The DCIT, Circle-4(1)(2), Ahmedabad V. Voltamp Transformers Ltd., Ahmedabad

ITA 1047/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5367 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Business income; Earning of tax free income; Rule 8D
• Section: 14A; 201; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESID E N T A ND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 1047 / AHD/ 2016 / ASSTT. YEAR: 2012 - 2013 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4(1)(2) , AHMEDABAD VS M/S VOLTAMP TRANSFORMERS LIMITED 312, SANMAN - II, OPP. RELIANCE PETROL PUMP,PRAHLADNAGAR, SATELLITE, AHMEDABAD - 380051. PAN AA ACV5048G (APPLICANT) (RESPONENT) REVENUE BY : SHRI LALIT P. JAIN, SR. D . R ASSESSEE BY : SHRI DHINAL SHAH, A . R / DATE OF HEARING : 01 / 08 /201 8 / DATE OF PRONOUNCEMENT: 26 / 10 /201 8 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPEAL PREFERRED BY THE REVENUE BEFORE U S IS AGAINST THE ORDER DATED 10/02 /2016 , PASSED BY THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) - 4, AHMED ABAD, ARISING OUT OF TH E ORDER DATED 09/03/2015, PASSED U/S.143(3) OF THE INCOME TAX ACT 1961 , FRAMED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4(1)(2), AHMEDABAD, FOR THE ASSESSMENT YEAR 2012 - 2013 . ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE CIT(A) IS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,51,72,488/ - U/S.145A OF THE ACT BY THE AO ON ACCOUNT OF DISALLOWANCE OF CENVAT RECEIVABLE. 2. WHETHER THE CIT(A) IS RIGHT IN LAW AND ON FACTS IN DELETING ADDITION OF RS.19,52,291/ - MADE BY AO ON ACCOUNT OF DISALLOWANCE U/S.14A R.W.R. 8D. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. THE GROUND NO.1 OF THE INSTANT APPEAL RELATES TO THE DELETION OF RS.3,5172,488/ - U/S.145 A OF THE ACT, ON ACCOUNT OF DISALLOWANCE OF CENVAT RECEIVABLE. DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE HAD SHOWN AMOUNT RECEIVABLE ON ACCOUNT OF UNUTILIZED/CLOSING BALANCE ON ACCOUN T OF MODVAT/CENVAT CREDIT UNDER LOANS AND ADVANCES AND THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK. THE PROVISIONS UNDER SECTION 145A STIPULATES THAT THE TAXES, DUTY, CESS OR FEES RELATES TO THE STOCK NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. THEREFORE, THE ASSESSEE WAS REQUESTED TO EXPLAIN THE REASON FOR EXCLUSION OF MODVAT/CENVAT FROM THE CLOSING STOCK AND WAS FURTHER DIRECTED TO GIVE AN EXPLANATION AS TO WHY THE SAME SHOULD NOT BE INCLUDED IN THE VALUE OF CLOSING STOCK IN TERMS OF TH AT PARTICULAR SECTION. THE SUBMISSION MADE BY THE ASSESSEE WAS NOT ACCEPTED BY THE LEARNED ASSESSING OFFICER, AND HE THEN ADDED AMOUNT OF RS.3,51,72,488/ - TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE SAME WAS DELETED BY THE LD.CIT(A), IN VIEW OF THE ORDER PASSED BY THE CO - ORDINATE BENCH, IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010, AND HENCE APPEAL IS BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US AT THE TIME OF HEARING THAT THE ISSUE IS COVERED IN HIS OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010, BY THE JUDGMENT PASSED BY THE CO - ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 3 ORDINATE BENCH. ON THE CONTRARY, THE LD.DR, RELIED UPON THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER. 5. WE HAVE HEARD THE LEARNED COUNSEL, APPEARING FOR THE PARTIES . WE FIND THAT WHILE MAK ING ADDITION THE LEARNED ASSESSING OFFICER, OBSERVED AS FOLLOWS: ' THE ASSESSEE'S SUBMISSIONS HAVE BEEN CONSIDERED CAREFULLY AND FOUND NOT ACCEPTABLE. THE AUDITOR IN THE REPORT U/S 44AB OF THE ACT HAS REPORTED THAT THE ASSESSEE HAS FOLLOWED THE EXCLUSIVE METHOD OF ACCOUNTING AND HAS ALSO ENCLOSED THE STATEMENT TO SHOW THAT EVEN AFTER FOLLOWING THE INCLUSIVE METHOD OF ACCOUNTING THERE IS NO EFFECT/IMPACT IN THE P & L ACCOUNT. 'THE ASSESSEE'S CONTENTION TO THE EXTENT OF DUTIES PAID DURING THE YEAR IS ACCEPTA BLE AS THE SAME HAS NOT BEEN DEBITED IN THE P & L ACCOUNT UNDER EXCLUSIVE METHOD. HOWEVER THE DUTIES WHICH ARE NOT PAID DURING THE YEAR AND REMAINED OUTSTANDING AS ON 31.03.2012 AND FOR WHICH THE ASSESSEE IS HAVING CLOSING/UNUTILIZED BALANCE IN THE BOOKS, NEED TO BE ADJUSTED IN VALUE OF STOCKS. THE UNUTILIZED CREDIT OF TAXES VIZ. MODVAT/CENVAT IS A KIND OF SUBSIDY AND INCENTIVE GIVEN BY THE GOVERNMENT. IT CANNOT BE TREATED AS ADVANCES GIVEN TO THE GOVERNMENT ON ACCOUNT OF SALES TA X/EXCISE DUTY PAYABLE. IN F ACT, MODVAT/CENVAT RECEIVED/CLAIMED BY THE ASSESSEE ON PURCHASE OF RAW MATERIAL IS BENEFIT GIVEN BY THE GOVERNMENT. IT CAN BE SET OFF AGAINST THE LIABILITY OF THE ASSESSEE ON ACCOUNT OF EXCISE DUTY PAYABLE ON THE FINISHED PRODUCT MANUFACTURED BY THE ASSESS EE COMPANY. 5.4 THERE IS NO DOUBT THAT THE STOCK SHOULD BE VALUED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AS PROVIDED IN CLAUSE (A) OF SECTION 145 A OF THE ACT. HOWEVER THE CLAUSE (B) OF SECTION 145 A THE ACT FURTHER PROVIDES TO INCLUDE THE TAXES, DUTY, CESS OR FEE, IF THE SAME IS NOT INCLUDED IN THE VALUE OF CLOSING STOCK......................... ...... ......... ...5.6 IN VIEW OF ABOVE REFERRED PROVISIONS OF SECTION 145A OF THE ACT, ALL THE TAXES/DUTY/CESS/FEE, WHIC H HAVE BEEN PAID/INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OR CONDITION, MUST BE INCLUDED WHILE VALUING THE CLOSING STOCK OF INVENTORY.' THE AO ALSO RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF MELMOULD CORPORATION VS. CIT REPORTED IN 202 ITR 789 (BOM), HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CARBORANDUM UNIVERSAL LTD. REPORTED IN 149 ITR 759 (MAD), HON'BLE ITAT IN THE CASE OF ACIT VS. SP FABRICATORS (P) LTD. REPORTED IN 10 SOT 652, HON'BLE MUMBAI ITAT IN THE C ASE OF CROYDON CHEMICAL WORKS LTD. VS. ACIT REPORTED IN 11 SOT 295 AND HON'BLE 'J' BENCH OF MUMBAI TRIBUNAL IN THE CASE OF THE WEST COAST PAPER MILLS LTD. IN (ITA NOS. 3187 AND 3750/M/2003, DT. 3 APRIL, 2006) 6. DURING THE APPELLATE PROCEEDINGS THE LEA RNED REPRESENTATIVE OF THE ASSESSEE SUBMITTED AS FOLLOWS: ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 4 THE LEARNED AO HAS MADE ADDITION OF CENVAT CREDIT RECEIVABLE OF RS. 3,51,72,488 UNDER SECTION 145A. IN THIS CONNECTION, IT MAY PLEASE BE NOTED THAT THE ASSESSEE COMPANY FOLLOWS THE EXCLUSIVE METHOD OF ACCOUNTING, MEANING BY THE CENVAT IS NOT DEBITED TO PUR CHASES ACCOUNT AND P & L ACCOUNT. IF THERE IS NO DEBIT TO P & L A/C. THE QUESTION OF INCLUDING THE SAME IN CLOSING STOCK DOES NOT ARISE. THIS IS HELD BY THE GUJARAT HIGH COURT DECISION IN THE CASE OF ACIT V'/S. N ARMADA CHEMATUR PETRO CHEMICAL LTD. 327 ITR 369 (GUJ). THE HIGH COURT HAS OBSERVED AS UNDER: ACCORDING TO THE SETTLED LEGAL POSITION AND ACCEPTED PRINCIPLES OF ACCOUNTING, CLOSING STOCK HAS TO BE VALUED, AT THE OPTION OF THE ASSESSEE, AT COST OR MARKET PRICES, WHICHEVER IS LOWER. DUTY OF CENTRAL EXC ISE IS LEVIED ON THE GOODS MANUFACTURED I.E. EXCISABLE GOODS MANUFACTURED BY AN ASSESSEE. IT IS NOT A PART OF MANUFACTURING COST. IT CAN BE TERMED A POST MANUFACTURING COST. THEREFORE, UNLESS AND UNTIL IT IS ENTERED ON ONE SIDE, AS AN ITEM OF COST, IT CANN OT BE TAKEN AS A COMPONENT OF THE VALUE OF THE CLOSING STOCK ON THE OTHER SIDE, THE TRUE PURPOSE OF CREDITING THE VALUE OF UNSOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED ON THE OTHER SIDE OF THE ACCOUNT.' THE GUJARAT HIGH COURT HAS FOLLOWED THE PRINCIPLE LAID DOWN BY THE SC IN THE CASE OF CHAINRUP SAMPATRAM V/S. CIT 24 ITR 481 AND THE SAID PRINCIPLES ARE REITERATED BY SC IN THE CASE OF CIT V/S. HINDUSTAN ZINC LTD. 291 ITR 391. THE PRINCIPLES ARE REPRODUCED ON PAGE NO. 377 IN PARA NO. 16 OF TH E REPORT. THE ABOVE REFERRED PRINCIPLES THAT IF THERE IS NO DEBIT THAN THERE IS NO CREDIT ARE AFFIRMED BY SC IN THE CASE OF CIT V/S. DYNAVISION LTD. 348 ITR 380. WE ENCLOSE HEREWITH THE RECONCILIATION STATEMENT. IT REFLECTS THAT EVEN IF THE INCLUSIVE ME THOD IS FOLLOWED, THAN THERE IS NO IMPACT ON THE NET PROFIT. THE LEARNED AO HAS ALSO STATED THAT HE HAS VERIFIED THE RECONCILIATION STATEMENT AND ALSO HAS ACCEPTED THAT THERE IS NO IMPACT ON THE NET PROFIT IN RESPECT OF DUTIES PAID DURING THE YEAR. HE DOES NOT ACCEPT FOR OUTSTANDING DUTY. THIS IS NOT CORRECT SINCE THE ASSESSEE FOLLOWS THE EXCLUSIVE METHOD SINCE YEARS AND THEREFORE THE OUTSTANDING DUTIES ARE ADJUSTED IN THE SUBSEQUENT YEARS. THEREFORE THE QUESTION OF INCLUDING DOES NOT ARISE. THE ITAT AHMEDA BAD BENCH IN CASE OF HIMSELF FOR A.Y. 2009 - 2010 HELD THAT NO ADDITION CAN BE MADE UNDER SECTION 145 A SINCE THE ASSESSEE FOLLOWS THE EXCLUSIVE METHOD . THIS VIEW IS ALSO FOLLOWED BY CIT (A) FOR A.Y. 2010 - 2011 AND A.}'.2011 - 012. THE COPY OF CIT(A) ORDERS AR E ENCLOSED. F URTHER, THE UNUTILIZED BALANCE OF CENVAT IS NOT AN INCOME AND IS USED AGAINST EXCISE DUTY PAYABLE IN THE SUBSEQUENT YEARS AND THEREFORE THE SAME CANNOT BE TREATED AS INCOME [CIT V/S. INDO NIPPON CHEMICALS LTD. 261 ITR 275 (SC). 1 , THE DETAILS OF THE CENVAT CREDIT UTILIZED IS GIVEN IN SCHEDULE - 5 TO THE TAX AUDIT REPORT ' 7 . THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE WAS DULY TAKEN CARE BY THE LD.CIT(A), FURTHER THAT FOLLOWING THE JUDGMENT PASSED BY THE CO - ORDINATE BENCH, IN APPELLANT OWN CASE THAT NO ADDITION CAN BE MADE U/S.145A OF THE ACT, SINCE THE ASSESSEE HAS FOLLOWED THE EXCLUSIVE METHOD AND FOLLOWING THE ORDER PASSED BY HIS OWN PREDECESSOR FOR THE ASSESSMENT YEARS 2010 - 2011 AND 2011 - 2012, ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 5 TAKING INTO CONSIDERATION RATI O LAID DOWN BY THE JUDGMENT OF CO - ORDINATE BENCH, THE LD.CIT(A), ALLOWED THE APPEAL IN THE MANNER AS FOLLOWS: IN VIEW OF THESE FACTS AND SUBMISSION AND ALSO THE LEGAL PROPOSITION ON THIS ISSUE, THE ADDITION SO MADE BY THE AO FOR RS.3,51,72,488/ - IS NO T JUSTIFIED. AFTER JUDGMENT OF IT AT FOR THE A.Y.2009 - 10 THE AO HAS ALREADY VERIFIED SUCH METHOD AND HAS EXAMINED THE ISSUE FOR LEGAL PROPOSITION AND HAS DELETED THE ADDITION BY GIVING APPEAL EFFECT. I FIND NO REASON TO DIFFER FROM THE EARLIER DECISIONS OF CIT(A) AND HON'BLE ITAT ON THIS ISSUE, HENCE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.3,51,72,488/ - , THE APPEAL ON GROUND NO.1 IS ALLOWED ... 8. WE FIND THE SAME ISSUE WAS AGAIN COVERED BY THE JUDGMENT OF THE CO - ORDINATE BENCH, PASSED IN ITA NO.2544/AHD/2014, FOR THE ASSESSMENT YEAR 2011 - 2012. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 2.4 LD. CIT(A) HELD THAT THE IT MAY PLEASE BE NOTED THAT THE CIT(A) HAS DELETED THE ABOVE REFERRED ADDITION FOR A.Y. 2009 - 2010. THE ITAT, AHMEDABAD IN PARA NO. 7.1 ON PAGE NO.8 HELD AS UNDER: 'IN THE RESULT, ON THE SAME LINES WE DEEM IT PROPER TO RESTORE THIS GROUND BACK TO THE STAGE OF THE AO TO VERIFY THE FACTS AS ALSO THE ACCOUNTING POLICY ADOPTED BY THE ASSESSEE IN RESPECT OF MODVAT/CENVAT INCENTIVES AND IF FIND ACCORDING TO THE LAW LAID DOWN, THAN NOT TO DISTURB THE METHOD OF ACCOUNTING OF THE ASSESSEE IN THIS REGARD. WE DIRECT ACCORDINGLY. THIS GROUND MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE.' THE CIT(A) HAS ALSO FOLLOWED THE ABOVE REFERRED ITAT ORDER FOR A.Y. 2009 - 2010 WHILE PASSING THE ORDER FOR A.Y. 2010 - 2011 AND DELETED THE ADDITION. THE COPY OF CIT(A) ORDER FOR A.Y. 2010 - 2011 IS ENCLOSED. 2.5 THE KIND ATTENTION IS DRAWN TO PARA NO. 12(B) OF THE 3CD REPORT UNDER SECTION 4 4AB WHICH IS REPRODUCED FOR READY REFERENCE: 'EXCISE / VAT PAID ON INPUT IS SET OFF AGAINST THE EXCISE PAYABLE ON FINISHED GOODS AND NO PORTION OF EXCISE / VAT PAID ON INPUT IS DEBITED TO P & L A/C. AND HENCE SUCH EXCISE / IS NOT CONSIDERED FOR THE PURPOSE OF VALUATION OF CLOSING STOCK.' 2.6 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE IS COVERED BY ITAT ORDER AND HAS FULFILLED THE REQUIREMENTS OF ITAT ORDER FOR A.Y.2009 - 10 AND ALSO CIT(A) ORDER FOR A.Y. 2010 - 11 THEREFORE FOR A.Y.2011 - 12 THE APPEAL SHOULD BE ALLOWED AND THAT THERE IS NEED TO GIVE ANY DIRECTION TO THE AO. 2.7 IN OUR OPINION, THIS ISSUE IS COVERED BY THE ITAT ORDER DATED 22/03/2013 IN ITA NO.1676/AHD/2012 PARA NO.7.1 ON PAGE NO.8 AND PARA NO.6.3 OF AO ON PAGE NO.14 IT IS STATED THAT AO HAS VERIFIED THE REVENUE NEUTRAL STATEMENT AND IN THE MATTER OF CIT VS. INDO NIPPON CHEMICALS LTD.261 ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 6 ITR 275. IT IS HELD THAT MODVAT RECEIVABLE IS NOT INCOME. IN THE RESULT, THIS GROUND OF DEPARTMENT IS DISMISSED 9. RESPECTFULLY, FOLLOWING THE SAME, WE HOL D MODVAT RECEIVABLE IS NOT THE INCOME AND THEREFORE, FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). WE UPHOLD THE SAME. IN THE RESULT, THE DEPARTMENT S APPEAL STANDS DISMISSED. 1 0. THE SECOND GROUND OF THE APPEAL RELATES TO THE DELETION OF ADDITI ON OF RS.19,52,2981/ - AS MADE BY THE LEARNED ASSESSING OFFICER, ON ACCOUNT OF DISALLOWANCE U/S.14A R.W.R 8D OF THE ACT. 11. THE ASSESSEE IN THIS CASE HAS ALSO DISALLOWED RS.24 , 98 , 464/ - BEING THE EXPENDITURE INCURRED FROM EARING EXEMPT INCOME. THE LEARNED ASSESSING OFFICER, WHILE DELETING THE CLAIM OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS GIVEN ONLY GENERAL EXPLANATION THAT IT WAS NOT INCURRED ANY EXPENSES, OTHER THAN WHAT HAS BEEN DISALLOWED SUO MOTTO, RELATED TO THE EXEMPT INCOME CLAIMED BY IT. NO SPECIFIC INFORM ATION ON EXEMPT INCOME AND GENERAL EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE HAS OPINED BY THE LEARNED ASSESSING OFFICER, NEIT HER ASSESSEE S ACCOUNTS GIVE S THE CORRECTNESS OF CLAIM OF EXPENDITURE MADE BY THE ASSESSEE IN RESPECT OF EXPE NSES RELATED TO THE EARING EXEMPT INCOME. 12. THE LEAR NED ASSESSING OFFICER, WHILE APPLYING THE PROVIS IONS OF RULE 8D OF THE ACT, PASSED ORDER IN THE FOLLOWING MANNER : 4.6 IN VIEW OF ABOVE DISCUSSIONS THE TOTAL DISALLOWANCE U/S 14A OF THE ACT AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES WORKS OUT TO RS.44,50,755/ - (7,94,274/ - + 36,56,481/ - ). HOWEVER SINCE RS 24,98,464/ - HAS ALREADY BEEN DISALLOWED TOTAL DISALLOWANCE COMES TO RS 19,52,291/ - . HENCE THE SAID SUM OF RS. 19,52,291/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 7 13. THE ISSUE WAS ULTIMATELY DEC IDED BY THE LD.CIT(A) ON THE BASIS OF THE ORDER PASSED BY HIS OWN PREDECESSOR WHEREBY AND WHEREUNDER SIMILAR ADDITION U/S.14A OF THE ACT, FOR THE ASSESSMENT YEAR 2010 - 2011, AND ASSESSM ENT YEAR 2011 - 2012, WAS DELETED. HE THEN ALLOWED THE CLAIM OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS: .. IN VIEW OF VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT, IT IS CLEAR THAT BEFORE INVOKING RULE 8D, THE AO MUST RECORD HIS SATISFACTION ABOUT INCORRECTNESS OF EXPENDITURE RELATABLE TO EXEMPT INCOME DISALLOWED VOLUNTARILY BY APPELLANT. THE CIT(A) IN HIS ORDER FOR A.Y. 2011 - 12 CONCLUDED AS UNDER: '(VII) THE RATIO FROM THESE DECISIONS APART FROM RECORDING OF SATISFACTION OF AO FURTHER REQUIRED THAT AO HAS TO EXAMINE THE BOOKS OF ACCOUNT AND VARIOUS EXPENDITURE DEBITED IN P&L ACCOUNT AND CLEARLY BROUGHT OUT SUCH SATISFACTION THAT WHAT ARE THE EXPENSES CLAIMED BY APPELLANT WHICH ARE RELATABLE TO EXEMPT INCOM E AD THE SAME ARE NOT CONSIDERED BY APPELLANT WHILE DISALLOWING SUCH EXPENDITURE. IN ORDER TO DISALLOW THE EXPENDITURE U/S.!4A THERE MUST BE A LIVE NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF TOTAL INCOME. NO NOTIONAL EXPENDIT URE CAN BE APPORTIONED FOR THE PURPOSE OF EARNING EXEMPT INCOME UNLESS THERE IS AN ACTUAL EXPENDITURE IN RELATION TO EARNING THE INCOME NOT FORMING PART OF TOTAL INCOME. (VIII) I AM THEREFORE INCLINED WITH THE CONTENTION OF THE APPELLANT THAT IT HAD ALREADY DISALLOWED SALARY OF ONE OFFICER WHO WAS LOOKING AFTER THE INVESTMENT REDEMPTION, REALIZATION OF REDEMPTION/ DIVIDEND ETC. IT IS TRUE AS DETAILED EARLIER THAT AO DRAWN A SATISFACTION AT PARA 4.7 OF THE IMPUGNED ORDER BUT SUCH SATISFACTION WAS RELAT ED TO THE INTEREST EXPENSES FOR WHICH NO DISALLOWANCE BEING 0.5% OF AVERAGE INVESTMENT, NO DISSATISFACTION ABOUT CLAIM OF VARIOUS OTHER EXPENDITURE OTHER THAN INTEREST BEING NOT RELATED TO APPELLANT'S BUSINESS WAS DRAWN BY AO. AS PER THE RATIO OF VARIOUS C ASE LAWS AS DETAILED BY HON'BLE ITAT IN THE CASE OF JK INVESTORS (PVT.) LTD. (SUPRA), SUCH SATISFACTION OF THESE EXPENDITURE BEING RELATED TO EXEMPT INCOME SHOULD BE BASED ON VERIFICATION OF SUCH EXPENSES AND CLEAR FINDING OF ITS NEXUS WITH EXEMPT INCOME I S REQUIRED. THE APPELLANT HAS NOT SUBMITTED SPECIFIC EXPLANATION FOR SUBSTANTIATION OF GROUND EXCEPT U/S 14A AND THE IMPACT OF EXPENDITURE SO INCURRED COULD NOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SECTION 1 4A REQUIRED FINDING OF INCURRING OF EXPENDITURE. IF THE EXPENDITURE IS INCURRED WITH A VIEW TO EARN TAXABLE AND THERE IS APPELLANT DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EXPENDITURE INCURRED AND TAXABLE INCOME, THEN NO DISALLOWANCE CAN BE MADE U/S 1 4A MERELY BECAUSE SOME TAX EXEMPT INCOME IS RECEIVED BY THE ASSESSEE. IN THE ABSENCE OF AO HAS NOT GIVEN ANY FINDING THAT ANY OF THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE IS ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME, SUCH SATISFACTION ABOUT INC ORRECT CLAIM OF INTEREST WITH NO ADDITION ON SUCH POINT CANNOT BE GENERALIZED FOR MAKING DISALLOWANCES OVER AND ABOVE WHAT THE AO ALREADY DISALLOWED. . THEREFORE RESPECTFULLY FOLLOWING THE RATIO OF ALL THE CASE LAWS REFERRED ABOVE AND FACTS OF THE CASE, I FIND NO REASON TO DIFFER FROM THE ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 8 FINDINGS OF MY PREDECESSOR CIT(A) AND CONCLUDE THAT THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF RS.19,52,291/ - OVER & ABOVE ALREADY DISALLOWED EXPENDITURE OF RS. 24,98,464/ - . THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 19,52,291/ - . THE APPELLANT GETS RELIEF ACCORDINGLY. THIS GROUND IS ALLOWED ' 14. AT THE TIME OF HEARING OF THE APPEAL LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER PASSED BY THE CO - ORDINATE BENCH, OF THIS TRIBUNAL, IN ITA NO.2544/AHD/2014, FOR THE ASSESSMENT YEAR 20 11 - 2013. 15. HOWEVER, IT WAS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SAI D ORDER WAS CHALLENGED BEFORE THE HON BLE GUJARAT HIGH COURT BY THE REVENUE, WHICH WAS ULTIMATELY TA KEN UP ON DA TED 19/03/2018, AND JURISDICTIONAL HIGH COURT WAS DECLINE D TO ADMIT THE MATTER. THE APPEAL WAS THUS NOT ENTERTAINED, COPY WHEREOF HAS ALREADY BEEN ANNEXED WITH THE COMPILATION MADE AVAILABLE TO US BY THE ASSESSEE. THE LD.DR, RELIED UPON THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER. 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL S AVAILABLE ON RECORD. 17 . WE HAVE GONE THROUGH THE ORDER OF THE CO - ORDINATE BENCH, RELEVANT PORTION WHEREOF WHICH READS AS FOLLOWS: 3.2 WE HAVE GONE THROUGH THE RELEVANT RECORD AND NOTICED THAT THERE IS AN INTEREST FREE FUND ON THE FORM OF CAPITAL & RESERVE IS AS UNDER: CAPITAL :RS.10.12 CRORE RESERVE: RS.363.50 CRORE INVESTMENT IN MUTUAL FUND AS ON 31/03/2011 IS 41.08 CRORE ON PAGE NO.4 OF THE AO. THE ASSESSEE IS COVERED BY CIT VS. TORRENT POWER LTD. 363 ITR 474 (GUJ.) THE ASSESSEE HAS SUO MOTO ADDED EXPENDITURE OF RS.15,45,480/ - RELATING TO EXEMPT INCOME UNDER SECTION 14A AS PER STATEMENT OF INCOME ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 9 18 . WE HAVE ALSO GONE THROUGH THE ORDER OF THE JURISDICTIONAL HIGH COURT AND UPON PERUSAL OF WHICH THE ASSESSEE S SUBMISSION SEEMS TO BE GENUINE. THE RELEVANT PORTION THEREOF IS AS FOLLOWS: THE ISSUE PERTAINS TO ADDITION OF RS.69.48 LAKHS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF INCOME TAX ACT, 1961 [ THE ACT FOR SHORT] WHICH THE CIT(A) AND THE TRIBUNAL DELETED ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT RECORDED SATISFACTION ABOUT THE INACCURACY IN THE ASSESSEE S ACCOUNT IN THIS RESPEC T 19 . IN THIS CASE THE ASSESSEE HAS SUO MOTO MADE THE DISALLOWANCE OF RS.24,98,464/ - IN THE COMPUTATION OF INCOME UNDER THE PROV ISIONS OF SECTI ON 14A R.W.R 8D OF THE ACT. BUT , THE LD.AO, WORKED OUT THE DISALLOWANCE OF RS.44,50,755/ - . 20. IN OUR CONSIDERED VIEW THE LD.AO, SHOULD HAVE BEEN RECORDED SATISFACTION ABOUT THE INACCURACY BEFORE REJECTING THE CLAIM OF THE ASSESSEE AS MANDATED UNDER THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE ACT, AND DECIDED BY THE HON BLE HIGH COURT AS DISCUSSED ABOVE. T HEREFORE, WE ARE NOT IMPRESSED WITH THE DISALLOWANCE MADE BY THE LD.AO, WITHOUT RECORDING SATISFACTION. 21. IN THAT VIEW OF THE MATTER, WE FIND NO IN F IRMITY IN THE ORDER PASSED B Y THE LD.CIT(A) AND WE DISMISS THE GROUND OF APPEAL PREFERRED BY THE REVENUE. ORDER PRONOUNCED IN THE COURT ON 26 / 10 / 201 8 AT AHMEDABAD. - SD - ( PRAMOD KUMAR ) VICE PRESIDENT - SD - ( MS MADHUMITA ROY ) JUDICIAL MEMBER AHMEDABAD; DATED 26 / 10 / 201 8 MANISH ITANO1047/AHD/2016 FOR A.Y.2012 - 2013 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD