Income Tax Appellate Tribunal - Mumbai
Beekaylon Synthetics P.Ltd, Mumbai vs Addl Cit Cir 1(10, Mumbai on 11 July, 2017
ITA/2459/Mum/2015-Beekelon आयकर अपीलीय अिधकरण मुबं ई जे खंडपीठ , " " म Income-tax Appellate Tribunal -"J"Bench Mumbai सव ी राजे ,लेखा सद य एवं सी .एन . साद, याियक सद य Before S/Sh.Rajendra,Accountant Member and C. N. Prasad,Judicial Member आयकर अपील सं./I.T.A./2459/Mum/2015, िनधा रण वष /Assessment Year: 2010-11 M/s. Beekaylon Synthetics Pvt. Ltd. Addl.CIT- 1(1) 10,Jasville,2nd floor,9 Marine lines, Aayakar Bhavan Vs. Opp.Liberty Cinema,Mumbai-400 020 Mumbai.
PAN:AAACB 2976 M
(अपीलाथ /Appellant) ( यथ / Respondent)
राज
व क ओर से / Revenue by: Ms.Arju Garodia
अपीलाथ क ओर से /Assessee by: Shri Jay Shah
सुनवाई क तारीख / Date of Hearing: 11/07/2017
घोषणा क तारीख / Date of Pronounce ment: 11/07/2017 लेखा सद य, राजे के अनुसार/ PER Rajendra A.M.-
Challenging the order,dated 21/01/2015,of CIT (A)-2,Mumbai,the assessee has filed the present appeal.Assessee-company,engaged in the business of manufacturing and trading of polyester yarn and generation and sale of electricity, filed its return of income on 20/09/2010,declaring income of Rs. 6.61 crores.The Assessing Officer(AO)completed the assessment, u/s.143 (3) of the Act,on 07/ 02/2013,determining its income at Rs. 6.81 crores.
2.Effective ground of appeal is about disallowance made under section 14A of the Act, amounting to Rs. 14.18 lakhs.During the assessment proceedings, the AO found that the assessee had earned dividend income of Rs. 34.08 lakhs,that on its own it had made a disallowance of Rs. 3.43 lakhs,that it had paid Rs. 1.86 crores as interest on various borrowings. He observed that the assessee had not established clear nexus between the own funds and the investments, that the interest expenditure for the year under consideration was not attributable to any particular income/receipt, that disallowance of expenditure related to exempt income had to be made as per the provisions of section 14A read with rule 8D of the Income Tax Rules, 1962 (Rules).The assessee argued that while calculating the disallowance under rule 8D (2) (ii) of the Rules the interest paid on term loans should not be taken into consideration, that it was paid for availing loans for specific purposes. The AO observed that the assessee maintained a common bank account in which all sorts of receipts including term and other loans were deposited that from the same bank account all expenditure is were incurred including payment for making investments.
1ITA/2459/Mum/2015-Beekelon Invoking the provisions of rule 8D of the Rules,he made a disallowance of Rs. 18.32 lakhs. Considering the suo motu disallowance of Rs. 3.43 lakhs made by the assessee, the AO added a sum of Rs. 14, 88,400 /-to the total income of the assessee.
3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.The FAA referred to the order of his predecessor for the AY.2008-09 and confirmed the order of the AO.
4.During the course of hearing before us, the Authorised Representative (AR) contended that the assessee had sufficient own funds to make investments, that it had not utilised any borrowed funds, that own funds available for the year under consideration amounted to Rs. 47.18 crore, that the investment made by the assessee for the year was of Rs. 4.93 crore only, that the own funds were nearly 10 times that of the investments. He referred to the case of HDFC bank Ltd. (383 ITR 529) of the honorable Bombay High Court and argued that no disallowance under rule 8D(ii)should have been made, that the assessee itself at made a disallowance of which 3.43 lakhs under the head admission to expenses,that the AO had not given any finding about the correctness of the claim of the assessee,that without rejecting the claim made by the assessee the AO should not have made further disallowance. He referred to the case of Godrej and Boyce Manufacturing Co. (328 ITR 1).He further argued that the major expenditure under the head interest expenses was not for making investment,that interest was paid on term loans/Car loan, that the AO/FAA had not considered the submissions made by the assessee. The Departmental Representative(DR) supported the order of the FAA.
5.We have heard the rival submissions and perused the material before us including the balance sheet for the year under consideration. We find that the assessee had sufficient own funds during the year under consideration for making the investments. The assessee had own fund of Rs.47 crores(app.),whereas investments,resulting in exempt income,were of Rs.4 crores(app.).The honorable jurisdictional High Court in the case of HDFC Bank Ltd (supra)has held that if an assessee possessed sufficient own fund the presumption was that investment was made from own fund and not from borrowed funds.Similar view was taken by the Hon'ble Court in the case of Reliance Utilities & Power Ltd.(313 ITR340).Besides,the assessee had disallowed Rs.3.43 lakhs 2 ITA/2459/Mum/2015-Beekelon on its own under the head administrative expenses and the AO had not given any reason for rejecting the stand taken by the assessee.So,in our opinion,there was no need to make any further disallowance.Reversing the order of the FAA,we allow the effective ground raised by the assessee.
As a result,appeal filed by the assessee stands allowed.
फलतःिनधा रती ारा दािखल क गई अपील मंजूर क जाती है.
th Order pronounced in the open court on 11 , July , 2017.
आदेश क घोषणा खुले यायालय म दनांक 11जुलाई , 2017 को क गई ।
Sd/- Sd/-
(सी .एन . साद / C.N.Prasad ) (राजे
/ Rajendra)
याियक सद
य / JUDICIAL MEMBER लेखा सद
य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक/Dated : 11.07.2017.
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