ACIT, New Delhi v. M/s Jaipuria Beverages and Food Industries Pvt. Ltd., New Delhi

ITA 3614/DEL/2011 | 2008-2009
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 361420114 RSA 2011
Assessee PAN AABCT7041C
Bench Delhi
Appeal Number ITA 3614/DEL/2011
Duration Of Justice 3 month(s) 28 day(s)
Appellant ACIT, New Delhi
Respondent M/s Jaipuria Beverages and Food Industries Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 18-11-2011
Assessment Year 2008-2009
Appeal Filed On 21-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH D DELHI ] BEFORE SHRI R. P. TOLANI JM AND SHRI K. D. RA NJAN AM I. T. APPEAL NO. 3614 (DEL) OF 2011. ASSESSMENT YEAR : 2008-09. ASSTT. COMMISSIONER OF INCOME-TAX M/S. JAIPU RIA BEVERAGES AND FOOD C I R C L E : 4 (1) VS. IN DUSTRIES PRIVATE LIMITED N E W D E L H I. 702 ANSAL BHAWAN 16 K. G. MARG NEW DELHI 110 001. P A N / G I R NO. AAB CT 7041 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI MUKUL BAGLA C. A.; DEPARTMENT BY : MS. Y. KAKKAR SR. D. R. O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 8-09 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)VII NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THE ORDER OF THE LD. CIT (APPEALS) IS ERRONEO US AND CONTRARY TO FACTS AND LAW; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION UNDER SECTION 14-A OF THE INCOME TAX ACT TO RS.40 02 772/- AS AGAINST RS.63 0 2 376/- MADE BY THE ASSESSING OFFICER; 2 I. T. APPEAL NO. 3614 (DEL) OF 2011. 2.1 THE LD. CIT (APPEALS) ERRED IN IGNORED THE FACT THAT THE AO HAS MADE PROPORTIONATE DISALLOWANCE OF INTEREST INCURRED BY THE ASSESSEE ON INVESTMENT MADE DURING THE YEAR IN SHARES; 2.2 THE LD. CIT (APPEALS) IGNORED THE FIND ING RECORDED BY THE AO AND THE FACT THAT THE ADDITION WAS CORRECTLY MADE BY THE AO IN ACCORDANCE WITH THE PROVISIONS OF RULE 8-D OF THE INCOME TAX RULES. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO REST RICTING THE ADDITION UNDER SECTION 14-A OF THE INCOME-TAX ACT AMOUNTING TO RS.40 02 772/- AS A GAINST RS.63 02 376/- MADE BY THE ASSESSING OFFICER. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER WHILE COMPUTING TOTAL INCOME OBSERVED THAT THE ASSESSEE HAD MADE VARIOUS INVESTMENTS DURING THE RELEVANT PREVIOUS YEAR THE INCOME FROM WHICH DO NOT FORM PART OF TOT AL TAXABLE INCOME. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY RULE 8-D OF THE INCOME TAX RULES 1962 SHOULD NOT BE APPLIED. THE ASSESSING OFFICER OBSERVED THAT THE F UNDS HAVE BEEN USED FROM COMMON BANK ACCOUNT OF THE COMPANY. THERE WAS NO FEATURE DISTI NGUISHING THE FUNDS USED FOR INVESTING IN THE SHARES. THEREFORE THE CONTENTION OF THE ASSESSEE WAS REJECTED THAT THE INVESTMENT IN SHARES WAS MADE OUT OF INTERNAL ACCRUALS. THE ASSESSING OFFIC ER ALSO NOTED THAT THE ASSESSEE HAS INCURRED ADMINISTRATIVE EXPENSES FOR EARNING THE EXEMPT INCO ME. THE AO APPLYING RULE 8-D ESTIMATED DISALLOWANCE OF RS.63 02 376/-. 4. ON APPEAL IT WAS SUBMITTED THAT THE ASSESSING OF FICER HAD DISALLOWED AMOUNT OF RS.63 02 376/- UNDER SECTION 14A OF THE ACT READ WI TH RULE 8-D OUT OF WHICH RS.51 02 917/- REPRESENT INTEREST PAID ON BORROWED FUNDS INVESTED IN SHARES AND RS.11 99 459/- OUT OF OTHER ADMINISTRATIVE EXPENSES. IT WAS ALSO SUBMITTED BY T HE ASSESSEE THAT THE ASSESSEE HAD EARNED ONLY DIVIDEND OF RS.12/- AGAINST WHICH THE AO HAD DISALL OWED AN AMOUNT OF RS.63 02 376/- WITHOUT CONSIDERING THE FACTS THAT A SUM OF RS.11 99 459/- HAD ALREADY BEEN DISALLOWED IN THE RETURN OF INCOME. IT WAS SUBMITTED THAT THE ASSESSEE HAD INV ESTED IN SHARES NOT WITH THE INTENTION OF INVESTMENT AND TO EARN EXEMPT INCOME. THEREFORE T HE QUESTION OF DISALLOWANCE OF EXPENSES UNDER SECTION 14A WOULD NOT ARISE. THE ASSESSEE HA D EARNED PROFIT ON SALE OF SHARES HELD AS 3 I. T. APPEAL NO. 3614 (DEL) OF 2011. INVESTMENT OF RS.3 70 20 000/- WHICH HAS BEEN DULY CREDITED TO THE PROFIT AND LOSS ACCOUNT AND AFTER INDEXATION OF COST AN ADJUSTMENT OF LOSSES FO R THE YEAR AND BROUGHT FORWARD LOSSES NET LONG TERM CAPITAL GAIN OF RS.2 59 34 490/- HAS BEEN OFFE RED FOR TAXATION ON WHICH TOTAL TAX AT RS.58 76 757.0 HAS BEEN PAID. THEREFORE THE ASSES SEE COMPANY HAS MADE INVESTMENT IN SHARES NOT FOR THE PURPOSE OF EARNING DIVIDEND BUT FOR CA PITAL APPRECIATION. IT WAS ALSO SUBMITTED THAT THE FUNDS HAVE BEEN UTILIZED FOR INVESTMENT OUT OF MIXED FUNDS. THEREFORE ASSUMPTION WAS THAT INVESTMENT IN SHARES WERE MADE OUT OF INTEREST-FREE FUNDS AND NO PART OF THE INTEREST COULD BE ALLOWED UNDER SECTION 36(1)(III) OF THE ACT. THE A SSESSEE HOWEVER FILED THE WORKING OF DISALLOWANCE UNDER SECTION 14-A AS PER PROVISIONS O F RULE 8-D AT RS.40 02 771/-. THE LD. CIT (APPEALS) AFTER CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81 (B OM.) HELD THAT PROVISIONS OF RULE 8-D OF INCOME TAX WERE APPLICABLE WITH EFFECT FROM AY 2008 -09. SINCE THE ASSESSMENT YEAR INVOLVED WAS 2008-09 THE LD. CIT (A) HELD THAT PROVISIONS O F RULE 8-D WERE APPLICABLE IN THE CASE OF THE ASSESSEE. THE LD. CIT (A) FURTHER OBSERVED THAT FR OM THE PERUSAL OF FINANCIAL CHARGES DEBITED TO PROFIT AND LOSS ACCOUNT THE CLAIM OF THE ASSESSEE W AS FOUND TO BE CORRECT. THE BANK CHARGES TO THE EXTENT OF RS.31 305/- WAS TO BE EXCLUDED FROM T HE TOTAL INTEREST EXPENSES FOR THE PURPOSE OF CLAUSE (II) OF SUB RULE 2 OF RULE 8-D. THE BALANCE INTEREST CAME TO RS.67 39 599/- WHICH WAS TO BE APPORTIONED IN THE MANNER STIPULATED AS PER PROV ISIONS OF RULE 8-D(2)(II) AND THE INTEREST TO BE DISALLOWED CAME TO THE EXTENT OF RS.40 02 772/-. T HE LD. CIT (A) FURTHER DISALLOWED RS.11 99 459/- IN TERMS OF RULE 8-D(III) ON ACCOUNT OF ADMINISTRATIVE CHARGES. SINCE THE ASSESSEE HIMSELF DISALLOWED ADMINISTRATIVE CHARGES IN THE RE TURN OF INCOME THE LD. CIT (A) CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.40 02 772/-. AGGR IEVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE IS IN APPEAL AND THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST SUSTENANCE OF ADDITION OF RS.40 02 772/-. 5. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA D INVESTMENTS IN SHARE IN COME FROM WHICH HAD BEEN CLAIMED AS LONG TERM CAPITAL GAINS. THE ASSESSEE HAD NOT HELD THE SHARES AS STOCK IN TRADE. DIVIDEND RECEIVABLE WILL BE EXEMPT U/S 10 (34) OF THE ACT. WE FIND THAT THE LD. CIT (A) HAS COMPUTED DISALLOWANCE UNDER RULE 8-D IN THE LIG HT OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO (SUPRA). THE ASSESSEE HAD NOT PREFERRED ANY APPEAL 4 I. T. APPEAL NO. 3614 (DEL) OF 2011. AGAINST SUSTENANCE OF DISALLOWANCE BY CIT(A) U/R 8 D OF RS 40 02 772/-. DURING THE COURSE OF HEARING THE LD. SR. DR COULD NOT POINT ANY MISTAKE IN COMPUTATION OF DISALLOWANCE MADE BY THE LD. CIT(A) UNDER RULE 8D. HOWEVER HE HAS STRONGLY SUPPORTED THE ORDER OF THE AO. SINCE THE DISALLOWANCE HAS BEEN WORKED OUT IN ACCORDANCE WITH PROVISIONS OF RULE 8-D IN OUR CONSIDERED OPINION THE LD. CIT (A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.40 02 772/-. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE LD. CIT (A) CONFIRMING THE ADDITION TO THE EXTENT OF RS.40 02 772/-. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 18 TH NOVEMBER 2011. SD/- S D/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH NOVEMBER 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.