Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM & SHRI PAWAN SINGH, JM
O R D E R Per Sanjay Arora, A. M.: These are cross appeals, i.e., by the Assessee and the Revenue, directed against the Order by the Commissioner of Income Tax (Appeals)-17, Mumbai (‘CIT(A)’ for short) dated 29.11.2013, partly allowing the assessee’s appeal contesting it’s
2 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 17.12.2012.
At the very outset, it was submitted by the ld. Authorized Representative (AR), the assessee’s counsel, that the principal issue in the assessee’s appeal is qua the disallowance u/s. 14A, made suo motu by the assessee at Rs.91,24,735/- in respect of dividend income of Rs.162.05 lacs, which stands enhanced in assessment to Rs.158.54 lacs. The reason for the same is the non-exclusion of the investment in shares of the subsidiary company/s on the ground that even if income there-from arose or stands received by the assessee during the relevant year, the same would only be tax-exempt income and, therefore, the said asset/s qualifies to be a tax-exempt asset/s. This is as the shares in the subsidiary company/s are not listed, and both the dividend as well as the long-term capital gain arising thereon would not be tax-exempt u/ss. 10(34) or 10(38) of the Act. Reference for the purpose was made by him to the assessee’s computation appearing at page 6 of the paper-book (PB). Further, the disallowance of interest has been made by the assessee u/s.14A r/w rule 8D(2)(i) by relating each investment with the corresponding borrowing, while the Revenue has adopted an average formula prescribed under rule 8D(2)(ii) for indirect interest. The ld. CIT(A) has merely confirmed the disallowance as such. On being queried by the Bench that there is no finding in the orders by the Revenue authorities of the shares in the subsidiary company/s being not listed, he would submit that the matter could be remanded back for the purpose, even as was done by the Tribunal for another year. Again, as regards the working of direct interest, he could not show us the same - not forming part of the record, though would contend that the same had been supplied in the assessment proceedings, and that the AO in the remand proceedings could also verify the same as well.
3 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. The ld. Departmental Representative (DR), on the other hand, would submit that there is nothing on record to exhibit that the investment in the subsidiary company/s is unlisted and, further, that the assessee had in the course of assessment proceedings provided the working of the direct interest, so that in its absence no infirmity could be said to inflict the orders by the Revenue authorities, which therefore merit being upheld.
We have heard the parties, and perused the material on record. 3.1 The working of the disallowance by the assessee is as under: (PB page 6) Working for Disallowance u/s. 14A read with Rule 8D (Rs. in lakhs) Particulars 31.3.2009 31.3.2010 Investments See Note 1 9361.57 15,57,136 Average Investments (A) 12466.47 Assets See Note 2 64062.06 64884.05 Average Assets (B) 64473.06 Interest expenditure 97.79 Disallowance u/s. 14A A. Directly Attributable Interest Working 28.92 B. Indirect Interest (A)*(C)/(B) Nil C. Other expenses 0.5% of (A) 91.25
Particulars 31.03.2009 31.03.2010 Investments (as per Balance Sheet) 17057.49 31562.77 Add: Stock in trade 29.38 7.31 Less: Investment in subsidiary (Unquoted) *** -7,725.30 -15,998.71 Total 9361.57 15571.36 2. Assets Fixed Assets – net block 121.16 2245.35 Investments 17057.49 31562.77 Deferred tax asset 22.51 398.27 Current Assets 48860.90 30677.67 Total 64062.06 64884.05
4 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. The Assessing Officer’s (AO’s) working, since approved by the ld. CIT(A), is as under: Particulars 31.3.2009 31.3.2010 Investments (as per Balance Sheet) 17,057.49 31,562,77 Add: Stock in trade 29.38 7.31 Less: Investment in subsidiary -15,998.71 -7,725.30 (unquoted) *** Total 1,088.16 23,844.77 Sl. Particulars Amt. (Rs.) Amt. (Rs.) No. 1 Amount of expenses directly related to the income A Amount of interest expenses other than 1(A) 97,79,000 B1 Investments as on 01.4.09 1,70,86,87,000 B2 Investments as on 31.3.10 3,15,70,08,000 B Average value of investment [B + (B1+B2)/2] 2,43,28,47,500 C1 Assets as on 01.4.09 6,48,84,05,000 C2 Assets as on 31.3.10 6,40,62,06,000 C Average of total assets [C=(C1 + C2)/2] 6,44,73,05,500
2 Attributable indirect interest expenses [A*B/C] 36,90,040 3 ½% of the average value of investment 1,21,64,238 Disallowance under section 14A (1+2+3) 1,58,54,278 3.2 The exclusion or otherwise of the investment in the subsidiary company/s in working the disallowance u/s. 14A r/w rule 8D would depend on whether the shares thereof are quoted or, as claimed, unquoted. This is as exemption of dividend on shares or long-term gain on their transfer is confined to only listed shares. The burden of proving the same being unlisted, as well as the source of the investment in subsidiary company/s, is only on the assessee, so that both the matters would require being factually determined. This is particularly so as the disallowance u/s. 14A is in the nature of a statutory disallowance. However, once the assessee makes a claim in its respect with reference to its accounts, the onus to rebut the same would shift to the AO. The orders by the Revenue authorities are sans any findings qua material aspects.
5 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. The matter is, accordingly, restored to the file of the AO for the purpose, who shall determine the issue afresh, issuing definite findings of fact after hearing the assessee. We in fact observe another difference between the working by the assessee and the Revenue, i.e., with regard to the treatment of stock-in-trade; the assessee having excluded the same on the ground that it yields taxable income only. TheTribunal in the case of D. H. Securities (P.) Ltd. vs. Dy. CIT [2014] 146 ITD 1 (Mum) (TM) and Dy. CIT vs. Damani Estates & Finance (P.) Ltd. [2013] 25 ITR (Trib) 683 (Mum), after an exhaustive analysis of the relevant provisions, and considering that the dividend as well as the long-term gain arising on the shares held as stock-in-trade, would yield primarily taxable income, restricted the same to 20% of the sum exigible for disallowance under either r. 8D(2)(i) or r. 8D(2)(ii).The indirect administrative expenditure would though continue to be governed by r. 8D(2)(iii). We, respectfully following the same, hold like-wise. The finding as to stock-in-trade would however have to precede the application of the said formula. We decide accordingly.
The second issue, raised per Ground 2 of its appeal by the assessee, relates to disallowance of deduction u/s. 80-G in respect of ‘donation’ of Rs.50 lacs to one, K. D. Education Trust. The same has been as the assessee could not admittedly evidence the donation by producing its’ receipt. The assessee’s case before us was that the receipt stands lost, and even its duplicate could not be produced as the payee also claims to have lost the relevant records. That, however, would not mean that no donation has been made by the assessee, particularly considering its’ bank statement which clearly depicts the payment of the relevant amount on 4.8.2009 (PB pg. 72) as well as the order u/s. 80-G(5)(vi) in respect of K. D. Education Trust (PB pg. 71) granting approval u/s. 80-G, which is valid up to 31.3.2010.
We have heard the parties, and perused the material on record. The onus to prove its’ return, and the claims preferred thereby, is only on the assessee (refer: CIT
6 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. vs. Calcutta Agency Ltd. [1951] 19 ITR 191 (SC)). The question is if it has led sufficient evidence in support thereof, so that the Revenue, in not accepting its claim, is not acting reasonably. We think that it is not so in the instant case. While the bank statement clearly depicts the payment of Rs.50 lacs to K. D. Education Trust by cheque no. 658595 on 04.8.2009, the question would be: On what account? The assessee may well have given a loan to the payee-trust. It is only a certificate or a receipt by the payee-trust that would confirm the legal character of the payment, so that the assessee does not retain any right, title or interest in the said property and also that it is the same entity to which approval u/s. 80-G(5)(vi) stands granted. It is also surprising that both the payer and the payee have lost the relevant records. The assessee has also not produced any material to exhibit the efforts made by it to retrieve the receipt in-as-much as the payee is only supposed to have a copy thereof, or of the records of the payee being destroyed/untraceable, or otherwise cause to establish the amount paid being a donation. Under the circumstances, we only consider it proper that this aspect would also stand to be restored to the file of the assessing authority to allow the assessee an opportunity to prove its’ case. Why, the corpus of the payee institution, toward which the donation is presumably to form part of, is a continuing amount, carried over from year to year, so that its break-up ought to be available. We decide accordingly.
Revenue’s Appeal (ITA No. 690/Mum/2014) 6. The issue in the Revenue’s appeal is with regard to the loss arising on the valuation of the assessee’s outstanding as at the year-end. It was, however, at the out- set observed that the tax effect of the Revenue’s appeal is below Rs.10 lacs, and which is therefore not maintainable u/s. 268A of the Act in view of the recent Instruction issued by the Board (Instruction No. 21 of 2015 dated 10.12.2015 (F. No. 279/Misc/142/2007-IT(PT)). The ld. Departmental Representative (DR) fairly 7 & 690/Mum/2014 (A.Y. 2010-11) Hinduja Ventures Ltd. conceded to the said tax effect of the instant appeal being well below Rs.10 lacs, the claim under dispute - since allowed by the ld. CIT(A), being for Rs.16,06,582/-.
In view of the foregoing, the Revenue’s appeal is not maintainable u/s. 268A of the Act, requiring the appellate authorities to have regard to the monetary limit prescribed by the Board, which per its Circular dated 10.12.2015 (supra) is at Rs.10 lacs for the Appellate Tribunal, i.e., for appeals preferred by the Revenue. The same is therefore dismissed as incompetent. We decide accordingly.