Income Tax Appellate Tribunal - Mumbai
Dcit Cent. Cir. 4(2), Cent. Range - 4, ... vs K. Raheja Corp Pvt. Ltd., Mumbai on 10 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL "L"
BENCH, MUMBAI
BEFORE SHRIB. R. BASKARAN, AM &
SHRI SANDEEP GOSAIN, JM
आयकरअपीलसं./ I.T.A. No. 6002/Mum/2016,
(निर्धारणवर्ा / Assessment Year: 2011-12)
DCIT CENT CIR 4(2), Cent. M/s K. Raheja Corp.
Range-4, Room No. 1918, Pvt. Ltd.
19th Floor, Air India Building, Plot No. C-30, Block-G,
बिधम/
Nariman Point, Mumbai- Opp, SIDBI,
400021. Vs. BandraKurla Complex,
Bandra(E), Mumbai-
400051
स्थायीलेखासं ./ जीआइआरसं ./ PAN/GIR No. AAACP0522B
(अपीलाथी/Appellant) : (प्रत्यथी / Respondent)
अपीलाथीकीओरसे/ Appellant by : Shri M. V. Rajguru
प्रत्यथीकीओरसे/Respondentby : Shri Arvind Sonde
सुनवाईकीतारीख/
: 07/11/2017
Date of Hearing
घोषणाकीतारीख / : 10/01/2018
Date of Pronouncement
आदे श / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the revenue is against the order of Commissioner of Income Tax (Appeals)-52, Mumbai 2 I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
dated 13.07.16 for AY 2009-10 on the grounds mentioned herein below:-
1. "On the facts and in the circumstances of the case and in law,the Ld.CIT(A) has erred in deleting the disallowance of Rs.14,00,73,911/- u/s 14A r.w,r. 8D even when the assessee could not establish one-on-one nexus between the own fund/ non-interest bearing fund with investments either during the assessment proceedings or at the appellate stage."
2. "On the facts and in the circumstances of the case and in law,the Ld.CIT(A) has erred in not appreciating the decision of Hon'ble Jurisdiciaitonal High Court of Bombay in the case of M/s.Daga Capital Management SP) Ltd. 117 IID 169 and M/s.Godrej & Boyce Mtg.
Co. Ltd. 328 ITR 81 wherein a disallowance u/s 14A of the IT Act as per Rule 8D of the IT Rule has been categorically upheld."
3. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be."
2. As per the facts of the present case, the assessee is a private limited company which is engaged in the construction activity and is also running a Hotel at MadhMarve Road, Malad 3 I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
in the name and style "The Resort". Besides, this the company has invested in shares and it is also partner in various partnership firms. The assessee filed its return of income electronically on 30/9/2011, declaring total loss of Rs. 5,45,67,181/-. Subsequently the assessee filed Revised Return of Income on 28/03/2013 declaring total loss of Rs. 10,05,86,547/-. The case of the assessee was selected for scrutiny and after serving statutory notices and seeking reply of the assessee, order dated 31/03/2015 passed u/s. 143(3) of the Act, by making disallowance u/s 14A of the Act read with Rule 8D amounting to Rs. 14,00,73,911/-.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties allowed the appeal of the assessee and deleted the additions made by the AO u/s 14A r.w.r. 8D.
Now before us, the revenue has preferred the appeal by raising the above grounds.
Ground No. 1 to 2.
3. Since both the above grounds raised by the revenue are inter connected and inter related and relates to challenging the 4 I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
order of Ld. CIT(A) in deleting the disallowance of Rs. 14,00,73,911 u/s 14A r.w.r 8D of the I.T. Act, therefore we thought it fit to dispose of the same thorough this common order.
4. We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities.
Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 5 to 8 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 7 to 8 of its order and the same is reproduced below:-
7. I have considered the facts of the case and submissions and contentions of the assessee. It appears that this issue has been examined by the Hon'ble ITAT Mumbai, in the case of the assessee itself for the A.Y.2008-09 wherein vide order dated 04-04-2016, the Hon'ble 'A' Bench of ITAT, Mumbai directed to delete fl addition made u/s 14A by observing as under:-
"We find that The assessee had share capital of Rs. 60,48,00,000/- and reserves & surplus stood 5 I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
at Rs. 1,74,67,67,552/-, whereas the investment was at Rs. 2,06,66,62,442/-, that out of the said investment the assessee had made investment in properties also that the fresh investment in the shares was not very huge, that it had mode strategic investment, that there was no evidence to prove that borrowed funds were utilised for making investment in shares. In our opinion, the settled position of law stipulate that if the assessee has sufficient own funds then it should be presumed that investment was not made from borrowed funds. Considering the availability of funds we are of The opinion that the AO was not justified in disallowing interest expenditure. Similarity, disallowance as per the provisions of section 14A r.w. rule 8D of the Rules cannot be made in a mechanical manner. Thirdly, the disallowance cannot be more than the expenditure claimed by on assessee. We find that in the case of the assessee The Tribunal and the Hon'ble High Courthad decided the identical issue against the AO while deciding the appeal filed by the group concern and respectfully following the orders mentioned in para no. 4, we decide the effective ground of appeal in favour of the assessee."6
I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
In doing so the Hon'ble ITAT followed its own order in the case of the assessee for earlier years as also the judgment of Hon'ble Jurisdictional high court in case of appellant company in 1TA/4431- 4050/MUM/2000 and ITAs 4159/MUM/2001 and in appeal no 1260 of 2009.
After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by both the parties, we find that as per the facts of the present case, the assessee has shown investment of Rs. 258.40 crores in shares of various companies on 31.03.11 as compared to Rs. 131.20 crores on 31.03.2010. As per the profit and loss account of the assessee, it was found by the AO that the assessee had debited an amount of Rs. 1,38,91,50,775/- as interest paid on its borrowed funds. Since the assessee has invested in shares, the income from which does not part of the taxable income of the assessee, therefore, the AO was of the view that the provisions of section 14A r.w.r 8D of the I.T. Act 1961 were attracted in assessee's case, therefore additions were made. Ld. CIT (A) while appreciating the orders passed by Hon'ble 7 I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
ITAT in assessee's own case for the AY 2008-09, had deleted the additions by holding that the assessee had interest free funds more than the investment in shares. Therefore, while relying upon the judgment of jurisdictional High Court, it was held by Ld. CIT(A) that in such circumstances, it can be safely be presumed that investment in shares have been made out of the interest free surplus funds and hence deleted the disallowance u/s 14A on the premise that the assessee had sufficient interest free funds available.
After evaluating the orders passed by ld. CIT(A), we are in agreement with this proposition that when both borrowed and own funds are available and the own funds and interest free loan exceeds investment, the presumption can very well be made that investments have been made from interest free funds and not from borrowed funds. In this circumstances, while placed reliance on the judgment passed by Hon'ble Bombay High court in the HDFC Bank Vrs CIT 366 ITR 505 (Bom), we upheld this portion of the order passed by Ld. CIT(A). The Ld. AR also pointed out that the strategic investments stand at Rs. 198.35 crore out of total investment of Rs. 258.40 crore. 8
I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
From the facts as well as documents placed on record, we further noticed that the assessee had made huge investment as per profit and loss account and necessarily expenses must have been incurred towards undertaking these transaction / activities. Under these circumstances and keeping in view tribunal decisions in the preceding years in assessee's own case, thus , in order to maintain consistency and judicial discipline , end of justice will be met in the instant case if further disallowance of expenditure u/s 14A is kept at an additional amount of Rs.5,00,000/- towards administrative/misc. expenses to be added to the income of the assessee . This is in view of the non recording of proper satisfaction by the authorities below as to the incorrectness of the claim of the assessee's claim and also this disallowance u/s 14A so upheld by us is in consonance with the decision of Hon'ble Supreme Court in the case of Godrej and Boyce Manufacturing Company Ltd. v. DCIT (2017) 394 ITR 449(SC). We order accordingly.
Ground No. 3
5. This ground raised by the revenue is general in nature, thus requires no specific adjudication.
9
I.T.A. No. 6002 /Mum/2016 M/s K. Raheja Corp. Pvt. Ltd.
6. In the net result, the appeal filed by the revenue stands partly allowed.
Order pronounced in the open court on 10th Jan, 2018.
Sd/- Sd/-
(B. R. Baskaran) (Sandeep Gosain)
ले खासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनां कDated : 10.01.2018 Sr.PS. Dhananjay आदे शकीप्रनिनिनिअग्रे नर्ि/Copy of the Order forwarded to :
1. अपीलाथी/ The Appellant
2. प्रत्यथी/ The Respondent
3. आयकरआयुक्त(अपील) / The CIT(A)
4. आयकरआयुक्त/ CIT- concerned
5. यवभागीयप्रयतयनयध, आयकरअपीलीयअयधकरण, मुंबई/ DR, ITAT, Mumbai
6. गार्ड फाईल / Guard File आदे शधिुसधर/ BY ORDER, उि/सहधयकिंजीकधर .
(Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai