ASST CIT CIR 4(2), MUMBAI v. INDIA CAPITAL MARKETS P.LTD, MUMBAI

ITA 6947/MUM/2013 | 2010-2011
Pronouncement Date: 27-04-2015 | Result: Dismissed

Appeal Details

RSA Number 694719914 RSA 2013
Assessee PAN AABCN0802B
Bench Mumbai
Appeal Number ITA 6947/MUM/2013
Duration Of Justice 1 year(s) 4 month(s) 29 day(s)
Appellant ASST CIT CIR 4(2), MUMBAI
Respondent INDIA CAPITAL MARKETS P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 27-04-2015
Assessment Year 2010-2011
Appeal Filed On 28-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . . . BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI B.R.BASKARAN ACCOUNTANT MEMBER . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 THE ACIT CEN.CIR.4(2) ROOM NO.642 6 TH FLOOR AAYKAR BHAVAN MK ROAD MUMBAI 400 020 / VS. M/S. INDIA CAPITAL MARKETS PVT. LTD. (FORMERLY KNOWN AS NICHE BROKERAGE PVT. LTD.) 202-204 NEHA INDUSTRIAL ESTATE BEHIND CCI OFF DATTAPAD ROAD BORIVALI (E) MUMBAI 400 056. ./ ./ PAN/GIR NO. : AABCN0802B ( / APPELLANT ) .. ( ! / RESPONDENT ) ASSESSEE BY SHRI JETENDRA KUMAR RESPONDENT BY : SHRI BHAVIN SHAH $ % & / DATE OF HEARING : 27/04/2015 $ % & / DATE OF PRONOUNCEMENT : 27/04/2015 / O R D E R PER I.P.BANSAL JM: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-8 MUMBAI DATED 5/9/2013 FOR ASSESSMENT YEAR 2010- 11. GROUNDS OF APPEAL READ US UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSET WITHOUT . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 2 APPRECIATING THE FACT THAT A.O. HAS DOUBTED THE VER Y NATURE OF PAYMENT AS TO WHETHER THE SAME IS GOODWILL OR NON COMPETE FEE SO AS TO GET DEPRECIATION ON THE SAME AS WITH RESPECT TO NON-COMPETE FEE NO DEPRECIA TION IS ALLOWABLE'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE U/ S.14A R.W. RU LE BD WITHOUT APPRECIATING THE FACT THAT A.O. COMPUTED THE EXPENDITURE WITH REGARD TO THE EARNING OF EXEMPT INCOME AS PER THE METHOD PRESCRIBED BY CBDT VIDE NO TIFICATION DATED 24.3.200B AND ALSO IGNORING THE ORDER OF THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT ITA NO.626 OF 2010 & WP NO.75B OF 2010 DATED 12.B.2010 WHEREIN THE APPLICABILITY OF RULE B D WAS UPHELD'. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONS EQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. APROPOS GROUND NO.1 OF THE REVENUE; IT WAS SUBMI TTED THAT THIS ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN RESPECT OF ASSESSMENT YEAR 2006-07 COPY OF WHICH IS PLACED A T PAGE 1 TO 14 OF THE PAPER BOOK. THIS IS AN ORDER DATED 12/12/2012 PASSED IN ITA NO.2948/MUM/2010. LATER ON THE SAID ORDER WAS FOLLOWED IN SUBSEQUENT YEARS AND LATEST ORDER IS ORDER IN RESPECT OF ASSESSMENT YEAR 2009-10 WHEREI N IT HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON PAYMENT OF RS.2.50 CORES @ 25%. FOLLOWING THE SAID ORDER FOR A.Y. 2006-07 THE RELIE F HAS BEEN GIVEN BY THE TRIBUNAL IN RESPECT OF ASSESSMENT YEAR 2007-08 200 8-09 AND 2009-10. THE RELEVANT OBSERVATION OF TRIBUNAL IN RESPECT OF ASS ESSMENT YEAR 2006-07. ARE REPRODUCED BELOW: 21. IN OUR CONSIDERATE VIEW AFTER CONSIDERING THE ENTIRE GAMUT OF FACTS OF INSTANT CASE WE HAVE NO HESITATION TO HOLD THAT TH E ASSESSEE IS ENTITLED FOR DEPRECIATION ON PAYMENT OF RS.2.50 CRORES @ 25% WHI CH COMES TO RS.62 50 000/- AS CLAIMED BY THE ASSESSEE. THE ASS ESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW THE DEPRECIATION. GR OUND NO.1 IS ACCORDINGLY ALLOWED. 2.1 IN THIS VIEW OF THE SITUATION AFTER HEARING BO TH THE PARTIES AS THE ISSUE HAS BEEN DECIDED BY LD. CIT(A) IN ACCORDANCE WITH A FOREMENTIONED ORDER OF THE TRIBUNAL WE DISMISS THIS GROUND OF THE REVENUE. . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 3 3. APROPOS GROUND NO.2; THE AO CALCULATED DISALLOWA NCE UNDER RULE -8D AS FOLLOWS: 1. AMOUNT OF EXPENDITURE (AS PER RULE 8D(2)(I)] N IL 2. AMOUNT AS PER THE FORMULA GIVEN IN RULE 8D(2)9II ) (A) AMOUNT OF INTEREST 1 12 77 384 (B) AVERAGE VALUE OF INVESTMENTS 8 01 90 278 (C) AVERAGE VALUE OF TOTAL ASSETS 1 25 86 60 516 THEREFORE A*B/C 7 19 520 3. AMOUNT EQUAL TO ONE-HALF PERCENTAGE OF (B) 4 0 0 951 [AS PER RULE 8D (2)(II)] GROSS DISALLOWANCE 11 20 472 LESS: AMOUNT ALREADY DISALLOWED IN THE RETURNS 48 709 NET DISALLOWANCE 10 71 763 3.1 LD. CIT(A) HAS UPHELD THE DISALLOWANCE IN RESPE CT OF SL.NO.3 I.E. A SUM OF RS.4 00 951/- AND DISALLOWANCE FOR A SUM OF RS.7 19 520/- OF SL. NO.2 HAS BEEN DELETED ON THE GROUND THAT SHARE CAPITAL AND OWN FUNDS OF THE ASSESSEE ARE FAR EXCEEDING THE INVESTMENT MADE IN THE SECUR ITIES OUT OF WHICH ASSESSEE HAS EARNED TAX FREE INCOME. THE FIGURES ARE TABULA TED IN THE ORDERS OF LD. CIT(A) AND ARE REPRODUCED BELOW: PARTICULARS A.Y. 2010-11 A.Y 2009-10 A.Y.2008-09 A. Y 2007-08 A.Y.2006-07 SHARE CAPITAL 86044800 43022400 43022400 43022400 4 3022400 SHARE APPLICATION - 258134400 2197414240 - - RESERVES & SURPLUES 576325257 3277847964 298635457 183319753 160184335 TOTAL OWN FUNDS AVAILABLE 662370057 629004764 56172097 226342153 203206735 INVESTMENTS 100109341 60271215 62047441 50673667 20586052 3.2 AS IT CAN BE SEEN FROM THE ABOVE SHARE CAPITAL AND RESERVE AND SURPLUS OF THE ASSESSEE ARE RS.66.23 CRORES AGAINST INVES TMENT OF RS.10.01 CRORES. THEREFORE FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 3 40 AND ALSO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y 2009-10 LD. CIT(A) HAS DELETED THE ADDITION OF INTEREST FACTOR AS PER PARA 3.2 AND 3 .3 WHICH IS REPRODUCED BELOW: . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 4 3.2 . I HAVE CONSIDERED THE .SUBMISSION OF THE APPE LLANT CAREFULLY. I HAVE ALSO PERUSED THE ASSESSMENT ORDER PASSED. IT IS SEE N THAT SIMILAR ISSUE WAS INVOLVED IN THE APPELLANT'S OWN CASE IN A.Y. 20 09-10. THE HON'BLE ITAT MUMBAI IN APPEAL-NO. 4131/MUM/2012 HAS ALLOWE D PART RELIEF TO THE APPELLANT. OBSERVATIONS MADE BY THE HON'BLE IT AT ARE AS FOLLOWS :- '4. AS REGARDS THE ISSUE RELATING TO DISALLOWANCE O F RS.7 29 498/- MADE U/S.14A OF THE ACT AS RAISED IN GROUND 110. 2 IT IS OBSERVED THAT THE SAME MADE BY THE AO AS PER RULE 80 OF I.T. . RULES 1962 WAS COMPRISING OF DISALLOWANCE ON ACCOUNT OF INTERE ST AMOUNTING TO RS.5 25 751/- AND DISALLOWANCE 011 ACCOUNT OF OTHER EXPENSES AMOUNTING TO RS.3 27 500/-. AS REGARDS THE DISALLOW ANCE ON A/C. OF OTHER EXPENSES AMOUNTING TO RS.3 27 500/- THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED . ANY ARGUMENT TO DISPUTE T HE SAME. AS REGARDS THE DISALLOWANCE ON A/C. OF INTEREST HE HO WEVER HAS INCITED OUR ATTENTION TO THE BALANCE SHEET AS ON 31.03.2009 PLACED AT PAGE 3 OF HIS PAPER BOOK TO SHOW THAT SUFFICIENT OWN FUN DS OF RS.62.90 CRORES WERE AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND RESERVE AND SURPLUS TO MAKE THE INVESTMENT OF R S. 6.02 CRORES IN THE SHARES ON WHICH THE DIVIDEND INCOME EXCEPT F ROM TAX WAS EARNED. HE HAS RELIED ON THE DECISION OF THE TRIBUN AL IN THE CASE OF M/S.WEIZMANN LTD. VS. ACIT RENDERED VIDE ORDER DTD. 21.10.2011 IN ITA NO. 4751/MUM/201O WHEREIN IT WAS HELD RELYING ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F RELIANCE UTILITIES & POWER LTD. (313 ITR 340) THAT THE ASSES SEE HAVING SUFFICIENT OWN FUNDS TO MAKE INVESTMENT IN SHARES & SECURITIES IT COULD NOT BE SAID THAT INTEREST EXPENDITURE INCURRE D EN) THE ASSESSEE ON BORROWED FUNDS WAS IN RELATION TO EARNING OF EXE MPT DIVIDEND INCOME SO AS TO WARRANT ANY DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE U/S. 14A OF THE ACT. KEEPING IN VIEW TH E SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND HAVING REGARD TO THE FACT THAT SUFFICIENT OWN FUNDS WERE AVAILABLE WITH THE A SSESSESE AT THE RELEVANT TIME TO MAKE INVESTMENT IN THE SHARES WE ARE OF THE VIEW THAT THE DISALLOWANCE U/S.14A OF THE ACT ON ACCOUN T OF INTEREST EXPENDITURE CAN BE MADE. WE THEREFORE SUSTAIN THE DISALLOWANCE OF RS.7 29 498/- MADE U/S. 14A OF THE ACT TO THE EXTEN T OF RS.3 27 500/- AND ALLOW PARTLY GROUND NO.2 OF THE A SSESSEES APPEAL. 3.3. AS THE ISSUE IS IDENTICAL RESPECTFULLY FOLLOW ING THE ORDER OF HONBLE ITAT THE AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE OF RS.7 19 520/- ON ACCOUNT OF INTEREST THE BALANCE DISALLOWANCE OF RS.4 00 951/- IS CONFIRMED. THIS GROUND OF APPEAL IS ACCORDINGLY P ARTLY ALLOWED. . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 5 4. IN THIS VIEW OF THE SITUATION WE HAVE HEARD BOT H THE PARTIES AND AFTER CONSIDERING THEIR SUBMISSIONS WE DECLINE TO INTERFE RE IN THE RELIEF GRANTED BY LD. CIT(A) AS THE SAME IS IN ACCORDANCE WITH AFOREM ENTIONED DECISION OF HONBLE BOMBAY HIGH COURT AND ALSO THE DECISION OF TRIBUNAL IN RESPECT OF ASSESSEES OWN CASE FOR A.Y 2009-10. THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 5. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/04/2015 $ - . 27/04/2015 $ SD/- SD/- ( . . / B.R.BASKARAN ) . . /I.P.BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; - DATED 27/04/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. 0% ( ) / THE CIT(A)- 4. 0% / CIT 5. 1 %23 & 23 / DR ITAT MUMBAI 6. 4 / GUARD FILE. / BY ORDER ! 1% % //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI . . ./ VM SR. PS . / ITA NO. 6947/MUM/2013 / ASSESSMENT YEAR 2010-11 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 27/04/2015 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 27/04/2015 SR.PS/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 THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER