Piramal Sunteck Reality P.Ltd, Mumbai vs Department Of Income Tax

आयकर अपीलीय अिधकरण, अिधकरण मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'C' MUMBAI सव ौी आय.पी. बंसल, याियक सदःय एवं चंि पुजार , लेखा सदःय के सम BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER

ITA NO.5169/MUM/2013 (A.Y. 2010-11)

The DCIT, Cir.7(1), M/s. Piramal Sunteck Reality Room No.622, Aaykar Bhavan, Pvt. Ltd. MK Road, Mumbai 400020 Vs. 4th Floor, Piramal Tower, (Appellant ) Annexe, GK Marg, Lower Parel, Mumbai 400 013 PAN: AAECP 4731G (Respondent)

Appellant by : Shri Premanand J. Respondent by : Shri Rakesh Joshi

Date of hearing : 24/02/2015 Date of pronouncement : 24/02/2015

ORDER

PER I.P.BANSAL, J.M:

This is an appeal filed by the Revenue and it is directed against order passed by Ld. CIT(A)-13, Mumbai dated 22/05/2013 for assessment year 2010-11. The grounds of appeal read as under:

"(i) The Learned CIT(A) has erred on facts and in law, in restricting the disallowance of Rs.24,30,072/- to Rs.5.00 lacs under section 14A r.w.r. 8D, without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer.

(ii) The Learned CIT(A) has erred on fact and in law, in restricting the disallowance of Rs.24,30,072/- to Rs.5 lacs - under section 14A r.w.r. 8D, 2 ITA NO.5169/MUM/2013 (A.Y. 2010-11)

ignoring the fact that disallowance under section 14A as per rule 8D is justified and also rule 8D is to be applied for computation of disallowance under section 14A as per rule 8D is justified and also rule 8D is to be applied for computation of disallowance under section 14A from A.Y 2008-09 onwards as held by the Hon'ble Bombay High Court in the case of Godrej & Boyce."

2. During the year under consideration the assessee made following investment in subsidiary companies, the details of which is placed at page 14 of the paper book.

S.No. Date of Investment in Amount (Rs. Date of Source of Amount (In Investment shares Receipt investment Rs.) 1. 27.10.2009 Starlight 771,600,000 27.10.2009 Alpex 771,600,000 Systems Pvt. International Ltd. Ltd. 2. 1. 19/11/2009 Topzone 1.25.09.2009 1. 25.09.2009 1. Vishwas 1. 3,75,000 2.12.10.2009 Mercantile 2.7,00,00,000 2. 09.10-2009 Finvest Pvt. Ltd. 2. 7,30,00,000 3.12.10.2009 Co.Pvt. ltd. 3.8,00,00,000 3. 09.10-2009 2. Alpex 3. 4,00,00,000 4. 09.10.2009 International 4. 3,50,00,000 5. 09.10.2009 Ltd. 5. 55,00,000 3. Sunteck Realty Ltd. 4. Suntek Realty Ltd. 5. Sunteck Realty Ltd.

3. During the year under consideration, the assessee received dividend income of Rs.1,625/-, which was claimed as exempt under section 10(35) of the Income Tax Act, 1961 (the Act). The AO required the assessee to explain as to why the disallowance should not be made under section 14A r.w.r. 8D. The assessee vide letter dated 23/10/2012 submitted that no expenditure whatsoever was incurred for earning exempt income. It was submitted that investments have been made by the assessee from its own funds and no borrowed funds were involved. However, it was submitted that an adhoc sum of Rs.5000/- may be disallowed under section 3 ITA NO.5169/MUM/2013 (A.Y. 2010-11)

14A of the Act. The AO did not accept such submission of the assessee and applying rule 8D, he calculated the disallowance of Rs.24,30,072/- as under:

i) Direct Expenses - Rule 8D (2)(i) Nil ii) Indirect Interst expenses Rule 8D(2)(ii) Rs. 81,589/- iii)0.5% of average investments- 8D(2)(iii) Rs. 23,48,483/- TOTAL Rs. 24,30,072/- ============

4. The submissions made by the assessee before AO were reiterated before Ld. CIT(A). It was submitted that no expenditure whatsoever was incurred to earn exempt income. Considering the facts of the case Ld. CIT(A) has arrived at a conclusion that the disallowance, if any, was called for, the same should be to the extent of Rs.5.00 lacs and he restricted the disallowance to a sum of Rs.5.00 lacs. The relevant observations of Ld. CIT(A) are as under:-

"2.3 I have considered the facts of the case.

