M/s Trident Limited, Ludhiana V. DCIT, C-1, Ludhiana

CO 40/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4557 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2018
• Assessment Year: 2015-2016
• Appeal Filed On: 23-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH !, ' # $ , . .. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 586/CHD/2018 '* + ,+ / ASSESSMENT YEARS : 2015-16 THE DCIT CIRCLE-1, RISHI NAGAR LUDHIANA- PUNJAB M/S TRIDENT LIMITED E-212, KITCHLU NAGAR LUDHIANA- PUNJAB ./ PAN NO: AABCA4139J / APPELLANT / RESPONDENT CROSS OBJECTION NO. 40/CHD/2018 ( ./ ITA NO. 586/CHD/2018) '* + ,+ / ASSESSMENT YEARS : 2015-16 M/S TRIDENT LIMITED E-212, KITCHLU NAGAR LUDHIANA- PUNJAB THE DCIT CIRCLE-1, RISHI NAGAR LUDHIANA- PUNJAB ./ PAN NO: AABCA4139J / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. ASHWANI KUMAR / REVENUE BY : SHRI. RAM MOHAN SINGH SMT. VEENA JOSHI, CIT(DR) ! ' # / DATE OF HEARING : 30/05/2019 $%&'() # / DATE OF PRONOUNCEMENT : 30/05/2019 '-/ ORDER PER BENCH: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AN D CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE. 2. REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEA L : 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) WAS JUSTIFIED IN ALLOWING RELIEF ON ACCOUNT OF THE DISA LLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX R ULES, 1962 BY APPLYING AMENDED PROVISIONS OF RULE 8D (14 TH AMDT.), WHILE THE SAME AMENDMENT WAS INTRODUCED W.E.F. 02.06.2016 AND DOES NOT HAVE RETR OSPECTIVE EFFECT? 2. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 2 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND O APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. ASSESSEE HAS RAISED ONLY ONE GROUND IN ITS CROSS OBJECTION WHICH READS AS UNDER: THAT ORDER PASSED UNDER SECTION 250(6) OF THE INCOM E TAX ACT, 1961 BY THE LD. CIT(A)-1, LUDHIANA GRAVELY ERRED ASIDE ORDER OF LD. ASSESSING OFFICER WITH DIRECTION TO APPLY AMENDED PROVISION OF RULE 8D (14 TH AMENDMENT) FOR CALCULATION OF DISALLOWANCE UNDER SECTION 14A OF INCOME TAX ACT, T HEREBY IGNORING THE P[LEA OF THE APPELLANT THAT THE SAID DISALLOWANCE SHOULD BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE GROUND NO. 1 IN ITA NO. 586/CHD/2018 OF THE REVENUES APPEAL RELATES TO DELETION OF THE ADDITION OF RS. 2,65,66, 833/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT. THE C.O. SOUGHT TO APPLY THE AM ENDED PROVISION OF RULE 18 FOR CALCULATION. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER HAS DISALLOWED UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 AN AMOUNT O F RS. 2,65,66,833/- BASED ON THE CALCULATION MADE AS PER RULE 8D(2) TAKING TH E TOTAL INTEREST EXPENDITURE, AVERAGE VALUE OF INVESTMENTS, AVERAGE VALUE OF ASSE TS AND HALF PERCENTAGE OF AVERAGE VALUE OF INVESTMENTS INTO CONSIDERATION. 6. THE LD. CIT(A) DIRECTED TO COMPUTE THE DISALLOWA NCE UNDER SECTION 14A R.W.R 8D(2)(II)TAKING INTO CONSIDERATION THOSE INVE STMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR. 7. LD. DR RELIED ON THE JUDGMENT IN THE CASE OF PUN JAB TRACTORS LTD. VS. CIT, PATIALA 78 TAXMANN 65 (P&H HIGH COURT) WHEREIN IT W AS HELD THAT WHERE THE ASSESSEE DOES NOT PROVIDE ANY BIFURCATION OF THE EX PENDITURE INCURRED IN RESPECT OF ITS INCOME, THE ASSESSING OFFICER HAS NO OPTION BUT TO ESTIMATE THE EXPENDITURE AND TO RE-COMPUTE THE INCOME BY WAY OF DIVIDEND TO ARRIVE AT THE DEDUCTION THAT MAY BE ALLOWED UNDER SECTION 80M OF THE ACT. ASSUMING THAT SOME PORTION OF THE EXPENDITURE IS ATTRIBUTABLE TO THE DIVIDEND EARNED, THE ASSESSING OFFICER MUST ESTIMATE THE EXTENT THEREOF. IF THE ASSESSEE FURNISHED PROOF OR DETAILS OF SUCH EXPENDITURE TO THE SATISFACTION OF THE ASSESSING OFFICER HE MAY ACCEPT THE SAME, HOWEVER, THE ASSESSEE DOES NOT FUR NISH A BIFURCATION OF THE EXPENSES OR ANY REASONABLE BASIS FOR ARRIVING AT TH E SAME, THE ASSESSING OFFICER HAS NO OPTION BUT TO MAKE A REASONABLE ESTIMATE OF THE SAME. 3 8. BEFORE US THE LD. AR SUBMITTED THAT IN ANY CASE THE DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED THE EXEMPT INCOME EARNED BY THE ASSESSEE AND HE WOULD BE SATISFIED IF THE DISALLOWANCE IS RESTRICTE D UP TO THE EXEMPT INCOME. THE LD. DR HAS ALSO NOT SUBMITTED ANYTHING CONTRA. 9. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DELHI HIGH COURT IN C ASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT, 372 ITR 694 (DEL), AMAR PACKAGING PVT . LTD. VS. ITO IN ITA NO. 2358/DEL/2013 (ITAT DELHI BENCH), AND ALSO IN CASE OF DAGA GLOBAL CHEMICAL PVT. LTD. (ITAT MUMBAI BENCH) IN ITA NO.5592/MUM/20 12 HAS TAKEN VIEW THAT DISALLOWANCE CANNOT EXCEED THE EXEMPT INCOME. SIMIL AR MATTER HAS BEEN DECIDED IN ASSESSEES OWN CASE FOR THE A.Y. 2011-12 . HENCE KEEPING IN VIEW THE ABOVEMENTIONED JUDGMENTS IT IS HEREBY DIRECTED THE DISALLOWANCE UNDER SECTION 14A READ WI TH RULE 8D BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. 10. AS A RESULT THE APPEAL OF THE REVENUE IS DISMIS SED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . .. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 30/05/2019 *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * * ! // CIT 4. * * ! / ()/ THE CIT(A) 5. - 23 4, * # *4), 67839/ DR, ITAT, CHANDIGARH 6. 38 :'/ GUARD FILE