Mumbai v. M/S Godrej Industries Ltd., Mumbai

- Chitra Sonawane IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.218 OF 2018 Pr. Commissioner of Income Tax-14, Mumbai Vs. M/s Godrej Industries Ltd., Mumbai .. Appellant. .. Respondent. ..... Mr. Suresh Kumar for the appellant. Mr. P. J. Pardiwalla, Senior Advocate a/w Mr. Jitendra Jain i/b Mr. Atul K. Jasani, Advocate for the respondent. Digitally signedCORAM : K. R. SHRIRAM &by CHITRACHITRASANJAY N.R. BORKAR, J.J.SANJAYSONAWANESONAWANEDate:2022.04.20by CHITRACHITRASANJAY N.R. BORKAR, J.J.SANJAYSONAWANESONAWANEDate:2022.04.2015:29:33 +0530DATED : 11[ ] DATED : 11[ ] APRIL, 2022. P.C. 1.Following substantial questions of law are proposed in the appeal. a)Whether in law and on the facts of theinstant case, was the Tribunal right inupholding the decision of the CIT(A) in partlyconfirming the decision of the CIT (A); that iscontrary to the provisions of Section 14-A r/wRule 8-D, that has been introduced withretrospective effect from 1.4.1962. b)Whether on law and in the facts of theinstant case, was the Tribunal right indeleting the addition of interest disallowed bythe AO, in the absence of any evidence thatindicated that borrowed funds were not usedfor the purpose of making investments thatyielded exempt income? c)Whether in the law and on the facts of theinstant case, was the Tribunal right indirecting to exclude strategic investmentswhile calculating the disallowance under Rule8 D(2)(iii) of the Rules, d)Whether in law and on the facts of theinstant case, was the Tribunal right inupholding the direction of the CIT(A) that theCENVAT credit to the value of closing stock isnot to be adjusted u/s 145 of the Act ? 2.Mr.Suresh Kumar, learned Counsel for the appellant state thatquestion (d) proposed has been covered against revenue in earlier yearsand therefore, would no more be a substantial question of law. 3.As regards remaining questions, the Tribunal has deleteddisallowance on account of interest under Rule 8(D)(2)(ii) in toto andso far as disallowance under Rule 8(D)(2)(iii) is concerned,investments made in the sister concerns, 0.5% was disallowed asadministrative expenses. 4.Learned Counsel state that in view of Maxopp Investment Limited Vs. Commissioner of Income Tax, New Delhi reported in(2018) 91 taxmann.com 154 (SC), the Court may remand the matterback to the Tribunal to consider whether in law and in facts of the case,the Tribunal could exclude strategic investments while calculatingdisallowance under Rule 8 (D)(2)(iii) of the Rules. Orderedaccordingly. The Tribunal will also consider whether respondent’s contention that investments made by it in group Companies were made from a strategic perspective as to maintain controlling stake in the saidcompanies and not solely for the purpose of earning any dividendincome. If the answer to this, is in affirmative then, whether anyexpenditure can be apportioned towards earning of such dividendincome for the year under consideration and if the amount apportionedshould be excluded while calculating the disallowance under Rule8D(2)(iii) of the Rules. 5.The Tribunal shall also consider the law laid down in MaxoppInvestment Limited (supra) while deciding the issue. 6.We clarify that we have not made any observations on the meritsof the case. 7.As regards interest issue mentioned, Counsel state that it isalready covered by the Supreme Court Judgment in the case of SouthIndian Bank Ltd. Vs. Commissioner of Income Tax, 2021(438) ITR 1 (SC). 8.Appeal disposed accordingly. (N.R. BORKAR, J.) (K.R. SHRIRAM, J.)