M/s Chandigarh Finance Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

CO 32/CHANDI/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0324 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K MITTAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.546/CHD/2014 ASSESSMENT YEAR: 2008-09 THE DCIT, VS. CHANDIGARH FINANCE PVT. LTD. CENTRAL CIRCLE II SCO 98-99 CHANDIGARH SUB CITY CENTRE, SECTOR 34 CHANDIGARH PAN NOAAACC0629C & CROSS OBJECTION NO. 32/CHD/2014 (IN ITA NO.546/CHD/2014 ) ASSESSMENT YEAR: 2008-09 CHANDIGARH FINANCE PVT. LTD. VS. THE DCIT SCO 98-99 CENTRAL CIRCLE II SUB CITY CENTRE, SECTOR 34 CHANDIGARH CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. S.K. MITTAL RESPONDENT BY : SHRI. ASHOK GOYAL DATE OF HEARING : 11/02/2015 DATE OF PRONOUNCEMENT : 13/02/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 26/03/2014 PASSED BY THE CIT(A)(CENTRAL) GURGAON. 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUND WHICH ARE AS UNDER : (I) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE ON THE ISSUE OF DIS ALLOWANCE OF RS. 2 9,78,615/- U/S 14A OF IT ACT, 1961 READ WITH RULE 8 D WITHOUT APPRECIATING THE FACT THAT ON PRINCIPLE, THE ASSESS EE ALSO AGREED TO THE VERSION OF THE AO THAT SOME EXPENDITURE HAS BEEN INCURRED TOWARDS EARNING OF EXEMPT INCOME WHICH IS EVIDENT F ROM THE FACT THAT THE ASSESSEE HAS ITSELF DISALLOWED A PART OF I NTEREST DEBITED TO PROFIT & LOSS A/C AS BEING ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. (II) LD. CIT(A) ALSO ERRED IN NOT APPRECIATING THE FACT THAT SINCE BOTH THE AO AND THE ASSESSEE WERE AGREED AS TO THE DISAL LOWANCE OF PROPORTIATE INTEREST, THE QUANTUM OF DISALLOWANCE I S NOT TO BE DECIDED BY ESTIMATE BUT HAS TO BE COMPUTED IN ACCOR DANCE WITH THE PROVISION OF RULE 8D AS HAS BEEN DONE BY THE AO . 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS MADE INVES TMENTS ON WHICH DIVIDEND INCOME WAS EARNED WHICH WAS EXEMPTED FROM TAX, THEREFORE, PROVISIONS OF SECTION 14 A READ WITH RULE 8D WERE I NVOKED AND PROPORTIONATE DISALLOWANCE OF RS. 11,17,113/- WAS MADE. 4. ON APPEAL IT WAS MAINLY SUBMITTED THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE ON INTEREST BECAUSE ASSESSEE HAD PAID I NTEREST AMOUNTING TO RS. 40,19,043/- AND ASSESSEE HAD ALSO EARNED INTEREST A MOUNTING TO RS. 38,14,452/-. NET INTEREST OF RS. 2,04,591/- WAS INCURRED AND THA T AMOUNT HAS ALSO BEEN DISALLOWED BY ASSESSEE ITSELF. FURTHER AO HAS NOT F OUND ANY EXPENSES WHICH WERE INCURRED BY THE ASSESSEE THEREFORE, DISALLOWANCE WA S NOT JUSTIFIED. 5. THE LD. CIT(A) FOUND FORCE IN THIS SUBMISSION AN D DELETED THE ADDITION. 6. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 7. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT RULE 8D IS NOT APPLICABLE IN THIS YEAR AND ASSESSEE HAS ALSO D ISALLOWED THE AMOUNT OF INTEREST THEREFORE, FURTHER DISALLOWANCE WAS NOT JU STIFIED BY THE AO. HE ALSO STRONGLY SUPPORTED THE IMPUGNED ORDER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT CHANDIGARH BENCH OF THE TRIBUNAL IS CONSISTENTLY HO LDING THAT IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF M/ S GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DY. CIT 328 ITR 81, RULE 8D DOES NOT HAVE ANY 3 RETROSPECTIVE APPLICATION AND THEREFORE CANNOT BE A PPLIED FOR AY 2007-08 AND ONLY REASONABLE DISALLOWANCE CAN BE MADE. FURTHER A SSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE BECAUSE OF THE RECEIPT OF INTEREST AMOUNTING TO RS. 38,14,452 OUT OF THE TOTAL INTEREST EXPENSES MADE T O RS. 40,19,043. IN ANY CASE ASSESSEE HAS ALREADY DISALLOWED INTEREST THEREFORE FURTHER DISALLOWANCE WAS NOT CALLED FOR BY THE AO. THEREFORE, IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE AND WE UPHOLD HER ORDER. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . CROSS OBJECTION NO. 32 / CHD/2014 10. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT HE WISHES TO WITHDRAW THE CROSS OBJECTION AND ACCORDIN GLY THE ENDORSEMENT WAS ALSO MADE ON THE FORM 36A. 11. THE LD. DR HAD NO OBJECTION THEREFORE THE CROSS OBJECTION IS DISMISSED AS WITHDRAWN. 12. IN THE RESULT CROSS OBJECTION OF THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13/02/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR