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Deputy Commissioner of Income Tax -10 (3) , Mumbai Versus M/s. Bombay Oxygen Corporation Limited And Vice-Versa

2017 (9) TMI 1221 - ITAT MUMBAI

Disallowance u/s 14A r.w. Rule 8D2(ii) - Held that:- In respect of interest expenditure - CIT-A allowed claim - Held that:- On perusal of the order of the CIT(A) we find that the interest expenditure was deleted based on the fact that assessee made investments from out of the sale of land and no borrowed funds were utilized for such investments. Thus, the order of the Ld.CIT(A) in deleting the interest under Rule 8D2(ii) is sustained. - Whether investments not yielded income during the year .....

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er to compute the disallowance under Rule 8D2(iii) in accordance with the decision of the Special Bench (supra) - Referring the matter to the Valuation Officer u/s 55A(b)(ii) - addition on account understatement of capital gains - value adopted by the assessee is more than the fair market value adopted by the DVO - Held that:- In the case on hand also the case is covered by section 55A(a) since value of the asset claimed by the assessee is on the basis of the estimation made by the Registere .....

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DICIAL MEMBER For The Assessee : Shri Manish V. Shah, C.A. Shri Ikshu shah For The Revenue : Shri Vidusha Kalra ORDER PER C.N. PRASAD (JM) 1. The appeal and Cross Objection are filed by the Revenue and the assessee against the order of the Commissioner of Income Tax (Appeals)-21 Mumbai dated 01.11.2013 for the Assessment Year 2008-09. 2. The first ground in the Revenue s appeal is directed against deleting the disallowance u/s 14A r.w. Rule 8D2(ii).in respect of interest expenditure. 3. Briefly .....

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ments were made out of surplus funds of the assessee. Not convinced with the submissions of the assessee and not satisfied with the claim of the assessee that no expenditure was incurred for earning exempt income, the Assessing Officer invoking the provisions of Rule 8D computed the disallowance at ₹.78,96,449/- comprising of interest of ₹.37,28,564/- under Rule 8D2(ii) and towards administrative expenses of ₹.35,56,410/- being 0.5% of average value of investments under Rule 8D .....

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in the case of Reliance Utilities and Power Ltd [313 ITR 340] Ld.CIT(A) deleted the disallowance. However, he sustained the disallowance in respect of the administrative expenses of ₹.35,56,410/- being 0.5% of the average investments. 5. Ld. DR placing reliance on the order of the Assessing Officer submits that Ld.CIT(A) is not justified in deleting the interest disallowance. 6. We have heard the rival submissions perused the orders of the authorities below. On perusal of the order of the .....

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e of computing the average investments under Rule 8D2(iii). Ld. DR supported the orders of the lower authorities. 8. We have heard the rival submissions, perused the orders of the authorities below. Coming to the submissions made under Rule 8D2(iii) towards administrative expenses the assessee contended before the Ld.CIT(A) that section 14A cannot be applied to those investments from which no dividend is received. The assessee also placed reliance on the Hon ble Bombay High Court in the case of .....

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us, respectfully following the said decision we direct the Assessing Officer to compute the disallowance under Rule 8D2(iii) in accordance with the decision of the Special Bench (supra) 9. The second and last issue in the appeal of the Revenue is that the Ld.CIT(A) erred in holding that the Assessing Officer does not have any relevant circumstances for referring the matter to the Valuation Officer u/s 55A(b)(ii) of the Act and deleting the addition on account understatement of capital gains. 10. .....

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4,013/- as on 01.04.1981 was taken on the basis of valuation report of the Registered Valuer. Assessing Officer was of the view that the fair market value as on 01.04.1981 arrived by the Registered Valuer does not based upon any comparative sale instance in the immediate vicinity of the locality. He was also of the opinion that the estimation made by the Registered Valuer did not have any basis. Therefore, the property was referred to Departmental Valuation Officer (in short DVO ) u/s 55A(b)(ii) .....

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11. Assessee preferred an appeal before the Ld.CIT(A) and contended that value adopted by the assessee based on the Registered Valuer s report is only for the land and this value is much more than the fair market value as determined by the DVO and therefore, the reference is bad in law by placing reliance on various decisions in support of its contentions. It was also contended that there are no special circumstances for referring the matter for valuation as contemplated in section 55A(b)(ii) o .....

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at land in question is industrial as well as residential but Registered Valuer has taken only one rate. Therefore, the Ld. DR submits that the reference made by the Assessing Officer is in accordance with the provisions of the section 55A(b)(ii). 13. The Learned Counsel for the assessee vehemently supported the orders of the Ld.CIT(A). Learned Counsel for the assessee further submits that the property sold is only a land and the administrative block on such land. Therefore, there are no circumst .....

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The only reason given by Assessing Officer in the Assessment Order before referring the valuation to the DVO for such reference is that, the fair market value as on 01.04.1981 arrived by the Registered Valuer of the assessee is not based upon any comparative sale instances and the estimation made by the Registered Valuer did not have any basis. This is the only reason the Assessing Officer recorded for refereeing the matter for valuation u/s 55A(b)(ii). The Assessing Officer has not given any ex .....

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on the stamp duty valuation and the stamp duty valuation was applied only on the land portion excluding the structures i.e administrative building on such land. Therefore, the observation of the Assessing Officer that valuation adopted by Registered Valuer has no basis is not correct. On a perusal of the DVO s report we observe that the fair market value determined by the DVO is much less than the value adopted by the assessee which is based on the stamp duty valuation. Similarly, the sale cons .....

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rt dismissed the appeal of the Revenue holding that there is no substantial question of law and affirmed the order of the Tribunal in holding that the reference u/s 55A(a) is bad is law when the value adopted by the assessee is more than the fair market value adopted by the DVO. The Hon'ble Jurisdictional High Court also held that the contention of the Revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of section 55A(b)(ii) of the .....

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Court in the matter of Daulal Mohta HUF (supra). The revenue has not been able to point out how the aforesaid decision is 10 ITA.No.767/MUM/2014 (A.Y: 2008-09) CO.No.133/MUM/2017 (A.Y: 2008-09) M/s. Bombay Oxygen Corporation Ltd. inapplicable to the present facts nor has the revenue pointed out that the decision in Daulal Mohta HUE (supra) has not been accepted by the revenue. On the aforesaid ground alone, this appeal need not be entertained. However, as submissions were made on merits, we have .....

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artmental Valuation Officer. In fact, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified. 8. The contention of the revenue that in view of the amendment to Section 55A(a) of the Act in 2012 by which the words "is less tha .....

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