DOUBLEDOT FINANCE LTD,MUMBAI vs. DCIT RG 4(1), MUMBAI

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ITA 3571/MUM/2015Status: DisposedITAT Mumbai17 August 2016AY 2010-115 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that stock-in-trade should be excluded from the computation of average investment for calculating disallowance under Rule 8D(2)(iii). Regarding interest under Sections 234B and 234C, the Tribunal directed the AO to re-examine the levy based on peculiar facts and circumstances, considering Supreme Court judgments.

What were the facts?

The assessee appealed against the disallowance of 0.50% of the average value of stock in trade and investments under Section 14A read with Rule 8D. The assessee also raised an additional ground regarding the levy of interest under Sections 234B and 234C in cases determined under Section 115JB.

What were the issues?

Whether stock-in-trade should be included in average investment for disallowance under Section 14A, and whether interest under Sections 234B and 234C is leviable in cases determined under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB,Section 234B,Section 234C

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI D.KARUNAKARA RAO

For Appellant: Shri Dharmesh Shah (AR)
For Respondent: Shri O.P. Meena (DR)
Hearing: 11.08.2015Pronounced: 17.08.2016

Date of Hearing : 11.08.2015 Date of Pronouncement : 17.08.2016 O R D E R D.KARUNAKARA RAO, AM: 1. This is the appeal filed by the assessee against the order of CIT(A)- 9, Mumbai dated 05.03.2015. Assesee raised the following Grounds and the same reads as under:

1.

The Learned Commissioner of Income Tax (Appeals) 9 has erred in confirming the disallowance at the rate of 0.50% of the average value of Stock in Trade u/s 14A of the Act read with Rule 8D.

2.

The Learned Commissioner of Income Tax (Appeals) 9 has erred in disallowing 0.50% of the average value of both Investments & Stock in Trade u/s 14A of the Act read with Rule 8D while computing income u/s 115Jb of the Act.

3. The Appellant craves leave to add, alter, amend or delete any or all of the above mentioned grounds of appeal.

2. Further, assessee filed a letter dated 10.08.2016 raising an additional Ground which is as under:

The Ld. CIT(A) erred in law and in facts in not appreciating that the interest u/s. 234B and 234C of the Act cannot be levied in case where the income is determined on the basis of the provisions of s. 115JB of the Act.

3.

Regarding the additional Ground, I find that the issue raised constitutes a legal issue and therefore, after hearing both the parties, I hereby admit the same and adjudicate in the following paragraphs of this order.

4.

To start with, I shall deal with the regular Ground raised before us and I find it relates to the exclusion of ‘stock-in-trade’ for the purpose of computation of ‘average investment’ for determining the disallowance under Rule 8D(2)(iii) of the I.T. Rules r.w.s 14A of the Act.

5.

Before me, on the above issue, it is the contention of the assessee, the stock-in-trade needs to be excluded for the purpose of “average investment”, which is the base figure for computing the disallowance applying rate of 0.5%. It is the contention of the assessee, the stock-in- trade, being not an investment should be excluded from the “average investment” and only the resultant adjusted “average investment” is required to the considered for calculating disallowance applying the rate of 0.5%. In support of the said interpretation, ld. Counsel for the assessee brought my attention to one of my orders in the case of M/s.

India Advantage Securities Ltd. (ITA No. 3759/Mum/2014–AY-2009-10 dated 10.02.2016).

6.

Bringing my attention to para-9 to 13, the counsel submitted that the similar directions, the matter can go back to the AO for applying ratio laid down in the said decision and calculating the disallowance as per the said order. After hearing both the parties, I have gone through the paras 9 to 12 and find the AO should be directed to follow the said order scrupulously. The AO should understand that the expression ‘investment’ is not to be confused the expression ‘stock-in-trade’ which is a current asset. AO is directed accordingly.

7.

In the result, regular ground filed by the assessee is allowed as above.

8.

Regarding the second issue relating to levy of statutory interest in respect of taxes relatable to the book profits determined u/s 115JB of the Act. Ld. Counsel for the assessee relied on the decision of the Tribunal in the case of Rockline Developers P. Ltd. (ITA No. 6595/Mum/2014-AY- 2011-12 dated 01.01.2016 wherein vide para-5 of the order, AO is directed to recalculate the interest and allowed the ground of the assessee in his favour partly.

9.

I perused the same and find the same is relevant, therefore, para-5 is extracted as under:

“5. We have heard the rival submissions and perused the material before us. We find that the levy of interest u/s. 234B and 234C in case of companies governed by MAT provisions was finally settled by the Hon’ble Apex Court on 7.1.2011, that before that the assessees were under bonafide belief that they had not to pay adv tax as per the provision of sec.207/208 of the Act, that after 07.1.2011 position became very clear that the assessees to be taxed u/s. 115JB would also have to pay advance tax. Considering the peculiar facts and circumstances of the case, we are of the opinion that interest should be levied for the default of March installment only and not for the earlier three installments. The AO is directed to recalculate the interest accordingly. Ground B is decided in favour of the assessee in part.”

10.

Considering the above, I am of the view that the interest should not be levied without examining the peculiar facts and circumstances of the case. AO is directed to examine the same and applying the cited Supreme Court’s judgments in the case of Kwality Biscuits (284 ITR 434)

& Rolta India (330 ITR 470) etc. AO shall grant opportunity of being heard to the assessee properly. Accordingly, the additional ground raised by the assessee is decided as above.

11.

In the result, appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open court on this 17th day of August, 2016.

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