KEWAL KIRAN CLOTHING LTD,MUMBAI vs. DCIT 12(3)(1), MUMBAI

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ITA 1852/MUM/2017Status: DisposedITAT Mumbai26 September 2018AY 2012-136 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, following its coordinate bench's decision in the assessee's own case, directed the Assessing Officer to delete the disallowance under Rule 8D(2)(ii) as the investments were made from surplus own funds. For disallowance under Rule 8D(2)(iii), the AO was directed to recompute considering only investments yielding exempt income.

What were the facts?

The assessee challenged the disallowance of Rs. 19,94,808/- under Section 14A read with Rule 8D. The assessee argued that the issue was covered by a previous ITAT decision in its own case for an earlier assessment year.

What were the issues?

Whether disallowance under Section 14A read with Rule 8D is justified when investments are made from surplus own funds and whether disallowance under Rule 8D(2)(iii) should consider only investments yielding exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, “H”

Before: HON’BLE SHRI SANDEEP GOSAIN, JM& HON’BLE SH.N. K. PRADHAN, AM

For Appellant: Shri Ronak G. Doshi, Shri Manoj Kumar, DR सुनवाईकीतारीख/

DCIT 12(3)(1), M/s.Kewal Kiran Clothing R. no. 147B/223/262, Ltd. बिधम/ AayakarBhavan, Kewal Kiran Estate, 460/7 J. Vs. Marine Line, Mumbai- B. Patel Rd, Near Western Express Highway, Goregaon 400 020 (east) Mumbai – 400 063 स्थायीलेखासं./जीआइआरसं./ PAN No. AAACK3402H (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Ronak G. Doshi, AR प्रत्यथीकीओरसे/Respondentby : Shri Manoj Kumar Singh, DR सुनवाईकीतारीख/ : 28/08/2018 Date of Hearing घोषणाकीतारीख / 26.09.2018 : Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

1.

The present Appeal filed by the assesseeis against the order of Ld. CIT (Appeal) – 20, Mumbai dated 02.12.16for AY 2012-13.

M/s. Kewal Kiran Clothing Ltd. 2. The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding the action of AO in disallowing a sum of Rs. 19,94,808/- u/s 14A r.w rule 8D of the I. T. Rules, 1962.

3.

Ld. AR appearing on behalf of the assessee submitted before us that the ground raised in the present appeal is fully covered by the order of the Coordinate Bench of Hon’ble ITAT in for AY 2011-12 in assessee’s own case wherein the identical ground raised in the present appeal has already been decided on merits.

4.

On the other hand, Ld. DR fairly agreed to the contention of Ld. AR that the issue is covered in favour of assessee.

5.

We have heard both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground has already been decided by the Coordinate Bench of ITAT in for AY 2011-12 in assessee’s own case. The M/s. Kewal Kiran Clothing Ltd. operative portion of the order of ITAT is contained in para no. 7 & 8, which is reproduced below:-

7.

We have heard the rival submissions, perused the orders of the authorities below. Having perused the orders of the Authorities below, Paper Book and the case laws relied on, we notice that the assessee had sufficient surplus funds for making investments. Further the profits for the current Assessment Year stood at ₹.46.23 Crores. Therefore, it can fairly be considered even assuming that entire investments of ₹.26.85 Crores was made by the assessee during this Assessment Year it can be safely said that the investment was made out of surplus own funds. Hence, following the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. HDFC Bank (supra) and CIT v. Reliance Utilities and Power Ltd. (supra), we direct the Assessing Officer to delete the disallowance made under Rule 8D(2)(ii).

8.

In so far as the disallowance under Rule 8D(2)(iii), following the decision of the Special Bench in the case of ACIT vrs. Vireet Investments Pvt. Ltd. (Supra), we direct the Assessing Officer to recomputed the disallowance by considering only those investments which yielded exempt income.

M/s. Kewal Kiran Clothing Ltd. After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and ITAT as mentioned above in assessee’s own case, we find that as per the facts of the present case, as per balance sheet which is annexed at page no. 1 of paper book, the assessee was having sufficient own funds and as per statement of profit and loss for the year ended 31st March 2012, which is at page no. 2 of the paper book, the net profit before tax is Rs. 763,146,502/-. From the records, we noticed that the assessee had net worth, which was more than the investments in tax-free securities. Therefore following the decision of Hon’ble jurisdictional High Court in the case of CIT Vrs. HDFC Bank (2014) 49 taxman.com 335 (Bom) and CIT vrs. Reliance Utilities and Power Ltd 313 ITR 340 (Bom), we direct the AO to delete the disallowance made under rule 8D(2)(ii).

In so far as the disallowance, under rule 8D(2)(iii), following the decision of Special bench in the case of ACIT vrs. Vireet Investments Pvt. Ltd. (2017) 165 ITD 27 (Del) (SB), we M/s. Kewal Kiran Clothing Ltd. direct the AO to recompute the disallowance by considering only those investments which yielded exempt income.

Therefore, in view of our above findings and also respectfully following the decision of the Coordinate Bench of ITAT in assessee’s own case, we order accordingly.

6.

In the net result, the appeal filed by the assessee stands partly allowed with no order as to cost. Order pronounced in the open court on 26th Sept. 2018 Sd/- Sd/- (N. K. Pradhan) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 26.09.2018 Sr.PS. Dhananjay M/s. Kewal Kiran Clothing Ltd. आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT- concerned 4. 5. यवभागीयप्रयतयनयध, आयकरअपीलीयअयधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER,

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