Income Tax Appellate Tribunal - Mumbai
Weizmann Ltd, Mumbai vs Addl Cit Rg 1(3), Mumbai on 1 September, 2017
आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई " जी"
जी" खंडपीठ Income-tax Appellate Tribunal -"G"Bench Mumbai सव ी राजे ,लेखा सद य एवं, शि जीत डे, याियक सद य Before S/Shri Rajendra,Accountant Member and Saktijit Dey,Judicial Member आयकर अपील सं/ ITA No. 5418/Mum/2015: िनधा रण वष /Assessment Year:2012-13 M/s. Weizmann Ltd. Addl CIT , Range-1(13) Empire House,214, Dr. D.N. Road Mumbai.
Ent. A.K. Nayak Marg, Fort Vs.
Mumbai-400 001.
PAN:AAACW 1260 H
(अपीलाथ /Appellant) ( यथ / Respondent)
Revenue by: Shri V. Vidhyadhar-DR
Assessee by: Shri Anuj Kishnadwala
सुनवाई क तारीख / Date of Hearing: 29/08/2017
घोषणा क तारीख / Date of Pronouncement: 01.09.2017
आयकर अिधिनयम,1961
अिधिनयम क धारा 254(1)केके अ
तग त आदे श
Order u/s.254(1)of the Income-tax Act,1961(Act) सद य, राजे के अनुसार लेखा सद य ार/ PER Rajendra A.M.-
Challenging the order dtd.12.10.2015 of the CIT(A)-3,Mumbai,the Assessee has filed the present appeal.Assessee-company,engaged in the business of manufacturing and export of textile and other goods,filed its return of income on 26.03.2014,declaring total income of Rs. 3.06crores.TheAssessing Officer(AO)finalised the assessment,u/s.143(3)of the Act, on 26.03. 2014,determining the income of the assessee at Rs.3.41 Crores.
2.Effective ground of appeal is about disallowance made u/s.14A read with Rule 8D(ii)and
(iii)of the Income-tax Rules,1962(Rules)of Rs. 25.54 laksh and Rs. 10.6 lakhs respectively. During the assessment proceedings,AO found the assessee had received exempt income of Rs.3.9lakhs.He held that he was not satisfied with submissions made by the assessee with regard to Nil allocation of the expenses towards the investments bearing exempt income.The assessee submitted that it had not borrowed any money for making investment in shares.Not being satisfied with the explanation of the assessee,he made a disallowance of Rs.34.90 lakhs(25.54 laksh + Rs. 10.6 lakhs)as stated earlier.
3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Auhtority(FAA).After considering the submissions of the assessee and the assessment order,he held that as per the Circular 5 of 2004 of the CBDT,dtd.11. 02.2014, provisions of Rule 8D r.w.s.14A of the Act have to be applied even when no exempt income was earned,that the AO had rightly disallowed Rs.25.54 lakhs under Rule 8D(ii)of the Rules.With regard to disallowance made as per the provisions of Rule 8D(iii),he held that 5418/M/15(12-13) M/s. Weizmann Ltd.
investment during the year were as high as Rs.18.06 crores,that in the earlier AY.s the Tribunal had restricted the disallowance to 5% of the dividend income,that some time energy/effort must have been devoted to earn the exempt income,that the Tribunal had not considered the judgment of Hon'ble Bombay High Court in Godrej & Boyce(328 ITR
81),that the AO was justified in making the disallowance u/r 8D(iii)of the Rules.
4.Before us,Authorised Representative(AR)submitted that the Tribunal had decided the identical issue in favour of the assessee for the AY.s.2006-07,2008-09 and 2010-11(ITA/ 4751/Mum/2010,dtd.21.11.2011,ITA/6008/Mum/2012-dtd.12/02/2014 & ITA/7102/Mum/ 2014, dtd. 04.04.2016),that the Hon'ble High Court had dismissed the appeal filed by the department for the AY.s.2006-07 and 2007-08.The Departmental Representative(DR)left the issue to the discretion of the Bench.
5.We have heard the rival submissions and perused the material before us.We find that in the AY.2006-07 the FAA had upheld the disallowance made by the AO u/s.14A r.w.8D of the Income-tax Rules,1962(Rules).Deciding the matter in favour of the assessee,Tribunal vide its order 21.11.2011( ITA/4751/M/2010)has held as under :
"7.We have considered the rival submissions and perused the relevant material on record.As demonstrated by the learned counsel for the assessee from the balance sheet of the assessee company on 31st,March,2006,shareholders'fund in the form of share capital and reserve and surplus aggregating to Rs.71.16 crores were available with the assessee company as on 31st, March,2006.Out of the reserves and surplus, revaluation reserves was to the extent of Rs10.41 crores whereas remaining reserves available to the assessee to the extent of Rs.47.89 crores were free reserves.Thus own funds to the extent of Rs.60.75 crores were available with the assessee company at the relevant time which were more than the investment of Rs,57.64 crores made in the shares and securities in the corresponding period. It is no doubt true that no separate account was maintained by the assessee in respect of investment made in shares and securities and it was a case of mixed funds available in the form of own funds and borrowed funds which were utilized for making investments in shares as well as for the purpose of its main business of manufacturing and export of textiles and other products.However,as held by the Hon'ble Bombay High Court in this context in the case of Reliance Utilities and Power Ltd. (supra), if there are funds available,both interest free and interest borrowing,then a presumption would arise that investment would be out of interest free funds generated or available with the company. Relying on the said decision of Hon'ble jurisdictional High court,we hold that the assessee having sufficient own funds to make investment in shares and securities,it cannot be said that interest expenditure incurred by it on borrowed funds which were utilized for the purpose of business was in relation to earning of exempt dividend income,so as to warrant any disallowance on account of interest expenditure u/s.14A.The decision of the Tribunal in the case of Shoppers Stop Ltd. (supra) cited by the 1earned counsel for the assessee fully supports our view wherein it was held that the assessee having sufficient own funds to cover up investments made in shares and securities,no disallowance u/s.14A on account of interest expenditure was warranted.It is also observed that the AO himself did not make disallowance u/s l4A on account of interest expenditure in assessee's own case for assessment year 2005-06 in the assessment completed u/s 143(3) vide an order dated 20-12-2007 holding that the assessee having sufficient shareholders' fund including internal accruals to make investments in shares and securities,no disallowance u/s 14A was called for.We, therefore, hold that the disallowance 2 5418/M/15(12-13) M/s. Weizmann Ltd.
made by the AO and confirmed by the learned CIT(Appeals) on account of interest expenditure u/s.14A is not sustainable and delete the same.
8.As regards the disallowance of Rs.27,93,160/- made by the AO and confirmed by the learned CIT(Appeals)on account of administrative expenses u/s.14A, we find ourselves in agreement with the learned counsel for the assessee that the same is highly excessive and unreasonable considering the amount of dividend income earned by the assessee to the extent of Rs.l,06,50,514/-.In one of the decisions rendered in the case of ACIT vs. Vinod Chopra Films P. Ltd. vide its order dated 29th July,2011 passed in ITA No. 4019/Mum/2010, the Tribunal has found it fair and reasonable to sustain a similar disallowance to the extent of 5% of the total dividend earnings.Respectfully following the said decision of the coordinate bench of this Tribunal,we sustain the disallowance made by the AO and confirmed by the learned CIT(Appeals)on account of administrative expenses u/s.14A to the extent of 5% of dividend income.Ground Nos.1 to 5 of the assessee's appeal are thus partly allowed."
Similar issue was decided in favour of the assessee by the Tribunal for the AY.2007-08 also (ITA/7697/Mum/2010-dated 27.06.2012).We find that facts of the case under appeal are similar to the facts of earlier AY.s.So,following the orders of the Tribunal,that were endorsed by the Hon'ble Bombay High Court, we hold that no disallowance can be made under the head interest expenditure.As far as administrative expenses are concerned;following the order of the Tribunal for the earlier years;we direct the AO to restrict the same to 5% of dividend income.Grounds of appeal taken by the AO are allowed,in part.
As a result,appeal filed by the AO stands partly allowed. फलतः िनधा रती अिधकारी क अपील आंिशक प से मंजूर क जाती है.
Order pronounced in the open court on 1st September, 2017. आदेश क घोषणा खुले यायालय म दनांक 01 िसतंबर,2017 को क गई ।
Sd/- Sd/-
(शि जीत डे / Saktijit Dey) (राजे
/ Rajendra)
याियक सद
य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक/Dated : 01.09.2017.
Jv.Sr.PS.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1.Appellant /अपीलाथ! 2. Respondent /"#यथ!
3.The concerned CIT(A)/संब% अपीलीय आयकर आयु', 4.The concerned CIT /संब% आयकर आयु'
5.DR " G " Bench, ITAT, Mumbai /िवभागीय "ितिनिध, खंडपीठ,आ.अ. याया.मुंबई
6.Guard File/गाड फाईल स#यािपत "ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.3