JAYNEER CAPITAL P. LTD, MUMBAI v. ITO WD 6(1)(1), MUMBAI

ITA 6203/MUM/2009 | 2006-2007
Pronouncement Date: 29-03-2011 | Result: Allowed

Appeal Details

RSA Number 620319914 RSA 2009
Assessee PAN AAACJ1688G
Bench Mumbai
Appeal Number ITA 6203/MUM/2009
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant JAYNEER CAPITAL P. LTD, MUMBAI
Respondent ITO WD 6(1)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 29-03-2011
Date Of Final Hearing 28-12-2010
Next Hearing Date 28-12-2010
Assessment Year 2006-2007
Appeal Filed On 30-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI T R SOOD ACCOUNTANT MEMBER I T A NO: 6203/MUM/2009 (ASSESSMENT YEAR: 2006-07) M/S JAYNEER CAPITAL PRIVATE LIMITED MUMBAI APPEL LANT (PAN: AAACJ1688G) VS INCOME TAX OFFICER 6(1)(1) MUMBAI RESPONDENT APPELLANT BY: MR PARAS SAVLA RESPONDENT BY: MR S K SINGH O R D E R R V EASWAR PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE WHICH IS A COMPA NY ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE. WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2006-07. 2. THOUGH THERE ARE FIVE GROUNDS OF APPEAL WITH SEV ERAL SUB- GROUNDS THE ONLY EFFECTIVE ISSUE IS WHETHER THE DE PARTMENTAL AUTHORITIES HAVE RIGHTLY INVOKED SECTION 14A OF THE INCOME TAX ACT 1961 IN DISALLOWING A PART OF THE INTEREST PAID BY THE ASSESSEE AS HAVING BEEN INCURRED IN RELATION TO THE EXEMPTED IN COME. 3. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. THE CONTENTION OF THE ASSESSEE BEFORE US IS THAT IT HAS MIXED FUNDS WHICH INCLUDES OWN FUNDS AS WELL AS INTEREST BEARIN G FUNDS AND AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 34 0 (BOM) A PRESUMPTION SHOULD BE DRAWN THAT THE INVESTMENTS IN SHARES WHICH ITA NO: 6203/MUM/2009 2 YIELDED TAX FREE DIVIDEND CAME OUT OF INTERNAL ACC RUALS AND OWN FUNDS AND THAT THE BORROWED FUNDS WERE USED FOR EAR NING TAXABLE INCOME. THIS CONTENTION OF THE ASSESSEE SEEMS TO H AVE BEEN ACCEPTED BY THE CIT(A) IN PARAGRAPH 2.3 OF HIS ORDE R THOUGH ULTIMATELY HE HAS NOT GIVEN THE BENEFIT OF THE PRES UMPTION TO THE ASSESSEE. THE CIT(A) HAS ALSO REFERRED TO THE AMOU NT OF OWNED INCOME AND BORROWED FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE IN THE AFORESAID PARAGRAPH. THE OWNED SOU RCES AMOUNTED TO ` 89.00 CRORES AND BORROWED FUNDS AMOUNTED TO ` 5.00 CRORES. THE INVESTMENT DURING THE YEAR WAS ` 97.00 CRORES. EVEN GOING BY THESE FIGURES AND APPLYING THE PRESUM PTION LAID DOWN IN THE AFORESAID JUDGMENT THE INVESTMENT TO T HE EXTENT OF ` 89.00 CRORES SHOULD HAVE BEEN TAKEN TO HAVE COME OU T OF THE ASSESSEES OWNED SOURCES. IN THAT CASE THERE WOULD HAVE BEEN A MUCH LESSER DISALLOWANCE OF THE INTEREST UNDER SECT ION 14A OF THE ACT. HOWEVER THIS EXERCISE HAS NOT BEEN DONE BY T HE CIT(A) WHO AS WE MENTIONED EARLIER SOMEHOW DID NOT EXTEND THE BENEFIT OF THE PRESUMPTION TO THE ASSESSEE. BE THAT AS IT MAY TH E LEARNED COUNSEL FOR THE ASSESSEE HIMSELF FAIRLY STATED THAT IT IS FOR HIS CLIENT TO PROVE BEFORE THE ASSESSING OFFICER THE EXISTENCE OF MIXED FUNDS AND THE COMPENSATION THEREOF INCLUDING THE QUANTUM OF THE COMPONENTS IN ORDER TO CLAIM THE BENEFIT OF THE PR ESUMPTION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT (SUPRA). THI S IS A FACTUAL EXERCISE WHICH NEEDS TO BE CARRIED OUT BY THE ASSES SING OFFICER. WE THEREFORE DEEM IT PROPER IN THE INTEREST OF JUS TICE TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SH ALL TAKE A FRESH ITA NO: 6203/MUM/2009 3 DECISION WITH REGARD TO THE APPLICABILITY OF SECTIO N 14A OF THE ACT IN RESPECT OF THE INTEREST AFTER GIVING ADEQUATE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. WE ALSO MAKE IT CLEAR THAT THE ASSESSING OFFICER SHALL NOT INVOKE RULE 8D OF THE INCOME TAX RULES WHICH HAS BEEN HELD TO BE APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09 BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ AND BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM). WE DIRECT ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSESSEE FO R STATISTICAL PURPOSES. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF THE HEARING ON 29 TH MARCH 2011. SD/- SD/- (T R SOOD) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI DATED 29 TH MARCH 2011 SALDANHA COPY TO: 1. M/S JAYNEER CAPITAL PRIVATE LIMITED CONTINENTAL BUILDING 135 DR A B ROAD WORLI MUMBAI 400 018 2. ITO 6(1)(1) MUMBAI 3. CIT-CITY 6 MUMBAI 4. CIT(A)-VI MUMBAI 5. DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI