Renaisssance Jewellery Ltd, Mumbai vs Department Of Income Tax

BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) सव ी बी.आर.बा करन, लेखा सद य एवं ी संजय गग , या यक सद य के सम

आयकर अपील सं./I.T.A. No.6860/Mum/2012 ( नधा रण वष / Assessment Year : 2008-09)

Assistant Commissioner of बनाम/ M/s Renaissance Jewellery Ltd., Income Tax 8(3), Vs. Plot No.36A and 37 MIDC Marol, Room No.217, Seepz, Aayakar Bhavan, M K Marg, Andheri, Mumbai-400020. Mumbai-400096. (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AACCR2148B

अपीलाथ ओर से / Appellant by Shri Love Kumar यथ क# ओर से/ Respondent by Shri Sanjay R Parikh

सन ु वाई क# तार'ख / Date of Hearing : 3.3.2015 घोषणा क# तार'ख /Date of Pronouncement : 3.3.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The appeal filed by the revenue is directed against the order dated 31.8.2012 passed by Ld CIT(A)-18, Mumbai and it relates to the assessment year 2008-09. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the disallowance made u/s 14A of the Act.

2. We heard the parties and perused the record. We notice that the AO, during the course of assessment proceedings, noticed that the assessee had received dividend income from Mutual funds to the tune of Rs.53,38,266/- and claimed the same as exempt. Hence the AO 2 ITA. No.6860/Mum/2012

disallowed following amounts as per the provisions of Sec. 14A r.w. Rule 8D of IT Rules.

Proportionate interest u/s Rule 8D(2)(ii) 21,32,028 Administrative expenses 3,23,337

The assessee accepted the disallowance of administrative expenses, but contested the disallowance of interest by filing appeal before Ld CIT(A). The assessee contended that it had parked the proceeds received through Initial Public Offer (IPO) in Mutual funds and no part of borrowed funds was used for making investment. The Ld CIT(A) accepted the contentions of the assessee and accordingly restricted the disallowance of proportionate interest to Rs.214/-. Aggrieved, the revenue has filed this appeal before us.

3. The Ld D.R placed strong reliance on the assessment order. However, the Ld A.R pointed out that the assessing officer himself has accepted the fact that the investment has been made out of IPO proceeds. He invited our attention to the following observations made by the AO in paragraph 4.2 of the assessment order:-

" Replies and submissions of the assessee company are considered. Assessee was able to show that there are no direct expenses in relation to the earning of dividend income. Further assessee also proved that the investment in the mutual fund is out of the proceeds of IPO and as such no utilization of the borrowed fund for the purpose of making investment. In view of the same, no disallowance on account of interest is called for. Assessee has, further, claimed that there are no indirect expenses as the dividend gets accumulated and finally disbursed through ECS. However, the possibility of indirect expenses cannot be ruled out. Therefore, I compute the disallowance u/s 14A read with Rule 8D as under...."

4. Thus, we notice that the AO, after having satisfied himself that the investment has been made out IPO proceeds, has however proceeded to disallow the proportionate interest expenditure also. We further notice 3 ITA. No.6860/Mum/2012

that the assessee has further substantiated its claim by demonstrating before Ld CIT(A) that the funds were borrowed for specific purposes and hence there was no diversion. Since it was established that the borrowed funds were not diverted, rather the investments have been made out of interest free funds, we are of the view that there is no requirement of making any disallowance out of interest expenditure. Under these set of facts, we do not find any infirmity in the decision of Ld CIT(A) and accordingly uphold his order.

5. In the result, the appeal filed by the revenue is dismissed.

Pronounced accordingly in the open court on 3rd March, 2015 in the presence of both the parties.

घोषणा खुले यायालय म+ ,दनांकः 3rd March, 2015 को क# गई ।

sd sd

(संजय गग /SANJAY GARG) ( बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

मंब ु ई Mumbai:3rd March,2015. व. न.स./ SRL , Sr. PS

आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु1त(अपील) / The CIT(A)- concerned

4. आयकर आयु1त / CIT concerned

5. 2वभागीय त न4ध, आयकर अपील'य अ4धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील'य अ4धकरण, मुंबई /ITAT, Mumbai