ROHA DYECHEM P.LTD, MUMBAI v. ACIT CEN CIR 43, MUMBAI

ITA 2742/MUM/2019 | 2014-2015
Pronouncement Date: 05-03-2021 | Result: Allowed

Appeal Details

RSA Number 274219914 RSA 2019
Assessee PAN AAACR4974P
Bench Mumbai
Appeal Number ITA 2742/MUM/2019
Duration Of Justice 1 year(s) 10 month(s) 3 day(s)
Appellant ROHA DYECHEM P.LTD, MUMBAI
Respondent ACIT CEN CIR 43, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 05-03-2021
Last Hearing Date 29-10-2020
First Hearing Date 29-10-2020
Assessment Year 2014-2015
Appeal Filed On 02-05-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI ! BEFORE SHRI VIKAS AWASTHY JUDICIAL MEMBER . 2742 / / 2019 (%. .2014-15 ) ITA NO. 2742/MUM/2019 (A.Y.2014-15) M/S. ROHA DYECHEM PVT. LTD. A44/45 ROAD NO.2 MIDC ANDHERI(E) MUMBAI 400 093 PAN:AAACR4974P / VS. : / APPELLANT DY. COMMISSIONER OF INCOME TAX CENTRAL RANGE 7(4) AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020. : / RESPONDENT ASSESSEE BY : SHRI SNEHAL SHAH REVENUE BY : MS SMITA VERMA / DATE OF HEARING : 10/12/2020 / DATE OF PRONOUNCEMENT : 05/03/2021 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-49 MUMBAI (IN SHORT THE CIT(A)) DATED 04/02/2019 FOR THE ASSESSMENT YEAR 2014-15. 2. THE SOLITARY ISSUED RAISED IN THE APPEAL BY ASS ESSEE IS DISALLOWANCE OF RS.36 59 072/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT) R.W.R. 8D OF THE INCOME TAX RULES 1962 (IN SHORT THE RULES) WHILE DETERMINING TAXABLE INCOME OF THE ASSESSEE UNDER MAT PROVISIONS. 2 ITA NO. 2742/MUM/2019 (A.Y.2014-15) 2. SHRI SNEHAL SHAH APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAS EARNED TAX FREE INCOME OF RS.2.29 CROR ES DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE MAD E SUO-MOTU DISALLOWANCE OF RS.6 73 779/- TOWARDS EARNING OF EXEMPT INCOME. T HE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS WITHOUT APPRECIATING THE FAC TS OF THE CASE RECOMPUTED DISALLOWANCE UNDER SECTION 14A R.W.R 8D AT RS.43 32 851/- THEREBY ENHANCING DISALLOWANCE BY RS.36 59 072/-. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHILE RECOMPUTING DISALLOWANCE UND ER RULE 8D THE ASSESSING OFFICER HAS DISALLOWED INTEREST EXPENDITURE U/R 8D (2)(II) RS.34 98 340/-. THE ASSESSING OFFICER HAS FAILED TO TAKE NOTE OF THE FA CT THAT AS AGAINST INVESTMENT OF RS.16.69 CRORES THE ASSESSEE IS HAVING OWN INTERES T FREE FUNDS TO THE TUNE OF RS.495.96 CRORES. THUS OWN FUNDS OF THE ASSESSEE WERE SUFFICIENT TO COVER THE INVESTMENT MADE. NO DISALLOWANCE IN RESPECT OF INT EREST EXPENDITURE SHOULD HAVE BEEN MADE IN THE LIGHT OF DECISION RENDERED IN THE CASE OF HDCF BANK LTD. VS. DCIT 383 ITR 529(BOM). 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDE R THE PROVISIONS OF SECTION 115JB OF THE ACT. THE PROVISIONS OF SECTION 14A OF THE ACT ARE NOT ATTRACTED WHERE THE INCOME HAS BEEN COMPUTED UNDER SECTION 115JB OF THE ACT. IN SUPPORT OF HIS SUBMISSIONS THE LD. AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE PLACED RELIANCE ON THE DECISION BY SPECIAL BENCH OF TRIBUNAL IN THE CA SE OF CIT VS. VIREET INVESTMENT 165 ITD 27( DEL-TRIB) (SB). 3.1 THE LD. AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT WITHOUT PREJUDICE TO HIS PRIMARY CONTENTIONS FOR COMPUT ATION OF DISALLOWANCE U/R. 8D(2)(III) ONLY THOSE INVESTMENTS SHOULD BE CONSIDERED ON WHIC H TAX FREE INCOME HAS BEEN EARNED. 4. MS SMITA VERMA REPRESENTING THE DEPARTMENT VEHEM ENTLY SUPPORTED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL BY ASSESSEE. THE LD. 3 ITA NO. 2742/MUM/2019 (A.Y.2014-15) DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT DISALLOW ANCE UNDER SECTION 14A OF THE ACT HAS BEEN MADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF MAXOPP INVESTMENTS VS. CIT 402 ITR 640 TO COUNTER THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE. 5. BOTH SIDES HEARD ORDERS OF AUTHORITIES BELOW EX AMINED. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS EARNED TAX FREE INCOME O F RS.2.29 CRORES AGAINST WHICH THE ASSESSEE HAS MADE SUO-MOTU DISALLOWANCE OF RS.6 73 779/- UNDER SECTION 14A OF THE ACT. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE STATEMENT AT PAGE 67 OF THE PAPER BOOK WHERE IN DETAILS OF TOTAL INVESTMENTS AND AVAILABILITY OF OWN INTEREST FREE FUNDS HAS BE EN TABULATED. WE FIND THAT THE SAID STATEMENT HAS BEEN EXTRACTED FROM THE BALANCE SHEET AS ON 31/04/2014. THE ASSESSEE HAS ALSO FILED COPY OF ANNUAL REPORT FOR T HE FINANCIAL YEAR 2013-14. IT IS EVIDENT FROM RECORDS THAT AS AGAINST OWN INTEREST F REE FUNDS OF RS.495.96 CRORES THE ASSESSEE HAD MADE INVESTMENT OF RS.16.69 CRORES. T HUS THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVESTMENT. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) HAS HELD THAT W HERE BOTH INTERST BEARING FUNDS AND INTEREST FREE FUNDS ARE AVAILABLE IT SHALL BE PRESUMED THAT THE INVESTMENTS ARE MADE FROM INTEREST FREE FUNDS. IF INTEREST FREE F UNDS ARE SUFFICIENT TO COVER THE INVESTMENTS MADE NO DISALLOWANCE U/R. 8D(2)(II) IS WARRANTED. 6. WE FURTHER OBSERVE THAT THE ASSESSING OFFICER HA S MADE ASSESSMENT BY INVOKING MAT PROVISIONS. AS AGAINST THE TOTAL INCO ME OF RS.39 01 080/- COMPUTED UNDER NORMAL PROVISIONS THE BOOK PROFIT UNDER S ECTION 115JB OF THE ACT IS RS.29 85 56 180/-. SINCE TAX ON BOOK PROFITS I S MORE THAN NORMAL INCOME THE ASSESSING OFFICER HAS ASSESSED THE INCOME U NDER SECTION 115JB OF THE ACT. IN THE CASE OF VIREET INVESTMENTS PVT. LTD. (SUPRA) THE S PECIAL BENCH HAS HELD THAT WHERE COMPUTATION OF INCOME UNDER SECTION 115JB ) OF TH E ACT IS MADE THE PROVISIONS OF SECTION 14A R.W.R. 8D ARE NOT ATTRACTED. IN A RECEN T JUDGMENT IN THE CASE OF SOBHA 4 ITA NO. 2742/MUM/2019 (A.Y.2014-15) DEVELOPERS LTD. VS. DCIT REPORTED AS 125 TAXMANN.CO M 72(KAR) THE HONBLE HIGH COURT IN PARA -7 HELD: THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IS A NOTIONAL DISALLOWANCE AND THEREFORE BY TAKING RECOURSE TO SECTION 14A OF THE ACT THE AMOUNT CANNOT BE ADDED BACK TO BOOK PROFIT UNDER CLAUSE(F) OF SECTION 115JB OF THE ACT 7. THUS IN VIEW OF THE FACTS OF THE CASE AND THE D ECISIONS REFERRED ABOVE WE FIND MERIT IN THE APPEAL BY ASSESSEE. SINCE TH E INCOME OF ASSESSEE HAS BEEN ASSESSED TO TAX UNDER SECTION 115JB OF THE ACT NO DISALLOWANCE UNDER SECTION 14A R.W.R.8D IS WARRANTED. CONSEQUENTLY THE IMPUGNED ORDER IS SET-ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 8. IN THE RESULT APPEAL BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY T HE 05 TH DAY OF MARCH 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI (%/ DATED: 05/03/2021 VM SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT 2. *+ / THE RESPONDENT. 3. + ( )/ THE CIT(A)- 4. + CIT 5. -.*+% . . . / DR ITAT MUMBAI 6. ./012 / GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT MUMBAI