TRIMURTI HEIGHTS AND PROPERTIES P.LTD, MUMBAI v. ITO 2(3)(3), MUMBAI

ITA 541/MUM/2016 | 2011-2012
Pronouncement Date: 30-09-2016 | Result: Allowed

Appeal Details

RSA Number 54119914 RSA 2016
Assessee PAN AACCT5299F
Bench Mumbai
Appeal Number ITA 541/MUM/2016
Duration Of Justice 7 month(s) 25 day(s)
Appellant TRIMURTI HEIGHTS AND PROPERTIES P.LTD, MUMBAI
Respondent ITO 2(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 30-09-2016
Assessment Year 2011-2012
Appeal Filed On 04-02-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMB AI BEFORE SHRI B. R. BASKARAN AM AND SHRI PAWAN SINGH JM ./ I.T.A. NO. 541/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) AND ./ I.T.A. NO. 542/MUM/2016 ( / ASSESSMENT YEAR: 2012-13) M/ S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. 102 ARIHANT BUILDING 15 TH ROAD KHAR (WEST) MUMBAI 400052 / VS. I TO WARD 2(3)(3) MUMBAI ./ ./PAN/GIR NO.AACCT5299F ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SH. AARTI SATHE -AR / RESPONDENT BY : SH. B.S. BIST - SR DR / DATE OF HEARING : 28.07.2016 / DATE OF PRONOUNCEMENT : 30.09.2016 / O R D E R PER PAWAN SINGH JM: 1. THESE TWO APPEALS U/S. 253 ARE DIRECTED AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-6 MUMBAI DATED 20.11.2015 FOR ASSESSMENT YEARS (AY) 2011-12 AND 2012-2013. IN BOTH THE APPEAL THE ASSES SEE HAS RAISED COMMON GROUNDS OF APPEAL AGAINST THE DISALLOWANCE U/S. 14 A OF THE ACT. AS FACTS OF BOTH THE YEARS ARE ALMOST IDENTICAL AND COMMON GROUNDS OF APPEAL ARE R AISED THUS BOTH THE APPEALS WERE CLUBBED HEARD TOGETHER AND ARE DECIDED BY COM MON ORDER. 2 ITA NOS. 541 & 542/MUM/16 M/S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. 2. BRIEF FACTS RELATED TO THE DISPOSAL OF THE PRESENT APPEALS ARE THAT THE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF INVESTING IN PROPERTIES. FOR AY 2011-12 THE ASSESSEE FILED ITS RETURN OF INCOME ON 24 TH SEPTEMBER 2011. IN THE RETURN OF INCOME ASSESSEE CLAIMED EXEMPT INCOME OF RS. 3 40 617/-. T HE ASSESSEE HAS NOT APPORTIONED ANY EXPENDITURE TOWARD EARNING SUCH EXEMPT INCOME. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND WHILE FRAMING ASSESSMENT THE AO ASKED THE ASSESSEE AS TO WHY APPROPRIATE DISALLOWANCE SHOULD NOT BE MADE U/S . 14A OF THE INCOME TAX ACT AS PER RULE 8D. THE ASSESSEE FILED REVISED COMPUTATION OF INCOME AND OFFERED RS.7 03 118/- FOR DISALLOWANCE U/S. 14A OF THE ACT. THE WORKING OF DISALLOWANCE OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO COM PUTED THE DISALLOWANCE U/S. 14A AS PER RULE 8D AT RS. 10 45 373/- AND ADDED BA CK TO THE ASSESSEES TOTAL INCOME IN ITS ORDER DATED 26 TH MARCH 2014. SIMILARLY FOR AY 2012 -13 THE ASSESSEE-COMP ANY CLAIMED DIVIDEND INCOME OF RS. 98 450/-. THE AO WHILE FRAMING ASSESSMENT ASKED THE ASSESSEE TO FURNISH ITS EXPLANATION AS TO WHY APPROPRIATE DISALLOWANCE SHOU LD NOT BE MADE U/S. 14A OF THE INCOME TAX ACT AS PER RULE 8D OF I.T RULES 1962. T HE ASSESSEE FURNISHED ITS REPLY VIDE REPLY DATED 5 TH SEPTEMBER 2014 WHEREIN THE ASSESSEE SUBMITTED THA T NO DISALLOWANCE U/S. 14A HAD BEEN MADE FOR THE REASONS THAT ASSESSEE HAS SHOWN ITS INCOME UNDER THE HEAD HOUSE PROPERTY AND OTHER S OURCES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO AND THE AO MADE THE DISALLOWANCE U/S. 14A READ WITH RULE 8D OF RS 34 50 193/- VIDE ORDER DATED 27 TH FEB 2015. AGGRIEVED BY THE ORDERS OF ASSESSMENT THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A). BOTH THE APPEALS OF THE ASSESSEE WERE DECID ED BY CIT(A) VIDE COMMON ORDER IMPUGNED IN THE PRESENT APPEALS. 3. WE HAVE HEARD LD AR OF THE ASSESSEE AND DR FOR REVE NUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD AR OF THE ASSESSEE ARGUED T HAT THE ORDER OF AO AND CIT(A) FOR MAKING DISALLOWANCE ARE NOT ONLY UNFAIR BUT UNR EASONABLE. THE AO DISALLOWED THE EXORBITANT AMOUNT WHICH IS MANY FOLDS THAN THE EXEMPT INCOME EARNED BY THE ASSESSEE. FOR AY 2011-12 LD. AR OF ASSESSEE ARGUED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE INVESTED IN MUTUAL FUND AND EARNED EXEMPT INCOME OF RS. 3 40 617/- THE INCOME WAS BY WAY OF DIVIDEND ON TH E UNIT OF MUTUAL FUND. THE 3 ITA NOS. 541 & 542/MUM/16 M/S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. ASSESSEE BORROWED FUNDS FROM M/S SARASWAT BANK FOR THE PURPOSE OF INVESTING IN BUSINESS REPAYMENT OF UNSECURED LOAN AND FOR WORK ING CAPITAL. THE ASSESSEE HAD INVESTED THE EXCESS FUNDS FROM TIME TO TIME IN MUTU AL FUND TO SAVE COST WHEN THE FUNDS WERE TEMPORARILY NOT UTILIZED. THE ASSESSEE S UO-MOTO DISALLOWED INTEREST EXPENDITURE OF RS. 7 03 118/- WHICH WAS INCURRED T O EARN EXEMPT INCOME. THE AR OF THE ASSESSEE FURTHER ARGUED THAT DETAILS OF COMP UTATION OF DISALLOWANCE WERE PROVIDED TO THE AO. THE RULE 8D CAN ONLY BE INVOKED IF THE AO IS NOT SATISFY WITH THE CORRECTNESS OF THE CLAIM OF THE EXPENDITURE INC URRED FOR EARNING EXEMPT INCOME OR THE CLAIM MADE BY ASSESSEE THAT NO EXPENDITURE H AS BEEN INCURRED FOR EARNING EXEMPT INCOME. THE AO HAS NOT RECORDED ITS SATISFAC TION THAT THE CALCULATION/DETAILS FOR DISALLOWANCE ARE NOT CORRECT. ON THE OTHER HAND LD. DR FOR REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. DR FOR REVENUE FURT HER ARGUED THAT THE CALCULATION OF DISALLOWANCE SUBMITTED BY AO WAS FOUND TO BE NOT AS PER RULE 8D AND THE AO DULY RECORDED HIS OBSERVATION IN PARAGRAPH 4.3 OF THE OR DER. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND FURTHER PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAI MED TO HAVE EARNED DIVIDEND INCOME OF RS. 3 40 617/- DURING THE RELEVANT FINANC IAL YEAR. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE FURNISHED THE CALCULATION OF VOLUNTARY DISALLOWANCE U/S.14A OF RS. 7 03 118/-. THE ASSESSEE FURTHER CONTENDED T HAT THEY HAVE INVESTED THE EXCESS LOAN FROM FUND FROM TIME TO TIME FOR A MUTUAL FUND TO SAVE THE COST WHEN THE FUNDS WERE TEMPORARILY AVAILABLE. WE HAVE SEEN THAT THE ASSESSEE RESERVE AND SURPLUS FUND OF RS.10.93 CRORE AND THE ASSESSEE HAD INVESTMENT O F RS. 2.61 CRORE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE CATEGORICALLY STA TED THAT ONLY COST INCURRED BY THE ASSESSEE TO EARN EXEMPT DIVIDEND INCOME WAS IN THE FORM OF INTEREST PAYMENT OF THE SAID LOAN FOR WHICH THE VOLUNTARY DISALLOWANCE OF I NTEREST EXPENDITURE OF RS. 7 03 118/- WAS MADE. THE AO WHILE FRAMING THE ASSES SMENT ORDER SIMPLY OBSERVED THAT WORKING OF DISALLOWANCE SUBMITTED BY ASSESSEE IS NOT AS PER RULE 8D NOT SATISFIED IN RESPECT OF WORKING IS RECORDED. LD. CI T(A) WHILE CONSIDERING THE GROUND OF DISALLOWANCE CONCLUDED THAT ASSESSEE MADE THE HU GE INVESTMENT OF RS. 2 61 25 979/-. THE ASSESSEE INCURRED FINANCE COST O F RS. 2 49 37 929/- IN THE YEAR. THE AO FINALLY CONCLUDED THAT THE APPORTIONMENT IS REQUIRED TO BE MADE IN TERMS OF 4 ITA NOS. 541 & 542/MUM/16 M/S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. SECTION 14A R.W.R 8D WHICH IS MANDATORY FROM AY 200 8-09. THE LD. CIT(A) HAS ALSO NOT EXAMINED THE PRE-CONDITIONS FOR APPLICABIL ITY OF RULE 8D. THE AO AS WELL AS THE LD CIT(A) FAILED TO RECORD THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME. THE AO CALCULATED THE DISALLOWANCE WITHOUT DISCARDING THE STATEMENT O F ACCOUNT AND THE WORKING OF DISALLOWANCE SUBMITTED BY ASSESSEE. THE DISALLOWANC E MADE BY AO IS NOT IN ACCORDANCE WITH THE PRE-CONDITION PROVIDED UNDER SU B-SECTION (2) OF SECTION 14A OF THE ACT. IN OUR CONSIDERED OPINION WHEN THE ASSE SSEE IS ENGAGED IN COMPOSITE AND INDIVISIBLE BUSINESS AND EARNED BOTH TAXABLE AND EX EMPT INCOME (NON-TAXABLE INCOME) EXPENDITURE INCURRED TOWARDS THE EXEMPT IN COME SHOULD BE IDENTIFY BY APPORTIONMENT. THE AO WHILE FRAMING ASSESSMENTS SH OULD ISSUE SPECIFIC QUESTIONARY TO IDENTIFY THE APPARENT CONNECTION TO SPECIFIC EXPENDITURE WHEN THE ASSESSEE EARN TAXABLE AND NON-TAXABLE INCOME FROM A LL BUSINESS ACTIVITIES CONSTITUTE INDIVISIBLE BOSSINESS. THE EXPENDITURE FACTUALLY IN CURRED ON NON-TAXABLE RECEIPT IS TO BE DISALLOWED. THE EXPENDITURE ASSUMES PRESUMES OR DEEMED TO BE INCURRED ON NON- TAXABLE INCOME CANNOT BE ALLOWED. THERE SHOULD BE A PROXIMATE CAUSE FOR DISALLOWANCE WHICH HAS RELATIONSHIP WITH THE EXEMP T INCOME. THE RETURN OF INVESTMENT OR HUGE INVESTMENT CANNOT BE A PROXIMATE CAUSE. THE ASSESSEE SPECIFICALLY PLEADED DURING THE ASSESSMENT THAT THE Y HAVE EARNED NON-TAXABLE INCOME BY WAY OF DIVIDEND ON THE MUTUAL FUNDS. THE ASSESSE E HAS INVESTED THE EXCESS LOANS FUNDS. THE ASSESSEE HAS SUO-MOTO DISALLOWED THE INT EREST EXPENDITURE OF RS.7 03 118/-. THE AO MERELY HOLD THAT THE WORKING OF THE DISALLOWANCE IS NOT AS PER RULE 8D AND THE SAME WAS UPHELD BY LD. CIT(A). W ITH THE ABOVE OBSERVATION WE HOLD THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRI CTED TO RS. RS.7 03 118/- PLUS RS.65000/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES AS PER RULE 8D2(III). IN THE RESULT THE APPEAL OF THE ASSESSEE FOR AY 20 11-12 IS ALLOWED. 4. FOR AY 2012-13 THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESSEE EARNED DIVIDEND INCOME OF RS. 98 450/-. THE ASSESSEE HAS NOT MADE A NY VOLUNTARY DISALLOWANCE AS THEY HAVE NOT CLAIMED DEDUCTION FOR THE EXPENSES IN CURRED BY ASSESSEE THUS THE DISALLOWANCE U/S 14A WERE NOT POSSIBLE. THE AO DISA LLOWED A SUM OF RS.43 50 194/- U/S 14A OF THE ACT WHILE FRAMING ASSESSMENT AND TH E SAME WAS SUSTAINED IN FIRST 5 ITA NOS. 541 & 542/MUM/16 M/S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. APPEAL. THE LD. DR FOR REVENUE ARGUED THAT DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE EARNED THE DIVIDEND INCOME OF RS 98 450/- WHICH WAS CLAIMED AS EXEMPT INCOME. THE ASSESSEE HAS NOT APPORTIONED ANY EXPEND ITURE FOR EARNING SUCH EXEMPT INCOME. DESPITE MAKING SHOW CAUSE BY THE AO THAT AS TO WHY DISALLOWANCE U/S 14A BE NOT MADE AGAINST THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXPLANATION. THE AO HAS NO OPTION EXCEPT TO CALCULA TE THE DISALLOWANCE AS PER RULE 8D OF INCOME-TAX RULE 1962. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE EARNED T HE DIVIDEND INCOME OF RS. 98 450/- WHICH WAS CLAIMED AS EXEMPT INCOME. THE AS SESSEE HAS NOT APPORTIONED ANY EXPENDITURE ATTRIBUTABLE TO EARN SUCH EXEMPT IN COME. THE CIT(A) WHILE CONSIDERING THE GROUND OBSERVED THAT THE INVESTMENT OF ASSESSEE HAS INCREASED FROM RS. 2 61 25 979/- TO RS. 4 21 25 979/- DURING THE F Y. THE FINANCE COST HAS ALSO GONE FROM 2 49 37 929/- TO 3 44 17 216/-. THE CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE HOLDING THAT THE SUBMISSION MADE BY AR ARE SIMILAR AS FOR EARLIER YEARS. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE MATERIAL AVAILABLE BEFORE US. THE ASSESSEE HAS SURP LUS INTEREST FREE FUND OF RS. 10.10 CRORE AND MADE INVESTMENT OF RS.5.56 CRORE DURING T HE YEAR. ON SPECIFIC QUERIES THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INCURRED CORRESPONDING INTEREST EXPENDITURE OF RS. 1 95 668/-. WE HAVE FURTHER SEE N THAT THE FACT OF THIS APPEAL ARE AT LITTLE VARIANCE TO THE EARLIER YEAR. IN THE EARLIER YEAR THE ASSESSEE VOLUNTARILY MADE THE DISALLOWANCE OF RS.7 03 118/- HOWEVER IN THE YEAR UNDER CONSIDERATION NO VOLUNTARY DISALLOWANCE WAS MADE. IT HAS COME ON REC ORD THAT ASSESSEE EARNED DIVIDEND INCOME ON UNITS OF MUTUAL FUND. THE ASSESS EE INVESTED THE BORROWED FUND FOR THE INVESTMENT IN THE MUTUAL FUND IN EARLIER YE ARS THUS THE ASSESSEE MUST INCURRED INTEREST ON THE BORROWED FUND. ON OUR SPEC IFIC QUERIES THE ASSESSEE SUBMITTED THE CORRESPONDING INTEREST EXPENDITURE IN CURRED FOR EARNING THE EXEMPT INCOME AND THE SUCH INTEREST IS WORKED OUT AT RS. 1 96 668/-. ACCORDINGLY THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S OF THE AC T AT RS. 1 95 668/- PLUS ADMINISTRATIVE EXPANSES OF RS.1 70 000/- UNDER RULE D2(III). 6 ITA NOS. 541 & 542/MUM/16 M/S. TRIMURTI HEIGHTS AND PROPERTIES PVT. LTD. IN THE RESULT BOTH THE APPEAL OF ASSESSEE ARE AL LOWED IN THE ABOVE TERM. ORDER ANNOUNCED IN THE OPEN COURT ON 30 TH DAY OF SEPTEMBER 2 016. SD/- SD/- (B. R. BASKARAN) (PAWAN SI NGH) ! / ACCOUNTANT MEMBER ' # ! / JUDICIAL MEMBER MUMBAI; # DATED :30.09.2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' ( ) / THE CIT(A) 4. ' / CIT - CONCERNED 5. * * / DR ITAT MUMBAI 6. + / GUARD FILE / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI