS.3 68 38 741/- AND ASSESSING OFFICER HAS REPLACED THE CALCULATION OF DISALLOWABLE INTEREST UNDER RULE 8D (2)(I). WE FIND THAT THIS ASPECT REQUIRES A DETAILED INVESTIGATION TO ESTABLISH THAT INTEREST EXPENDITURE WAS DIRECTLY RELATABLE TO THE EXEMPTED INCOME OR IT WAS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR ACTIVITY. THEREFORE IN THE INTEREST OF JUSTICE AND EQUITY WE FIND IT APPROPRIATE TO RESTORE THE I SSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT FOR DETERMI NATION OF THE AMOUNT OF EXPENDITURE OF INTEREST IN RELATION TO INCOME NOT I NCLUDIBLE IN THE TOTAL INCOME THE ASSESSING OFFICER SHALL WORK OUT WHICH EXPENDITURE WAS ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 6 DIRECTLY RELATING TO SUCH INCOME AND WHICH INTEREST PAID WAS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. F OR THIS PURPOSE THIS ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 9. IN THE GROUND NOS.3 4 & 5 THE ISSUE RAISED BY ASSESSEE IS COMPUTATION OF DISALLOWANCE U/S 14A OF THE INCOME-T AX ACT 1961 READ WITH RULE 8D(2)(III) AT RS.35 45 959/- WHEREIN THE ASSESSEE HAS DISALLOWED RS.19 81 276/-. THE TOTAL EXPENDITURE DE BITED UNDER THE HEAD ADMINISTRATIVE EXPENSES WERE RS.23 19 542/-. THUS THE ASSESSEE HAS CLAIMED ONLY A SUM OF RS.3 38 266/-. IT WAS SUBMITT ED BY LD. AR THAT THE ASSESSEE HAS TAXABLE INCOME OF RS.76 89 000/- THER EFORE THE CLAIM OF RS.3 38 266/- UNDER THE HEAD ADMINISTRATIVE EXPENS ES IS JUSTIFIED. LD. AR ALSO PLEADED THAT CERTAIN EXPENDITURE IS NECESSA RY TO RUN THE COMPANY LIKE AUDIT FEES DIRECTORS SITTING FEE LEGAL AND PROFESSIONAL CHARGES THEREFORE THIS EXPENDITURE OF RS.3 38 266/- CLAIME D WAS JUSTIFIED. THE ASSESSING OFFICER MECHANICALLY APPLIED THE RULE 8D( 2)(III) AND CALCULATED THE DISALLOWANCE OF RS.35 45 959/- WHICH WAS MORE T HAN THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. IN AN ALTERNAT IVE SUBMISSION LD. AR SUBMITTED THAT THE DISALLOWANCE CANNOT BE MORE THAN CLAIMED IN THE PROFIT AND LOSS ACCOUNT AND RELIANCE WAS PLACED ON THE DEC ISION OF ITAT DELHI BENCH F IN THE CASE OF RENUKA FINANCIAL SERVICES LTD. IN ITA NO.3467/DEL/2011 DATED09.08.2012 AND ALSO ON THE DE CISION OF ITAT ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 7 DELHI BENCH D IN JINDAL EQUIPMENT LEASING & CONSU LTANCY SERVICES LTD. IN ITA NO.4222/DEL/2012 DATED 12.04.2013. 10. LD. DR SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT (A) HAS NO AUTHORITY TO DISTURB THE CALCULATION AS PROV IDED IN RULE 8D(2)(III) THEREFORE THE ASSESSEES GROUND HAS NO MERITS. 11. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON. THE TOTAL EXPENDITURE DEBITED UND ER THE HEAD ADMINISTRATIVE EXPENSES WERE OF RS.23 19 542/-. T HE ASSESSEE ITSELF DISALLOWED RS.19 81 276/- AND BALANCE AMOUNT WAS CL AIMED RELATABLE TO TAXABLE INCOME OF RS.76.89 LACS AND ALSO FOR THE MA INTENANCE OF THE COMPANY AS CERTAIN NECESSARY EXPENSES LIKE AUDIT FE E DIRECTORS SITTING FEE LEGAL AND PROFESSIONAL CHARGES ARE NECESSARY. AFTER HEARING WE FIND THAT THE DISALLOWANCE OF EXPENDITURE CANNOT EXCEED THE TOTAL EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE BECAUSE SECTIO N 14A PROVIDES THAT EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCL UDIBLE IN THE TOTAL INCOME SHALL NOT BE ALLOWED. SO THERE IS FIRST COND ITION THAT THE ASSESSEE SHOULD HAVE INCURRED CERTAIN EXPENDITURE IN RELATIO N TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE IN COME-TAX ACT 1961. WHEN THE EXPENDITURE HAS NOT BEEN INCURRED BY THE A SSESSEE THEN WE HOLD THAT THERE IS NO SCOPE FOR ANY DISALLOWANCE UNDER S ECTION 14A AS THERE IS NOT EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS R ELATABLE TO THE INCOME ITA NO.2306/DEL/ 2013 ITA NO.2395/DEL/ 2013 8 WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THIS ISSUE ALSO STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT CITED SUPRA WHEREIN THE DISALLOWANCE IS RESTRICTED TO THE ACTUA L EXPENDITURE INCURRED. THEREFORE WE DIRECT THE AUTHORITIES BELOW TO RESTR ICT THE EXPENDITURE TO THE TUNE OF RS.23 19 542/-. 12. GROUND NOS.6 & 7 IN ASSESSEES APPEAL AND GROUN D NOS.3 4 & 5 IN REVENUES APPEAL ARE GENERAL IN NATURE AND DO NOT R EQUIRE ANY ADJUDICATION HENCE THE SAME ARE DISMISSED. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE AND T HE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF OCTOBER 2013. SD/- SD/- (A.D. JAIN) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 29 TH DAY OF OCTOBER 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT NEW DELHI