Income Tax Appellate Tribunal - Mumbai
Fortune Financial Services (India) ... vs Addl. Cit Range 4(1), on 18 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "F", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM ITA No.2103/Mum/2016 (Assessment Year :2011-12) M/s. Fortune Financial Services Vs. Addl. CIT Range 4(1), (India) Ltd., Mumbai st 21 Floor, A Wing Naman Midtown Senapati Bapat Marg, Elephinstone Road (West) Mumbai - 400 013 PAN/GIR No. AAACF0610J Appellant) .. Respondent) Assessee by Shri Anuj Kisnadwala Revenue by Ms. Pooja Swaroop Date of Hearing 21/11/2017 Date of Pronouncement 18/12/2017 आदे श / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A)- 9, Mumbai dated 04/12/2015 for A.Y.2011-12 in the matter of order passed u/s.143(3) of the IT Act.
2. Following grounds have been taken by the assessee:-
Disallowance u/s 14A of Income Tax Act, 1961 of Rs. 61,14,053/- The Ld. CIT (A) eared in Law and on Facts confirming disallowance of Rs. 61,14,053/-u/s 14A.
2. Disallowance of premium paid on Insurance Premium paid of Rs. 1,32,832/-
The Ld. CIT (A) eared in Law and on Facts confirming disallowance of Rs. 1,32,832/- towards premium paid on the Insurance policy. 2 ITA No.2103/Mum/2016
Fortune Financial Services (India) Ltd.,
3. The appellant further craves leave to add, alter or amend his Grounds of Appeal during the course of appeal.
3. Rival contentions have been heard and record perused.
4. Facts in brief are that the assessee is engaged in the business of Investment Banking, Equity / Debt Syndication, Issue Management and Corporate Advisory. In the return of income, the assessee had sue-moto disallowed sum of Rs.38,037/- u/s 14A r/w Rule 8D. While framing assessment u/s.143(3), AO disallowed interest and other expenditure amounting to Rs.61,14,053/- u/s.14A, on the plea that same were incurred for earning the exempt income.
5. By the impugned order, CIT(A) confirmed the disallowance so made by the AO against which assessee is in further appeal before us.
6. Learned AR drawn our attention to the investment made by the assessee which was in its subsidiary companies. Our attention was also drawn to the fact that assessee was having its own capital and free reserves much more than the investment so made, accordingly relying on the decision of Hon'ble Supreme Court in case of Reliance Utilities and Power Ltd., and Hon'ble Bombay High Court in case of HDFC Bank Ltd., It was contended that no disallowance of interest should be made.
7. With regard to the other disallowance, it was submitted that assessee himself has offered disallowance of Rs.38,000/- under Rule 8D (2)(iii), accordingly, no further disallowance was warranted. 3 ITA No.2103/Mum/2016
Fortune Financial Services (India) Ltd.,
8. On the other hand, it was contended by learned DR that assessee could not demonstrate one to one investment in shares out of the own funds and reserves, therefore, AO was justified in disallowing the proportionate interest so debited to the P & L Account.
9. We have considered rival contentions and carefully gone through the orders of the authorities below. As per the balance sheet on record, we found that assessee was having its own share capital and reserves of Rs.10004.10/- lakhs as against the investment of Rs.8094.70 lakhs. Since own capital and reserve was more than the investment, in terms of decision of the Bombay High Court in case of HDFC Bank, no disallowance on account of interest is warranted. We also found that the decision of the Tribunal relied on by CIT(A) has been reversed by the Hon'ble Bombay High Court.
10. No interest disallowance can be made u/s.14A of the Act since own funds are sufficient to cover the value of investments, in terms of the following judicial pronouncements:-
1. CIT vs. Reliance Utilities Ltd., [313 ITR 340 (Bom)
2. CIT VS. HDFC Bank Ltd [366 ITR 505 (Bom)
3. HDFC Bank vs. Dy. CIT [383 ITR 529 (Bom)
11. In view of the above, we direct the AO to delete the disallowance on account of interest made u/s.14A.
12. With regard to the other disallowance made under Rule 8D(2)(iii), we found that assessee himself has offered disallowance of Rs.38,000/-.We also found that most of the investments of the assessee are in group 4 ITA No.2103/Mum/2016 Fortune Financial Services (India) Ltd., concerns which are required to be excluded from average investment while computing disallowance under Rule 8D, in view of the following judicial pronouncements.
1) Cheminvest Ltd. v CIT [378 ITR 33 (Del)/ 281 CTR 447 (Del)]
2) Garware Wall Ropes Limited v Addl. CIT (ITA No. 5408/Mum/2012)
3) M/s JM Financial Limited v Addl. CIT (ITA No: 4521/Mum/2012)
4) CIT v Oriental Structural Engineers Pvt. Ltd (Delhi High Court)
13. Respectfully following the judicial pronouncements, we direct the AO to recompute the disallowance under Rule 8D(2)(iii) after excluding the investment made in group concerns. We direct accordingly.
15. With regard to the premium of Rs.1,32,832/- paid on medical insurance policy of Managing Director, we found that it was paid on the insurance policy of key management personnel Mr. Nimish C Shah, Managing Director of the Company. Reliance was placed by learned AR on the decision of the Bombay High Court in the case of V.N. Export 323 ITR 178, wherein it was held that assessee has not taken key man insurance policy for the personal benefit of its partner but for the benefit of the firm in order to protect itself against the set back that may be caused on account of the death of the partner, insurance premium so paid is deductable. However, in the instant case the policy has been taken for the Managing Director of the Company who is a key personnel of the Company. However the terms of employment of Managing Director was not brought on record to substantiate the contention that premium so paid was for the benefit of company. Unless it is shown that premium so paid was for the benefit of company and not the personal benefit of Managing 5 ITA No.2103/Mum/2016 Fortune Financial Services (India) Ltd., Director, the ratio laid down by Bombay High Court in the case of V.N. Export (supra) cannot be applied. We therefore, restore the matter back to AO for deciding afresh in terms of above observation.
16. In the result, appeal of the assessee is allowed in part in terms indicated hereinabove.
Order pronounced in the open court on this 18/12/2017
Sd/- Sd/-
(AMARJIT SINGH) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 18/12/2017
Karuna Sr.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
DR, ITAT, Mumbai
5. BY ORDER,
6. Guard file.
सत्यापित प्रतत //True Copy//
(Asstt. Registrar)
ITAT, Mumbai