2.3(a) In view of the appellants above submissions, the disallowance under Rule 8D(2)(ii) of indirect interest expenses of Rs.81,589/- is deleted since the interest expenditure was pertaining to loan which loan was not utilized for the purpose of investments.

In respect of administration and managerial expenses, disallowed by the AO at Rs.23,48,483/- under Rule 8D(2)(iii), being 0.5% of average investments, there is force in appellants argument that 4 single transaction of investments in shares of 4 companies does not require incurring of such huge expenses. As per balance sheet, the appellant has made fresh investments in the shares of 4 companies. However, in the shares of 2 companies, investments were only at Rs.1 lac and Rs.1,150,000/- The major investments was in shares of only 2 companies. These were single investment transactions and therefore were not requiring incurring of such huge expenses for the purpose of taking decisions for purchase of shares and thereafter management of such investments. Considering the facts and circumstances of the case, the disallowance made by the AO at Rs.23,48,483/- under Rule 8D(2)(iii) is reduced to Rs.5 lacs.

4 ITA NO.5169/MUM/2013 (A.Y. 2010-11) In the result, the disallowance made by the AO under Sec. 14A at Rs.24,30,072/- is reduced to Rs.5 lacs."

5. Ld. DR relying upon the assessment order pleaded that rule 8D was rightly invoked by the AO and Ld. CIT(A) has committed an error in granting impugned relief to the assessee.

6. On the other hand, it was submitted by Ld. AR that order passed by Ld. CIT(A) should be upheld as the same is based on facts. He submitted that according to the facts of the case assessee did not incur any expenditure and in similar situation, Mumbai ITAT in the case of M/s .JM Financial Limited vs. Addl. CIT vide order dated 26/3/2014 in ITA No.4521/Mum/2012 have deleted the addition and copy of the said order was also placed on our record. It was submitted that Hon'ble Delhi High Court also in the case of CIT vs. Oriental Structural Engineering Pvt. Ltd. has accepted the disallowance only to the tune of 2% of the dividend income and copy of the said order dated 15/1/2013 was placed on our record. Thus, it was pleaded by Ld. AR that Ld. CIT(A) did not commit any error in upholding disallowance to the extent of Rs.5.00 lacs in place of disallowance calculated by AO u/r 8D amounting to Rs.24,30,072/-.

7. We have heard both the parties and their contentions have carefully considered. After careful consideration, we are of the opinion that order passed by Ld. CIT(A) does not call for any interference for the reason that according to the facts of the case the assessee did not make direct expenses for earning exempt income which can be said to be exceeding Rs.5.00 lacs. Ld. CIT(A) has clearly 5 ITA NO.5169/MUM/2013 (A.Y. 2010-11)

brought out the facts in his order and these facts have not been disputed by the Revenue.

7.1 In this view of the situation, after hearing both the parties, we decline to interfere in the relief granted by Ld. CIT(A) and his order is upheld.

8. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 24/02/2015 आदे श क" घोषणा खुले यायालय म& 'दनांकः 24/02/2015 को क" गई ।

Sd/- Sd/- (चंि पुजार /CHANDRA POOJARI ) (आय.पी. बंसल / I.P. BANSAL) लेखा सदःय /ACCOUNTANT MEMBER याियक सदःय / JUDICIAL EMBER मुंबई Mumbai; 'दनांक Dated 24/02/2015 आदे श क" ूितिल.प अमे.षत/Copy षत of the Order forwarded to : 1. अपीलाथ1 / The Appellant 2. ू2यथ1 / The Respondent. 3. आयकर आयु3(अपील) / The CIT(A)- 4. आयकर आयु3 / CIT

5. .वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स2या.पत ूित //True Copy//

उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai