Andhra Pradesh Industrial Infrastructure Corporation Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(1), Hyderabad

ITA 1002/Hyd/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7455 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2013-2014
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RULE DIII AT RS
• Keywords: Earning of tax free income; Revised return; Rule 8D
• Section: 143(3); 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU , ACCOUNTANT MEMBER (THROUGH VIRTUAL CONFERENCE) S. NO. ITA NO. AY APPELLANT RESPONDENT 1 1002/H/2018 2013 - 14 ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., HYDERABAD. PAN AABCA 9029K DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. DATE OF HEARING : 1 2 - 0 1 - 20 2 1 DATE OF PRONOUNCEMENT : 20 - 01 - 20 2 1 O R D E R PER LAXMI PRASAD SAHU, A .M. : T H IS IS AN APPEAL FILED BY THE ASSESSE E DIRECTED AGAINST THE ORDER OF CIT(A) 1 , HYDERABAD, DATED 2 1 / 12 / 201 7 RELATING TO AY 20 1 3 - 1 4 ON THE FOLLOWING GROUNDS OF APPEAL: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD, HYDERABAD, A STATE PSU IS IN THE BUSINESS OF DEVELOPMENT OF INDUSTRIAL INFRASTRUCTURE IN THE STATE OF AP. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 27/09/2013 ADMITTING TAXABLE INCOME OF RS. 10,3 0,69,890/ - UNDER FOR ASSESSEE : SHRI B. SATYANARAYANA MURTHY FOR REVENUE : SHR I SUNIL KUMAR PANDEY ITA NO. 1002 /HYD/1 8 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., : - 2 - : NORMAL PROVISIONS AND BOOK PROFITS AT RS. 27,76,57,693/ - . SUBSEQUENTLY, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 30/03/2015 ADMITTING A TAXABLE INCOME OF RS. 25,17,56,000/ - , WHICH WAS PROCESSED U/S 143(3) OF IT ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE, AGAINST WHICH, THE LD. AR OF THE ASSESSEE FILED THE INFORMATION AS CALLED FOR. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPT INCOME OF RS. 16,65,45,000/ - U/S 10(34) OF THE IT ACT, AGAINST WHICH, THE ASSESSEE HAS NOT DISALLOWED SUO - MOTO ANY EXPENDITURE U/S 14A OF THE ACT. ACCORDINGLY, THE AO APPLIED RULE 8D AND CALCULATED THE DISALLOWANCE UNDER RUL E 8D(II) AND RULE 8D(2)(III) AT RS. 1,61,21,222/ - AND COMPLETED THE ASSESSMENT. 2.2 WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), THE CIT(A) UPHELD THE DISALLOWANCE MADE BY THE AO BY HOLDING THAT THE AO HAS CORRECTLY TAKEN THE AVERAGE VALUE OF INVESTMENTS AVAILABLE IN THE BALANCE SHEET AMOUNTING TO RS. 3,22,42,44,500/ - , REJECTING THE DISALLOWANCE OF COMPUTATION UNDER RULE 8D(2)(III) FILED BY THE ASSESSEE BEFORE HIM, WHICH WAS EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGE 5. ITA NO. 1002 /HYD/1 8 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., : - 3 - : 3. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D(2)(III) MADE WAS SUBMITTED BEFORE THE CIT(A), BUT, HE HAS NOT CONSIDERE D THE SAME, AS THE DISALLOWANCE SHOULD BE MADE ON THOSE INVESTMENTS , IN WHICH, THE EXEMPT INCOME HAS BEEN RECEIVED, BUT, NOT ON THE ENTIRE INVESTMENTS. HE, THEREFORE, CONTENDED THAT THE CALCULATION MADE BY THE ASSESSEE AND SUBMITTED BEFORE THE CIT(A), SHOU LD HAVE BEEN ACCEPTED BY HIM. 5. ON THE OTHER HAND, THE LD. CIT - DR BESIDES RELYING ON THE ORDERS OF THE REVENUE AUTHORITIES SUBMITTED THAT THE CIT(A) RELYING ON THE DECISION OF THE ITAT IN ASSESSEES OWN CASE UPHELD THE ACTION OF THE AO, THEREFORE, THE O RDER OF THE CIT(A) IS CORRECT. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AS WELL AS GOING THROUGH THE ORDERS OF REVENUE AUTHORITIES, WE OBSERVE THAT RULE 8D(2)(III) IS CLEAR THAT DISALLOWANCE SHOULD BE MADE UNDER THE SAID RULE ON THOSE INVESTMENTS, ON WHICH THE ASSESSEE EARNS EXEMPT INCOME, BUT, NOT ON THE ENTIRE INVESTMENTS. IN THIS CONNECTION, WE REFER TO THE DECISION I N THE CASE OF TRANSPORT CORPORATION OF INDIA LTD. IN ITA NO. ITA NO. 1002 /HYD/1 8 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., : - 4 - : 117/HYD/2016 VIDE ORDER DATED 21 ST SEPTEMBER, 2016 , WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS UNDER: 11.1 WHILE CAREFULLY READING THE RULE 8D(2)(II), THE FORMULA GIVEN ARE: A X B/C WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR: B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DA Y OF THE PREVIOUS YEAR; IN PARTICULAR, THE NOTES FOR B CLEARLY STATES THAT THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. IT IS CLEAR THAT WE HAVE TO INCLUDE THOSE INVESTMENTS WHICH HAS GENERATED I NCOME AND EXCLUDE THOSE INVESTMENTS, WHICH HAVE NOT GENERATED INCOME. IN THE PRESENT CASE, AO HAD TAKEN THE TOTAL INVESTMENT INSTEAD OF THOSE INVESTMENTS, WHICH HAVE GENERATED INCOME. ACCORDINGLY, WE DIRECT THE AO TO CALCULATE THE DISALLOWANCE OF INTEREST AS BELOW ( AS PER RULE 8D): INTEREST X INVESTMENT( WHICH GENERATED INCOME) AVERAGE TOTAL ASSETS THE MAIN REASON IS THAT AS PER SECTION 14A, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCO ME, WHICH IS EXEMPT FROM TAX. THE RELEVANCE IS THE EXPENDITURE IN RELATION TO INCOME. THE QUANTIFICATION HAS TO BE UNDERTAKEN IN RELATION TO THE EXEMPT INCOME. THE INVESTMENT WHICH HAS NOT GENERATED EXEMPT INCOME SHOULD BE EXCLUDED FROM THE CALCULATION OF RATIO TO DETERMINE THE DISALLOWANCE. 11.2 SIMILARLY, FOR THE ADMINISTRATIVE EXPENSES, 0.5% OF AVERAGE INVESTMENTS FROM WHICH THE EXEMPT INCOME IS RECEIVED SHOULD BE CONSIDERED INSTEAD OF AVERAGE OF THE TOTAL INVESTMENTS. 11.3 CONSIDERING THE ABOVE DISCUSSION, WE DIRECT THE AO TO RECALCULATE THE DISALLOWANCE AS PER RULE 8D AS PER THE ABOVE GUIDANCE. ACCORDINGLY, GROUND RAISED BY ASSESSEE IS ALLOWED. ITA NO. 1002 /HYD/1 8 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., : - 5 - : AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF THE SAID CASE, FOLLOWING THE CONCLUSIONS DRAWN THEREIN WE DIRECT THE AO TO RECALCULATE THE DISALLOWANCE AS PER RULE 8D AS PER THE GUIDELINES GIVEN AS ABOVE IN THE CASE OF TRANSPORT CORPORATION OF INDIA AND CALCULATE THE DISALLOWANCE OF EXPENDITURE UNDER RULE 8D(2)( III) TAKING THE AVERAGE INVESTMENT FROM WHICH THE EXEMPT INCOME IS RECEIVED. FOLLOWING THE ABOVE DECISION, WE DIRECT THE AO TO CALCULATE THE DISALLOWANCE UNDER RULE 8D(2)(III) IN LINE WITH THE ABOVE DECISION . THE ASSESSEE IS DIRECTED NOT TO TAKE ANY UNNE CESSARY ADJOURNMENTS FOR EARLY DISPOSAL OF THE APPEAL. NEEDLESS TO SAY THAT REASONABLE OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESUL T APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2021 . SD/ - SD/ - ( P. MADHAVI DEVI ) ( LAXMI PRASAD SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 20 TH JANUARY, 20 2 1 K V ITA NO. 1002 /HYD/1 8 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., : - 6 - : C OPY TO : 1 M/S AP INDUSTRIAL INFRASTRUCTURE CORPORATION LTD., C/O VENUGOPAL & CHENOY, CAS., 4 - 1 - 889/16/2, TILAK ROAD, HYDERABAD 500 001 2 DC ITO, CIRCLE 1 ( 1 ) , HYDERABAD. 3 CIT(A) 1 , HYDERABAD. 4 PR. CIT - 1 , HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.