HINDUJA VENTURES LTD, MUMBAI v. DCIT CIR 8(2), MUMBAI

ITA 302/MUM/2014 | 2010-2011
Pronouncement Date: 30-09-2016 | Result: Allowed

Appeal Details

RSA Number 30219914 RSA 2014
Assessee PAN AAACH2058N
Bench Mumbai
Appeal Number ITA 302/MUM/2014
Duration Of Justice 2 year(s) 8 month(s) 20 day(s)
Appellant HINDUJA VENTURES LTD, MUMBAI
Respondent DCIT CIR 8(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 30-09-2016
Date Of Final Hearing 08-09-2016
Next Hearing Date 08-09-2016
Assessment Year 2010-2011
Appeal Filed On 10-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI SANJAY ARORA A M AND SHRI PAWAN SINGH J M ./ I.T.A. NO. 302/MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) HINDUJA VENTURES LTD. 49/50 IN CENTRE MIDC 12 TH ROAD MAROL ANDHERI (E) MUMBAI - 400 093 / VS. DY. CIT CIRCLE 8(2) AAYAKAR BHAVAN MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACH 2058 N ( A SSESSEE ) : ( REVENUE ) & ./ I.T.A. NO. 690 /MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) DY. CIT CIRCLE 8(2) AAYAKAR BHAVAN MUMBAI - 400 020 / VS. HINDUJA VENTURES LTD. 49/50 IN CENTRE MIDC 12 TH ROAD MAROL ANDHERI (E) MUMBAI - 400 093 ( REVENUE ) : ( A SSESSEE ) ASSESSEE BY : SHRI HA RI S. RAHEJA RE VENUE BY : MRS. NEELMA NADKARNI / DATE OF HEARING : 08.09.2016 / DATE OF PRONOUNCEMENT : 30 .09.2016 / O R D E R PER SANJAY ARORA A. M.: THESE ARE CROSS APPEALS I.E. BY THE ASSESSEE AND THE R EV ENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 17 MUMBAI (CIT(A) FOR SHORT) DATED 29.11.2013 PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING IT S 2 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) F OR THE ASSESSMENT YEAR (A.Y.) 201 0 - 11 VIDE ORDER DATED 17.12.2012 . ASSESSEES APPEAL ( I.T.A. NO. 302/MUM/2014) 2. AT THE VERY O UTSET IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR) THE ASSESSEES COUNSEL THAT THE PRINCIPAL ISSUE IN THE ASSE SSEES APPEAL IS QUA THE DISALLOWANCE U /S. 14A MADE SUO M OTU BY THE ASSESSEE AT RS.9 1 24 735/ - IN RESPECT OF DIVIDEND INCOME OF RS.162.05 L ACS WHICH STANDS ENHANCED IN ASSESSMENT TO RS.158.54 L ACS. THE REASON FOR THE SAME IS THE NON - EXCLUSION OF THE INVE STMENT IN SHARES OF THE S UBSIDIARY COMPANY/S O N THE GROUND THAT EVEN IF INCOME THERE - FROM AROSE OR STANDS RECEIVED BY THE ASSESSEE DURING THE RELEVANT YEAR THE SAME WOULD ONLY BE TAX - EXEMPT INCOME AND THEREFORE THE SAID ASSET /S QUALI F IES TO BE A TAX - EXE MPT ASSET /S . THIS IS AS THE SHARES IN THE SUBSIDIARY COMPANY /S ARE NOT LISTED AND BOTH THE DIVIDEND AS WELL AS THE LONG - TERM CAPITAL GAIN ARISING THEREON W OULD NOT BE TAX - EXEMPT U /S S . 10(34) OR 10 ( 38 ) OF THE A CT. REFERENCE FOR THE PURPOSE WAS MADE BY HI M TO THE ASSESSEES COMPU T A TION APPEARING AT PAGE 6 OF THE PAPER - BOOK (PB ) . FURTHER THE DISALLOWANCE OF INTEREST HAS BEEN MADE BY THE ASSESSEE U /S. 14A R /W R ULE 8D ( 2 )(I) BY RELATING EACH INVESTMENT WITH THE CORRESPONDING BORROWING WHILE THE R EVENUE HAS ADOP TED AN AVERAGE FORMULA PRESCRIBED UNDER R ULE 8D ( 2 )(II) FOR INDIRECT INTEREST. THE LD. CIT(A) HAS MERELY CONFIRMED THE DISALLOWANCE AS SUCH. ON BEING QU E R I ED BY THE BENCH THAT T HERE IS N O FINDING IN THE ORDERS BY THE R EVENUE AUTHORITIES OF THE SHARES IN THE SUBSIDIARY COMPANY /S BEING NOT LISTED HE WOULD S UBMIT THAT THE MATTER COULD BE REMANDED BACK FOR THE PURPOSE EVEN AS WAS DONE BY THE T RIBUNAL FOR ANOTHER YEAR. AGAIN AS REGARDS THE WORKING OF DIRECT INTEREST HE COULD NOT SHOW US T HE SAME - NO T FORMING PART OF THE RECORD THOUGH WOULD CO NTEND THAT THE SAME HAD BEEN SUPPLIED IN THE ASSESSMENT PROCEEDINGS AND T HAT THE AO IN THE REMAND PROCEEDINGS COULD ALSO VERIFY THE SAME AS WELL . 3 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. THE LD. D EPARTMENTAL REPRESENTATIVE (DR) ON THE OTHER HAND WOULD SUBMI T THAT THERE IS NOTHING ON RECORD TO EXHIBIT THAT THE INVESTMENT IN THE SUBSIDIARY COMPANY /S IS UNLISTED AND FURTHER THAT THE ASSESSEE HAD IN THE COURSE OF ASSESSMENT PROCEEDINGS PROVIDED THE WORKING OF THE DIRECT INTEREST SO THAT IN ITS ABSENCE NO INFI RMITY COULD BE SAID TO INFLICT THE ORDERS BY THE R EVENUE AUTHORITIES WHICH THEREFORE MERIT BEING UPHELD. 3 . WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3 .1 THE WORKING OF THE DISALLOWANCE BY THE ASSESSEE IS AS UNDER : (PB PAGE 6 ) WORK ING FOR DISALLOWANCE U/S. 14A READ WITH RULE 8D (RS. IN LAKHS) PARTICULARS 31.3.2009 31.3.2010 INVESTMENTS SEE NOTE 1 9361.57 15 57 136 AVERAGE INVESTMENTS (A) 12466.47 ASSETS SEE NOTE 2 64062.06 64884.05 AVERAGE ASSETS (B) 64473.06 INTEREST EXPE NDITURE 97.79 DISALLOWANCE U/S. 14A A. DIRECTLY ATTRIBUTABLE INTEREST WORKING 28.92 B. INDIRECT INTEREST (A)*(C)/(B) NIL C. OTHER EXPENSES 0.5% OF (A) 91.25 PARTICULARS 31.03.2009 31.03.2010 INVESTMENTS (AS PER BALANCE SHEET) 17057.49 31562 .77 ADD: STOCK IN TRADE 29.38 7.31 LESS: INVESTMENT IN SUBSIDIARY (UNQU O TED) *** - 7 725.30 - 15 998.71 TOTAL 9361.57 15571.36 2. ASSETS FIXED ASSETS NET BLOCK 121.16 2245.35 INVESTMENTS 17057.49 31562.77 DEFERRED TAX ASSET 22.51 398.27 CURRENT ASSETS 48860.90 30677.67 TOTAL 64062.06 64884.05 4 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. THE ASSESSING OFFICERS (AO S ) WORKING SINCE APPROVED BY THE LD. CIT(A) IS AS UNDER: PARTICULARS 31.3.2009 31.3.2010 INVESTMENTS (AS PER BALANCE SHEET) 17 057.49 31 562 77 ADD: STOCK IN TRADE 29.38 7.31 LESS: INVESTMENT IN SUBSIDIARY (UNQUOTED) *** - 15 998.71 - 7 725.30 TOTAL 1 088.16 23 844.77 SL. NO. PARTICULARS AMT. (RS.) AMT. (RS.) 1 AMOUNT OF EXPENSES DIRECTLY RELATED TO THE INCOME A AMOUNT OF INTEREST EXPENSES OTHER THAN 1(A) 97 79 000 B1 INVESTMENTS AS ON 01.4.09 1 70 86 87 000 B2 INVESTMENTS AS ON 31.3.10 3 15 70 08 000 B AVERAGE VALUE OF INVESTMENT [B + (B1+B2)/2] 2 43 28 47 500 C1 ASSETS AS ON 01.4.09 6 48 84 05 000 C2 ASSETS AS ON 31.3.10 6 40 62 06 000 C AVERAGE OF TOT AL ASSETS [C=(C1 + C2)/2] 6 44 73 05 500 2 ATTRIBUTABLE INDIRECT INTEREST EXPENSES [A*B/C] 36 90 040 3 % OF THE AVERAGE VALUE OF INVESTMENT 1 21 64 238 DISALLOWANCE UNDER SECTION 14A (1+2+3) 1 58 54 278 3 .2 THE EXCLUSION OR OTHERWISE OF TH E INVESTMENT IN THE SUBSIDIARY COMPANY /S IN WORKING THE DISALLOWANCE U /S. 14A R /W R ULE 8D WOULD DEPEND ON WHETHER THE SHARES THEREOF ARE QUOTED OR AS CLAIMED UN QU OTED. THIS IS AS EXEMPTION OF DIVIDEND ON SHARES OR LONG - TERM GAIN ON THEIR TRANSFER IS CONF INED TO ONLY LISTED SHARES. THE BURDEN O F PROVING THE SAME BEING UNLISTED AS WELL AS THE SOURCE OF THE INVESTMENT IN SU BSIDIARY COMPANY/ S IS ONLY ON THE ASSESSEE SO THAT BOTH THE MATTER S WOULD REQUIRE BE ING FACTUALLY DETERMINED . THIS IS PARTICULARLY SO AS THE DISALLOWANCE U/S. 14A IS IN THE NATURE OF A STATUTORY DISALLOWANCE. HOWEVER ONCE THE ASSESSEE MAKES A CLAIM IN ITS RESPECT WITH REFERENCE TO ITS ACCOUNTS THE ONUS TO REBUT THE SAME WOULD SHIFT TO THE AO. THE ORDERS BY THE REVENUE AUTHORITIES ARE S ANS ANY FINDINGS QUA MATERIAL A SPECTS. 5 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. THE MATTER IS ACCORDINGLY RESTORED TO THE FILE OF THE AO FOR THE PURPOSE WHO SHALL DETERMINE THE ISSUE AFRESH ISSUING DEFINITE FINDINGS OF FACT AFTER HEARING THE ASSESSEE. WE IN FACT OBSERVE ANOTHER DIFFERENCE BETWEEN THE WORKING BY THE ASSESSEE AND THE R EVENUE I.E. WITH REGARD TO THE TREATMENT OF STOCK - IN - TRADE ; T HE ASSESSEE HAVING EX CL UD ED THE SAME O N THE GROUND THAT IT YIELDS TAXABLE INCOME ONLY. THE T RIBUNAL IN THE CASE OF D. H. SECURITIES (P.) LTD. VS. DY . CIT [2014] 146 ITD 1 (MUM) (TM) AND DY. CIT VS. DAMANI ESTATES & FINANCE (P.) LTD. [2013] 25 ITR (TRIB) 683 (MUM) AFTER AN EXHAUSTIVE ANALYSIS OF THE RELEVANT PROVISIONS AND CONSIDERING THAT THE DIVIDEND AS WELL AS THE LONG - TERM GAIN ARISING ON THE S HA RES HELD AS STOCK - IN - TRADE WOULD YIELD PRIMARILY TAXABLE INCOME RESTRICTED THE SAME TO 20% OF THE SUM EXIGIBLE FOR DISALLOWANCE UNDER EITHER R . 8D (2)(I) OR R. 8D(2) (II) . T H E INDIRECT ADMINISTRATIVE EXPENDITURE WOULD THOUGH CONTINUE TO BE GOVERNED BY R. 8D (2)(III). WE RESPECTFULLY FOLLOWING THE SAME H OLD LIKE - WISE. THE FINDING AS TO STOCK - IN - TRADE WOULD HOWEVER HAVE TO PRECEDE THE APPLICATION OF THE SAID FORMULA. WE DECIDE ACCORDINGLY. 4 . THE SECOND ISSUE RAISED PER GROUND 2 OF ITS APPEAL BY THE ASSESSEE RELATES TO DISALLOWANCE OF DEDUCTION U/S. 80 - G IN RESPECT OF D ONATION O F RS.50 LACS TO ONE K. D . E DUCATION T RUST. THE SAME HAS BEEN AS THE ASSESSEE COULD NOT ADMITTEDLY EVIDENCE THE DONATION BY PRODUCING I T S RECEIPT. THE ASSESSEES CASE BEFORE US WAS THAT THE RECEIPT STANDS LOST AND EVEN ITS DUPLICATE COULD NOT BE PRODUCED AS THE PAYEE ALSO CLAIMS TO HAVE LOST THE RELEVANT RECORDS. THAT HOWEVER WOULD NOT MEAN THAT NO DONATION HAS BEEN MADE BY THE ASSESSEE PARTICULARLY CONSIDERING ITS BANK STATEMENT WHICH CLEARLY DEPICTS THE PAYMENT OF THE RELEVANT AMOUNT ON 4 . 8 . 2009 (PB P G. 72 ) AS WELL AS THE O RDER U /S. 80 - G ( 5 )( VI ) IN RESPECT OF K. D. EDUCATION TRUST ( PB PG . 71 ) GRANTING APPROVAL U/S. 80 - G WHICH IS VALID UP TO 31 .3. 2010. 5 . WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ONUS TO PROVE ITS RETURN AND THE CLAIMS PREFERRED TH EREBY IS ONLY ON THE ASSESSEE (REFER : CIT 6 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. VS. CALCUTTA AGENCY LTD. [1951] 19 ITR 191 (SC) ) . T HE QUESTION IS IF IT HAS LED SUFFICIENT EVIDENCE IN SUPPORT THEREOF SO THAT THE REVENUE IN NOT ACCEPTING ITS CLAIM IS NOT ACTING REASONABLY. WE THIN K THAT IT I S NOT SO IN THE INSTA N T CASE. WHILE THE BANK STATEMENT CLEARLY DEPICTS THE PAYMENT OF RS.50 LACS TO K. D. EDUCATION TRUST BY CHEQUE NO. 658595 ON 04.8.2009 THE QUESTION WOULD BE: ON WHAT ACCOUNT ? THE ASSESSEE MAY WELL HAVE GIVEN A LOAN TO THE PAYEE - TRUST. IT IS ONLY A CERTIFICATE OR A RECEIPT BY THE PAYEE - T RUST THAT WOULD CONFIRM THE LEGAL CHARACTER OF THE PAYMENT SO THAT THE ASSESSEE DOES NOT RETAIN ANY RIGHT TITLE OR INTEREST IN THE SAID PROPERTY AND ALSO THAT IT IS THE SAME ENTITY TO WHICH APPROVAL U/ S. 80 - G(5)( VI ) STANDS GRANTED . IT IS ALSO SURPRISING THAT BOTH THE PAYER AND THE PAYEE HAVE LOST THE RELEVANT RECORDS. THE ASSESSEE HA S ALSO NOT PRODUCED ANY MATERIAL TO EXHIBIT THE EFFORTS MADE BY IT TO RETRIEVE THE RECEIPT IN - AS - MUCH AS THE PAYEE IS ONLY SUP POSED TO HAVE A COPY THEREOF OR OF THE RECORDS OF THE PAYEE BEING DESTROYED/UNTRACEABLE OR OTHERWISE CAUSE TO ESTABLISH THE AMOUNT PAID BEING A DONATION. UNDER THE CIRCUMSTANCES WE ONLY CONSIDER IT PROPER THAT THIS ASPECT WOULD ALSO STAND TO BE REST ORED TO THE FILE OF THE ASSESSING AUTHORITY TO ALLOW THE ASSESSEE AN OPPORTUNITY TO PROVE ITS CASE. WHY THE CORPUS OF THE PAYEE INSTITUTION TOWARD WHICH THE DONATION IS PRESUMABLY TO FORM PART OF IS A CONTINUING AMOUNT CARRIED OVER FROM YEAR TO YEAR SO THAT ITS BREAK - UP OUGHT TO BE AVAILABLE. WE DECIDE ACCORDINGLY. REVENUES APPEAL ( ITA NO. 690/MUM/2014 ) 6 . THE ISSUE IN THE REVENUES APPEAL IS WITH REGARD TO THE LOSS ARISING ON THE VALUATION OF THE ASSESSEES OUTSTANDING AS AT THE YEAR - END. IT WAS HOWEVER A T THE OUT - SET OBSERVED THAT THE TAX EFFECT OF THE REVENUES APPEAL IS BELOW RS.10 LACS AND WHICH IS THEREFORE NOT MAINTAINABLE U/S. 268A OF THE ACT IN VIEW OF THE RECENT INSTRUCTION ISSUED BY THE BOARD (INSTRUCTION NO. 21 OF 2015 DATED 10.12.20 15 (F. NO. 279/MISC/142/2007 - IT(PT)). THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FAIRLY 7 ITA NO S . 302 & 690/MUM/2014 (A.Y. 2010 - 11) HINDUJA VENTURES LTD. CONCEDED TO THE SAID TAX EFFECT OF THE INSTANT APPEAL BEING WELL BELOW RS.10 LACS THE CLAIM UNDER DISPUTE - SINCE ALLOWED BY THE LD. CIT(A) BEING FOR RS.16 06 582/ - . 7 . IN VIEW OF THE FOREGOING THE REVENUES APPEAL IS NOT MAINTAINABLE U/S. 268A OF THE ACT REQUIRING THE APPELLATE AUTHORITIES TO HAVE REGARD TO THE MONETARY LIMIT PRESCRIBED BY THE BOARD WHICH PER ITS CIRCULAR DATED 10.12.2015 (SUPRA) IS AT RS.10 LACS F OR THE APPELLATE TRIBUNAL I.E. FOR APPEALS PREFERRED BY THE REVENUE. THE SAME IS THEREFORE DISMISSED AS INCOMPETENT. WE DECIDE ACCORDINGLY. 8 . IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES WHILE THE REVENUES APPEAL IS DISMI SSED AS NOT MAINTAINABLE. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 30 201 6 SD/ - SD/ - ( PAWAN SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 30 . 0 9 .201 6 . . ./ ROSHANI SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDEN T 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD F ILE / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI