SUBHODHCHANDRA JEWELLERS P. LTD, MUMBAI v. ASST CIT 7(2), MUMBAI

ITA 895/MUM/2013 | 2008-2009
Pronouncement Date: 19-11-2014

Appeal Details

RSA Number 89519914 RSA 2013
Assessee PAN EMBER2014S
Bench Mumbai
Appeal Number ITA 895/MUM/2013
Duration Of Justice 1 year(s) 9 month(s) 15 day(s)
Appellant SUBHODHCHANDRA JEWELLERS P. LTD, MUMBAI
Respondent ASST CIT 7(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2014
Appeal Filed By Assessee
Bench Allotted E
Tribunal Order Date 19-11-2014
Date Of Final Hearing 13-11-2014
Next Hearing Date 13-11-2014
Assessment Year 2008-2009
Appeal Filed On 04-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; OA OA OA OA JH CH JH CH JH CH JH CH- -- - VKJ VKJVKJ VKJ- -- - CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; DS LE{K DS LE{K DS LE{K DS LE{K BEFORE SHRI VIJAY PAL RAO JUDICIAL MEMBER AND SHRI B.R. BASKARAN ACCOUNTANT MEMBER ITA NO.895MUM/2013 ASSESSMENT YEAR: - 2008-09 SUBODHCHANDRA JEWELLERS PVT. LTD. 709 7 TH FLOOR TRADE CENTRE OPP. MTNL EXCHANGE BANDRA KURLA COMPLEX BANDRA (EAST) V S. ` ASST. COMMISSIONER OF INCOME TAX 7(2) APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 12.12.2012 OF CIT(A) FOR THE A.Y. 2008-09. THE ASSESSEE HAS RAISED F OLLOWING GROUNDS:- THE LEARNED CIT(A)-IX MUMBAI HAS ERRED IN LAW AN D ON FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF RS. 15 45 43 7/- MADE BY ASSESSING OFFICER U/S 14A READ WITH RULE 8D OF I.T. RULES 1962. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN AGED IN THE BUSINESS OF EXPORT OF GOLD ORNAMENTS. DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 24 01 378/-. SINCE THE ASSESSEE HAS NOT ASSESSEE BY MS. ARTI N. SHAH REVENUE BY SHRI LOVE KUMAR DATE OF HEARING 13.11.2014 DATE OF PRONOUNCEMENT 19-11-2014 SUBODHCHANDRA JEWELLERS PVT. LTD. 2 | P A G E DISALLOWED ANY EXPENDITURE U/S 14A THE ASSESSING OFFI CER ISSUED A SHOW CAUSE NOTICE AS TO WHY THE DISALLOWANCE U/S 14A OF THE ACT R.W.R 8D OF THE INCOME TAX RULES SHOULD NOT BE MADE. AFTER CONSIDERING THE RE PLY OF THE ASSESSEE THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 15 45 437/ - U/S 14A AND AS PER THE PROVISIONS OF RULE 8D. THE ASSESSEE CHALLENGED THE ACTI ON OF ASSESSING OFFICER BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 13 38 876/- ON ACCOUNT OF INTEREST EXPENSES UNDER RULE 8D(II) A S WELL AS A SUM OF RS. 2 05 561/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES UN DER RULE 8D(III). THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE DETAILS OF OWN FUND AS CONTAINED IN THE BALANCE-SHEET OF THE ASSESSEE AT PAGE NO. 11 OF T HE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE WAS HAVING ITS OWN SUFFICIE NT FUND FROM SHARE CAPITAL AND RESERVE TO THE TUNE OF RS. 30 CRORES WHER EAS THE INVESTMENT WAS ONLY ABOUT 8 CRORES THEREFORE THE ASSESSEE WAS HAVI NG ITS OWN INTEREST FREE FUND FOR MAKING THE INVESTMENT IN QUESTION AND NO DI SALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE U/S 14A IS CALLED FOR. THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE DETAILS OF THE FUNDS AT PAGE NO. 54 O F THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE EACH AND E VERY INVESTMENT THROUGH A SEPARATE SOURCE OF FUND WHICH IS GIVEN AT PAGE N O. 162 OF THE PAPER BOOK. THUS THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMI TTED THAT THE AUTHORITIES BELOW HAS IGNORED THE AVAILABILITY OF ASSES SEES OWN FUND FOR INVESTMENT AND SPECIFIC DETAILS PROVIDED BY THE ASSE SSEE BUT MADE A DISALLOWANCE ON THE GROUND THAT THE ASSESSEES ENTIRE FUND IS IN COMMON POOL AND THE INVESTMENT MADE FROM COMMON POOL HAS TO BE CO NSIDERED AS USE OF PROPORTIONATE BORROWED FUND. SUBODHCHANDRA JEWELLERS PVT. LTD. 3 | P A G E 4. AS REGARDS THE ADMINISTRATIVE DISALLOWANCE THE LD . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS AVAILED THE SERVICES OF FUND MANAGER NAMELY KOTAK SECURITIES AN D NO EXPENSES IN RESPECT OF SERVICE CHARGES OF THE FUND MANAGER WERE CLAIMED B Y THE ASSESSEE. SHE HAS FURTHER SUBMITTED THAT AS REGARDS THE D-MAT CHARGES THE ASSESSEE ITSELF HAS DISALLOWED A SUM AND THEREFORE IN THE ABSENCE OF AN Y OTHER EXPENSES NO DISALLOWANCE CAN BE MADE U/S 14A AND AS PER RULE 8D (III). 4. ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE AU THORITIES BELOW HAS GIVEN A FINDING THAT THE ENTIRE FUND OF THE ASSESSEE IS IN THE COMMON POOL AND THE INVESTMENT MADE FROM THE OWN POOL OF FUND IS COMP RISING OF ASSESSEES OWN FUND AS WELL AS BORROWED FUND. HE HAS FURTHER SUB MITTED THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD THE DIRECT LINK OF ASSESSEES OWN FUND USED FOR MAKING INVESTMENT AND THEREFORE THE PROPORTIONATE DI SALLOWANCE OF EXPENDITURE IS ESSENTIAL AS PER PROVISIONS OF SECTI ON 14A R.W.R 8D. HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CARRIED A PROFIT OF RS. 19. 55 CRORES IN THE BALANCE SHEET AS ON 31 ST MARCH 2007 THEREFORE THE ASSESSEE WAS HAVING SUFFICI ENT FUND AT THE BEGINNING OF F.Y. UNDER CONSIDERATION. WE NOTE THAT AS ON 31.03.2007 THE ASSESSEE WAS HAVING THE CASH DEPOSIT IN BANK OF RS. 15.41 CRORES. THEREFORE FOR THE A.Y. UNDER CONSIDERATION THE ASSESSEE WAS HA VING THE OPENING CASH BALANCE OF RS. 15.41 CRORES WHICH ITSELF IS SUFFICIEN T FOR MAKING THE INVESTMENT OF ABOUT RS. 8 CRORES IN THE SHARES. WE FURTHER NOTE T HAT DURING THE YEAR ITSELF THE ASSESSEE RECEIVED A SUM OF RS. 6.38 CRORES FROM REDEMPTION OF SBI MUTUAL FUNDS. THUS FROM THE DETAILS OF THE FUND IT IS CLEAR THAT THE ASSESSEE WAS HAVING ITS OWN FUND SUFFICIENT FOR MAKING THE INVESTME NT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT WHEN THE ASSESSEE WAS HAVING MORE THAN 15 SUBODHCHANDRA JEWELLERS PVT. LTD. 4 | P A G E CRORES OF CASH AVAILABLE AT THE BEGINNING OF THE YEAR AND FURTHER ABOUT 6.3 CRORES WAS RECEIVED ON ACCOUNT OF REDEMPTION OF SBI MUTUAL FUND THEN THERE IS NO QUESTION OF USING ANY BORROWED FUND FOR THE PURPO SE OF MAKING INVESTMENT OF ABOUT RS. 8.26 CRORES IN QUESTION. HENCE NO DI SALLOWANCE U/S 14A ON ACCOUNT OF INTEREST EXPENDITURE IS WARRANTED AND AC CORDINGLY THE SAME IS DELETED. 6. AS REGARDS THE ADMINISTRATIVE EXPENSES THE ASSES SEE HAS EXPLAINED THAT FOR THE PURPOSE OF INVESTMENT IT HAS AVAILED THE SER VICES OF FUND MANAGER NAMELY KOTAK SECURITIES AND NO EXPENDITURE REGARDING THE SERVICE CHARGES OF THE FUND MANAGER WAS CLAIMED IN THE P&L ACCOUNT. APART FROM SERVICE CHARGES OF THE FUND MANAGER THE D-MAT CHARGES WERE ALREADY DIS ALLOWED BY THE ASSESSEE ITSELF. IN VIEW OF THIS FACT THAT THE ASSES SEE HAS AVAILED THE SERVICES OF FUND MANAGER AND NO EXPENSES WERE CLAIMED ON ACCOUNT OF SERVICES CHARGES OF THE FUND MANAGER THE DISALLOWANCE UNDER RULE 8D(III) IS NOT WARRANTED. IT IS PERTINENT TO NOTE THAT THE DISALLOWANCE UNDER RULE 8 D(III) AT THE RATE OF 0.5% IS TAKEN AS A SIMILAR PERCENTAGE IS CHARGED BY THE PORTFOL IO MANAGERS FOR MANAGING THE PORTFOLIO OF THE INVESTORS THEREFORE WHE N THE ASSESSEE HAS AVAILED THE SERVICES OF FUND MANAGER AND NO EXPENDIT URE IS CLAIMED THE DISALLOWANCE MADE UNDER RULE 8D(III) IS DELETED. 7.. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF NOVEMBER 2014 SD/- SD/- (B.R.BASKARAN) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 19-11 -2014 SKS SR. P.S SUBODHCHANDRA JEWELLERS PVT. LTD. 5 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR E BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI