DCIT 4(1), MUMBAI v. DARSHAW & CO. P. LTD, MUMBAI

ITA 4225/MUM/2009 | 2006-2007
Pronouncement Date: 31-03-2011 | Result: Dismissed

Appeal Details

RSA Number 422519914 RSA 2009
Assessee PAN AAACB2360F
Bench Mumbai
Appeal Number ITA 4225/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 22 day(s)
Appellant DCIT 4(1), MUMBAI
Respondent DARSHAW & CO. P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 31-03-2011
Date Of Final Hearing 29-06-2010
Next Hearing Date 29-06-2010
Assessment Year 2006-2007
Appeal Filed On 09-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO.3816/MUM/2009 (ASSESSMENT YEAR: 2006-07) M/S. DARASHAW AND COMPANY PRIVATE LIMITED CENTRAL BANK BUILDING MAHATMA GANDHI ROAD FORT MUMBAI -400 023 .... ASSESSEE VS THE ADDL. COMMISSIONER OF INCOME-TAX RANGE -4(1) MUMBAI -400 020 .REVENUE PAN: AAACB 2360 F ITA NO.4225/MUM/2009 (ASSESSMENT YEAR: 2006-07) THE DY. COMMISSIONER OF INCOME-TAX-4(1) MUMBAI -400 020 .REVENUE VS M/S. DARASHAW AND COMPANY PRIVATE LIMITED CENTRAL BANK BUILDING MAHATMA GANDHI ROAD FORT MUMBAI -400 023 .... ASSESSEE PAN: AAACB 2360 F ASSESSEE BY: S/SHRI NITESH JOSHI & SANJAY SANGHVI REVENUE BY: SHRI JITENDRA YADAV O R D E R PER R.S. PADVEKAR JM ITA 3816/M/2009 ITA 4225/M/2009 M/S. DARASHAW AND COMPANY PRIVATE LIMITED 2 THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND AN OTHER BY THE REVENUE ARE FILED CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A)-IV MUMBAI DATED 27.04.2009 FOR THE A.Y. 2006-07. 2. WE FIRST TAKE THE ASSESSEES APPEAL FOR DISPOSAL . THERE IS ONLY ONE EFFECTIVE GROUND WHICH READS AS UNDER:- 1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISA LLOWANCE OF INTEREST ON BORROWINGS FOR THE PURCHASE OF INVESTME NT AMOUNTING TO ` 1 16 50 959/- WITHOUT PROPERLY APPRECIATING THE FACT OF THE CASE AND LAW APPLICABLE THERETO. 3. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBMITT ED THAT THE IDENTICAL DISALLOWANCE WAS MADE IN THE IMMEDIATE PR ECEDING YEAR I.E. A.Y. 2005-06 AND THE TRIBUNAL HAS DELETED THE DISALLOWAN CE MADE BY THE A.O. THE LD. COUNSEL ALSO REFERRED TO THE ORDER OF THE L D. CIT (A) AND SUBMITS THAT THE LD. CIT (A) HAS MERELY RELIED ON HIS ORDER FOR THE A.Y. 2005-06 AND CONFIRMED THE ADDITION MADE BY THE A.O. THE OR DER OF THE LD. CIT (A) FOR THE A.Y. 2005-06 HAS BEEN REVERSED BY THE TRIBU NAL IN APPEAL FILED BY THE ASSESSEE BEING ITA NO.135/MUM/2009 DATED 23.2.2 010. THE LD. COUNSEL ALSO FILED THE COPY OF THE TRIBUNAL ORDER. WE HAVE ALSO HEARD THE LD. D.R. AND PERUSED THE ORDER OF THE TRIBUNAL. IT IS SEEN THAT THE IDENTICAL DISALLOWANCE MADE IN ASSESSEES OWN CASE FOR THE A.Y. 2005-06 AND THE SAME WAS DELETED BY THE TRIBUNAL AFTER ELAB ORATELY DEALING WITH THE CASE LAW. THE LD. D.R. FAIRLY CONCEDED THAT TH E ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. WE THEREFORE FOLLOWING T HE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2005-06 DEL ETE THE ADDITION MADE BY THE A.O. BY DISALLOWING THE INTEREST ON THE BORR OWINGS FOR PURCHASE OF THE INVESTMENT. ACCORDINGLY GROUND NO.1 IS ALLOWE D. 4. GROUND NO.2 & 3 ARE GENERAL IN NATURE. ACCORDIN GLY ASSESSEES APPEAL IS ALLOWED. ITA 3816/M/2009 ITA 4225/M/2009 M/S. DARASHAW AND COMPANY PRIVATE LIMITED 3 5. NOW WE TAKE-UP REVENUES APPEAL BEING ITA NO.42 25 OF 2009. 6. THE FIRST ISSUE IS IN RESPECT OF THE DISALLOWANC E MADE U/S.40A(IA) TOWARDS TRANSACTION CHARGES AND VSAT CHARGES FOR NO T DEDUCTING THE TAX AT SOURCE TREATING THE SAME AS FEES FOR TECHNICAL S ERVICES. 7. THE LD. COUNSEL SUBMITTED THAT THIS ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF KOTAK SECU RITIES LTD. VS. ADDL. CIT 318 ITR (AT) 268 (MUM). THE LD. D.R. FAIRLY CONCED ED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF KO TAK SECURITIES LTD. (SUPRA) WHEREIN IT IS HELD THAT THE TRANSACTION CHA RGES AND VSAT CHARGES PAID BY THE SHARE BROKERS TO THE STOCK-EXCHANGE CAN NOT BE TREATED AS A FEES FOR TECHNICAL SERVICES AND THERE IS NO OBLIG ATION TO DEDUCT THE TAX ON THE SAID AMOUNT. WE RESPECTFULLY FOLLOWING THE DEC ISION IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA) CONFIRM THE ORDER OF THE LD. CIT (A) AND RELEVANT GROUNDS TAKEN BY THE REVENUE ARE DISMISSED . 8. GROUND NO.2(I) & (II) READ AS UNDER:- 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT (A) ERRED IN HOLDING THAT INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AS A DEDUCTION IS ALLOWABLE IN COMPUTI NG ITS TOTAL INCOME FOR THE YEAR WITHOUT APPRECIATING THE FACT T HAT THE ZERO COUPON BONDS OF ICICI ISSUED ON 22.02.01 WERE PURCH ASED BY THE ASSESSEE COMPANY ONLY ON 17.04.02 IN THE OPEN M ARKET WHICH WAS SUBSEQUENT TO THE DATE OF THE CBDTS CIRC ULAR DATED 15.02.2002. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN HOLDING THAT THE CLAIM OF INTEREST PAID ON THE FUNDS BORROWED BY THE ASSESSEE COMPANY UTILIZED FOR MAKING INVESTMENTS IN ZERO COUPON BONDS OF ICICI IS ELIG IBLE FOR ITA 3816/M/2009 ITA 4225/M/2009 M/S. DARASHAW AND COMPANY PRIVATE LIMITED 4 DEDUCTION U/S.57(III) OF THE I.T. ACT AND THAT IT I S NOT NECESSARY THAT ANY INCOME SHOULD IN FACT HAVE BEEN EARNED AS A RESULT OF THIS EXPENDITURE. 9. THE LD. COUNSEL SUBMITTED THAT THE GROUND NOS. 2 (I) & (II) ARE NOT ARISING OUT OF EITHER ASSESSMENT ORDER OR ORDER OF THE LD. CIT (A) AND HENCE BOTH THE GROUNDS ARE INFRUCTUOUS. WE HAVE A LSO HEARD THE LD. D.R. WHO FAIRLY CONCEDED THAT BOTH THE GROUNDS ARE NOT ARISING OUT OF THE ORDERS OF THE AUTHORITIES BELOW. WE THEREFORE HO LD THAT BOTH THE GROUNDS ARE INFRUCTUOUS AND SAME ARE DISMISSED. 10. IN THE RESULT ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 1ST MARCH 2011. SD/- SD/- ( B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 31ST MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) IV MUMBAI. 4) THE CIT 4 MUMBAI. 5) THE D.R. D BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 3816/M/2009 ITA 4225/M/2009 M/S. DARASHAW AND COMPANY PRIVATE LIMITED 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 29.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 29.03.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER