TaxTMI 
TaxTMI 
2016 (2) TMI 1409
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.... (i) Disallowance under section 14A Rs. 1,60,37,000/- (ii) Difference in valuation of closing stock Rs. 5,88,08,382/- (iii) Payment to Clubs Rs. 4,91,427/- (iv) Disallowance of expenditure on Guest House Residential Flats Rs.4,03,77,121/- 2.2 Aggrieved by the order of assessment for assessment year 2009- 10 dated 29/12/2011, the assessee preferred an appeal before the CIT(Appeals)-12, Mumbai. The Ld. CIT(A) disposed of the appeal vide order dated 6/9/2013 allowing the assessee partial relief. 3. Being aggrieved by the order of the CIT(Appeals)-12, Mumbai, the assessee has preferred this appeal before the Tribunal. Originally, the assessee filed certain grounds alongwith the appeal Memo and also additional grounds of appeal vide submission dated 23/04/2014. Subsequently, the assessee filed revised grounds of appeal on 16/11/2015, which are being taken up for adjudication and are extracted hereunder:- "1.The order of the CIT(A) is unsustainable and non-speaking in law since it is (a) against the facts and circumstances of the case; (b) against the principle of equity and natural justice and (c) without adjudicating the arguments raised by the Ap....
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.... said investments in instrumentS that earned exempt income. The Ld. Representative for the assessee drew the attention of the Bench to the Paper Book (pages 1 to 65) filed by the assessee and specifically to pages 24,26 and 34 to show that the assessee had substantial own interest free funds of Rs. 488.938 crores, which were far in excess of the investment in Mutual Funds amounting to Rs. 42.66 crores which earned exempt income of Rs. 77.87 lakhs. It was also submitted that the assessee has sufficient cash flow from business of Rs. 131.21 crores. In these circumstances it was contended that since only interest free own funds of the assessee were available and used for investment in mutual funds that generate tax free income, no disallowance in this regard could be made under section 14A of the Act. In support of this proposition, the Ld. Representative for the assessee for the assessee placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 2008-09, wherein in its order in ITA No.824/Mum/2012 dated 26/2/2015, the same issue on similar facts was held in favour of the assessee. The assessee also placed reliance on t....
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....7 Lakhs under section 14A of the Act 6.1 On due consideration, we admit this additional ground for adjudication in the interest of justice and equity. In this ground, the assessee contends that the disallowance of general expenses of Rs. 12.27 lakhs has been made by the Assessing Officer under section 14A of the Act without taking into account the fact that the assessee had itself disallowed Rs. 1.20 lakhs as expenditure incurred for earning of exempt income. It is also contended that since the Assessing Officer had neither found any discrepancy in the claim of the assessee nor recorded any satisfaction for making such disallowance, no disallowance on this count could be made by the Assessing Officer. In support of this proposition, the Ld. Representative for the assessee placed reliance on the following judicial decisions:- (i) Graviss Hospitality Ltd. (ITA Nos.3542&4801/Mum/2013 dated 21/11/2014 (ii) SIL Investment Ltd. (ITA No. 2431/Del/2010 and CO No.349/Del/2010 Dated 4/5/2012 for the disallowance u/r. 8D(2) (iii) to be restricted to 5%. It was submitted that in any case the disallowance under section 14A r.w.s. Rule 8D made at Rs. 1.60 crores should not have ex....
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....D. In the factual matrix of the case on hand, we find that the Assessing Officer has proceeded to apply Rule 8D for the purpose of disallowance under section14A of the Act, without complying with the mandatory requirements of Section 14A(2) of the Act or Rule 8D. In our view, once the Assessing Officer has failed to comply with the statutory requirement, he then cannot proceed to make the disallowance under section 14A(1) of the Act. In coming to this view, we drew support from and rely on the finding rendered by the Co-ordinate Bench of this Tribunal in the case of Graviss Hospitality Ltd. in ITA No.352& 4801/Mum/2013 dated 21/11/2014. In this view of the matter, we delete the disallowance under section 14A r.w. Rule 8D(2)(iii) of the Rules amounting to Rs. 12.27 lakhs to the extent it is excess of the suo-moto disallowance of Rs. 1.20 lakhs made by the assessee. It is accordingly ordered. Consequently, Ground No.2(b) is allowed as indicated above. 7. Ground No.3 - Adjustment to Valuation of Closing Stock - Rs. 5,58,08,382/- 7.1 In this Ground, the assessee contends that the Ld. CIT(A) erred in not deleting the adjustments made by the Assessing Officer to the value of closin....
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....e of the AC and the closing stock valuations have to be redone in the light of the provisions of section 145A of the Act. Accordingly, we remand the issue to the file of the AO for adjudicating the issue afresh after granting a reasonable opportunity of being heard to the assessee. Accordingly, ground No.3 raised by the assessee is allowed for statistical purposes." 7.3.2 The above order of the Tribunal was followed by another Coordinate Bench in the assessee's owncase for assessment year 2008-09in ITA No.824/Mum/2011 dated 26/2/2015. Following the aforementioned orders of the Co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 2007-08 and 2009-10, we remand this issue to the file of the Assessing Officer for adjudicating this issue afresh, after affording adequate opportunity of being heard and to file details/submissions required. Accordingly, Ground No.3 is treated as allowed for statistical purposes. 8. Ground No.4 - Guest House expenses - Rs. 4,03,77,121/- 8.1 In this ground, the assessee contends that the Ld. CIT(A) erred in confirming the disallowance of guest house expenses without appreciating the evidences and submissions bef....