Vaishnavi Infrastructure Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1007/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5440 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR CITIII BENGALURU
• Assessee Lawyers: H N KHINCHA
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ITA NOS. 1007 & 1028 TO 1031/BANG/2016 ASSESSMENT YEARS : 2008-09 TO 2012-13 VAISHNAVI INFRASTRUCTURE PVT. LTD., NO.2/2, WALTON ROAD, OFF VITTAL MALLYA ROAD, BENGALURU. PAN: AAACV 3531A VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA, CA RESPONDENT BY : SHRI SANJAY KUMAR, CIT-III(DR)(ITAT-3), BENGALURU. DATE OF HEARING : 19.04.2017 DATE OF PRONOUNCEMENT : 28.04.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGA INST THE COMMON ORDER OF THE CIT(APPEALS) ON COMMON GROUND WITH REG ARD TO DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE AC T. 2. THE OTHER GROUND IN THESE APPEALS IS WITH REGARD TO CHARGEABILITY OF INTEREST US/. 234B AND 234D OF THE ACT. THIS GROUN D IS CONSEQUENTIAL IN NATURE AND MUCH ARGUMENT WAS NOT ADVANCED BY THE LD . COUNSEL FOR THE ITA NOS. 1007 & 1028 TO 1031/BANG/2016 PAGE 2 OF 5 ASSESSEE. THEREFORE, WE FIND NO MERIT IN THIS GROU ND AND ACCORDINGLY WE CONFIRM THE ORDER OF CIT(APPEALS) IN THIS REGARD. 3. SO FAR AS DISALLOWANCE U/S. 14A OF THE ACT IS CO NCERNED, OUR ATTENTION WAS INVITED THAT DURING THE AYS 2008-09 A ND 2010-11, THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME, THEREFOR E NO DISALLOWANCE U/S. 14A CAN BE MADE. WITH RESPECT TO OTHER ASSESS MENT YEARS, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT HE HAS RECEIVED EXEMPTED ON ACCOUNT OF INVESTMENT IN MUTUAL FUNDS. MOREOVER, I T WAS DONE THROUGH MANAGEMENT CONSULTANT BY INVESTING ITS PERSONAL FUN DS. THEREFORE, NO DISALLOWANCE U/S. 14A CAN BE MADE BY BLINDLY APPLYI NG RULE 8D OF THE I.T. RULES. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PL ACED RELIANCE UPON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT V. MICROLABS, 383 ITR 490 (KAR) AND THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION V. CIT, 298 ITR 298 (SC) IN SUPPORT OF HIS CONTENTION THAT IF THE INVESTMENTS WERE MADE OUT OF MIXED FUNDS AND OWN FUNDS AND OWN FUNDS ARE SUFFICIENT TO COVER THE TAX FREE INVESTMENTS, THEN PRESUMPTION WILL BE ONLY THAT THE INVESTMENTS WERE MADE OUT OF OWN FUNDS. SINCE THE ASSESSEE WAS HAVING SUFFICIENT PERSONAL F UNDS, THE AO OUGHT TO HAVE EXAMINED THIS ASPECT BEFORE MAKING A DISALLOWA NCE. 4. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIAN CE UPON THE ORDER OF CIT(APPEALS). ITA NOS. 1007 & 1028 TO 1031/BANG/2016 PAGE 3 OF 5 5. WE HAVE CAREFULLY EXAMINED THE ORDERS OF LOWER A UTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS. WE FIND THAT UNDISPUTE DLY DURING THE AYS 2008- 09 & 2010-11 RELATING TO APPEALS IN ITA NOS.1007/B/ 2016 & 1030/B/2016, THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME AS IS EVIDENT FROM A SUMMARY OF INVESTMENTS IN MUTUAL FUNDS AND INCOME T HEREFROM, COPY OF WHICH IS PLACED ON RECORD. IN THIS REGARD, OUR ATT ENTION WAS ALSO INVITED TO THE PROFIT & LOSS ACCOUNT AND THE DETAILS OF OTHER INCOME IN SUPPORT OF HIS CONTENTION THAT ASSESSEE HAS NOT EARNED ANY EXEMPTE D INCOME DURING THE IMPUGNED ASSESSMENT YEAR. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE UPON THE ORDER OF TRIBUNAL AND VARI OUS JUDGMENTS OF THE HIGH COURT IN WHICH IT HAS BEEN HELD THAT IN THE AB SENCE OF ANY EXEMPTED INCOME, PROVISIONS OF SECTION 14A CANNOT BE INVOKED . COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF ALLIANCE INFRASTRUCTURE PROJECTS PVT. LTD. V. DCIT, ITA NOS. 220 & 1043/BANG/2013 IN ITA NO.220 & 1043/BANG/2013 IS PLACED ON RECORD AT PAGES 100 TO 113 OF THE COMPILA TION. 6. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND FROM THE RECORD AND P ROFIT & LOSS ACCOUNT THAT THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME DURIN G THE AYS 2008-09 & 2010-11. THEREFORE, IN THE ABSENCE OF ANY EXEMPTED INCOME, PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. RELIANCE WAS PLACED UPON THE ORDER OF TRIBUNAL IN THE CASE OF ALLIANCE INFRASTRUCTURE PROJECTS PVT. LTD. V. DCIT (SUPRA) AND ALLBANK FINANCE LTD. IN ITA NO.465/KOL/2013 IN WHICH IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY EXEMPTED I NCOME, PROVISIONS OF ITA NOS. 1007 & 1028 TO 1031/BANG/2016 PAGE 4 OF 5 SECTION 14A OF THE ACT CANNOT BE INVOKED. THEREFOR E, IN THE LIGHT OF THIS LEGAL POSITION, WE ARE OF THE VIEW THAT IN THE INST ANT CASE, THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 14A FOR M AKING THE DISALLOWANCE. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(APPEALS) AND DELETE THE ADDITION MADE IN THIS REGARD. 7. SO FAR AS REMAINING DISALLOWANCES ARE CONCERNED, THE ISSUE WAS NOT EXAMINED BY THE LOWER AUTHORITIES IN THE LIGHT OF D ETAILS FURNISHED BY THE ASSESSEE. APPARENTLY IT IS EVIDENT THAT THE ASSES SEE HAS MADE THE INVESTMENTS IN MUTUAL FUNDS THROUGH MANAGEMENT CONS ULTANT AND EARNED SOME EXEMPTED INCOME. THE ASSESSEE HAS ALSO DEMON STRATED THAT HE HAS SUFFICIENT INTEREST FREE PERSONAL FUNDS WHICH W ERE ALSO INVESTED IN MUTUAL FUNDS TO EARN THE EXEMPT INCOME. THEREFORE, AO OUGHT TO HAVE EXAMINED THIS ASPECT WHETHER, THE INVESTMENT IN MUT UAL FUNDS WERE MADE OUT OF BORROWED FUNDS OR PERSONAL FUNDS. IF PERSON AL FUNDS, THE ISSUE OF DISALLOWANCE SHOULD HAVE BEEN ADJUDICATED IN THE LI GHT OF JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION V. CIT, 298 ITR 298 (SC) AND CIT V. MIC ROLABS LTD., 383 ITR 490 (KAR). THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE REQUIRES PROPER VERI FICATION AND EXAMINATION BY THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) IN THIS REGARD AND RESTORE THE ISSUE TO THE FILE OF ASSESSI NG OFFICER TO READJUDICATE THE ISSUE IN THE LIGHT OF RELEVANT PROVISIONS OF TH E ACT AFRESH, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NOS. 1007 & 1028 TO 1031/BANG/2016 PAGE 5 OF 5 8. IN THE RESULT, ITA NOS.1007/BANG/2016 AND 1030/B ANG/2016 ARE ALLOWED, AND ITA NOS.1028/BANG/2016, 1029/BANG/2016 & 1031/BANG/2016 ARE ALLOWED FOR STATISTICAL PURPOSES . PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2017. SD/- SD/- ( S. JAYARAMAN ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 28 TH APRIL, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.