Betex India Limited, Surat V. The Dy.CIT.,Circle-1, Surat

ITA 104/AHD/2012

• Counselvise Citation: 10420514 RSA 2012
• Duration Of Justice: 3 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH POPHARE SR DR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.104/AHD/2012 ( / ASSESSMENT YEAR : 2009-10) M/S.BETEX INDIA LTD. 504, TRIVIDH CHAMBERS RING ROAD, SURAT / VS. THE DCIT CIRCLE-1 SURAT % & ./ ./ PAN/GIR NO. : AABCB 2413 L ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : MS.URVASHI SODHAN, AR )*%( , + / RESPONDENT BY : SHRI ASHISH POPHARE, SR.DR -. , /& / DATE OF HEARING 19/10/2015 0123 , /& / DATE OF PRONOUNCEMENT 30/11/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT [CIT(A) IN SHORT] DATED 18/11/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONORABLE CIT(A)-I, SURAT HAS ERRED IN CONFIRMING T HE DISALLOWANCE ITA NO.104/AHD/ 2012 M/S. BETEX INDIA LTD. VS. DCIT ASST.YEAR 2009-10 - 2 - OF INTEREST EXPENDITURE OF RS.5,56,320/-, U/S.14A(1 ) OF THE I.T.ACT AND ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE ADDITION STATED ABOVE DESERVES TO BE DELETED, HENCE , IT IS PRAYED TO YOUR HONOUR TO DELETE THE SAME AND DO THE JUSTICE. 3. YOUR APPELLANT RESERVES THE RIGHT TO ADD, AMEND, AL TER AND/OR WITHDRAW ANY GROUND OF APPEAL AT THE TIME OF HEARIN G OF THE APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 25/03/2011, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION ON ACCOUNT OF DIFFERENCE IN CLOSING STOCK OF WORK-IN-PROGRESS OF RS.3,11743/-, DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS INVESTMENT AND TO EARN EXEMPT INCOME U/S.14A OF THE ACT OF RS. 5,56,320/- AND DISALLOWANCE OUT OF SUBSTATION CHARGES OF RS.70,417 /-. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER, PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING THE AP PEAL, THE LD.CIT(A) CONFIRMED THE DISALLOWANCE MADE ON ACCOUNT OF EXPEN DITURE INCURRED TO EARN EXEMPT INCOME U/S.14A OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE ASSESSEE IS IN FURTHER APPEAL BE FORE US. 3. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAI NST CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.5,56,320 /- U/S.14A(1) OF THE ACT. ITA NO.104/AHD/ 2012 M/S. BETEX INDIA LTD. VS. DCIT ASST.YEAR 2009-10 - 3 - 4. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAS EARNED EXEM PT INCOME OF RS.33,100/- AND THE AO HAS MADE DISALLOWANCE OF RS. 5,56,320/-. THE ASSESSEE CONTENDED BEFORE THE LD.CIT(A) THAT NO EXP ENDITURE WAS INCURRED, THEREFORE IN VIEW OF THE SECTION 14A(2) O F THE ACT, THERE WAS NO OCCASION TO MAKE DISALLOWANCE BY INVOKING THE SAID SECTION. FURTHER, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN OTHERWISE ALSO, THE LAW IS WELL SETTLED THAT THE DISALLOWANCE U/S.14A CANNO T BE IN EXCESS OF THE EXEMPT INCOME EARNED. IN SUPPORT OF THIS CONTENTIO N, LD.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH (ITAT B BENCH AHMEDABAD) IN THE CASE OF CHUDGAR R ANCHODLAL JETHALAL TRADE PVT.LTD. VS. DCIT (OSD) IN ITA NO.24 5/AHD/2013 FOR AY 2008-09, DATED 27/03/2015. THE LD.COUNSEL FOR T HE ASSESSEE ALSO RELIED ON THE JUDGEMENT OF THE HONBLE HIGH COURT O F DELHI RENDERED IN THE CASE OF JOINT INVESTMENT PVT.LTD. VS. CIT IN IT A NO.117 OF 2015, DATED 25/02/2015. HE SUBMITTED THAT THE ISSUE IS S QUARELY COVERED BY THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT REND ERED IN THE CASE OF CIT VS. WINTEX MILLS LTD. REPORTED AT (2000) 245 ITR 266 (GUJ.). 4.1. ON THE OTHER HAND, LD.SR.DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. ITA NO.104/AHD/ 2012 M/S. BETEX INDIA LTD. VS. DCIT ASST.YEAR 2009-10 - 4 - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENT/DECISION RELIED UPON BY TH E LD.COUNSEL FOR THE ASSESSEE. THERE IS NO DISPUTE WITH REGARD TO THE E XEMPTED DIVIDEND INCOME OF RS.33,100/- AND SHORT-TERM CAPITAL GAIN O N LISTED SECURITIES OF RS.1,67,544/- DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE DISALLOWANCE IS MADE OF RS.5,56,320/-. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF JOINT INVESTMENT PVT.LTD. VS. CIT I N TA NO.117 OF 2015 DECIDED ON 25/02/2015, HELD AS UNDER:- '9. IN THE PRESENT CASE, THE AO HAS NOT FIRSTLY DIS CLOSED WHY THE APPELLANT/ASSESSEE'S CLAIM FOR ATTRIBUTING RS.2,97, 440/- AS A DISALLOWANCE UNDER SECTION 14A HAD TO BE REJECTED. TAIKISHA SAYS THAT THE JURISDICTION, TO PROCEED FURTHER AND DETERMINE AMOUNTS IS DERIVED AFTER EXAM INATION OF THE ACCOUNTS AND REJECTION IF ANY OF THE ASSESSEE'S CLAIM OR EXPLANA TION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOUNTS BY THE AO - AN ASPECT WHICH IS COMPLETELY UNNOTICED BY THE CIT(A) AND THE IT AT. T HE THIRD, AND IN THE OPINION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INCOME IS RS.48,90,000/-, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110% OF THAT SUM, I.E. , RS.52,56,197/-. BY NO STRETCH OF IMAGINATION CAN SECTION 14A OR RULE 8D BE INTERP RETED SO AS TO MEAN THAT THE ENTIRE LAX EXEMPT INCOME IS TO BE DISALLOWED. THE W INDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EX EMPT INCOME'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE.' 5.1. THE COORDINATE BENCH IN THE CASE OF CHUDGAR RA NCHODLAL JETHALAL TRADE PVT.LTD. VS. DCIT(SUPRA) HAS HELD AS UNDER:- 13.CONSIDERING THE TOTALITY OF THE FACTS AND IN VI EW OF THE FACT THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FOR THE YEAR U NDER CONSIDERATION AND IN THE LIGHT OF THE AFORESAID DECISION OF DELHI HIGH COURT CITED ITA NO.104/AHD/ 2012 M/S. BETEX INDIA LTD. VS. DCIT ASST.YEAR 2009-10 - 5 - HEREINABOVE AND IN VIEW OF THE FACT THAT THE DISALL OWANCE WORKED OUT BY A.O U/S. 14A IS MORE THAN THE EXEMPT INCOME AND CONSIDERING THE ALTERNATE SUBMISSION OF ID. A.R. TO MAKE A REASONAB LE DISALLOWANCE U/S.14A AS DEEMED FIT, WE ARE OF THE VIEW THAT DISA LLOWANCE OF RS.5,000/- IF MADE IN THE PRESENT CASE WILL MEET TH E ENDS OF JUSTICE. WE THUS DIRECT ACCORDINGLY. 5.2. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, TAKING A CONSISTENT VIEW, TO MEET THE ENDS OF JUSTICE, WE HEREBY RESTRI CT THE DISALLOWANCE U/S.14A(1) OF THE ACT MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 15,000/-. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON MONDAY, THE 30 TH DAY OF NOVEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED / 11 /2015 6/..-, .-../ T.C. NAIR, SR. PS ITA NO.104/AHD/ 2012 M/S. BETEX INDIA LTD. VS. DCIT ASST.YEAR 2009-10 - 6 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-I, SURAT 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. ! / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 20.X.15 (DICTATION-PAD 6- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..29.X.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 30.11.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER