Vishal Engineers & Galvanizers, Ahmedabad V. The ACIT, Circle-6, Ahmedabad

ITA 1108/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8312 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: T P HEMANI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA NO.1108/AHD/2015 / ASSTT. YEAR: 2010-11 VISHAL ENGINEERS & GALVANIZERS 73, ASHWAMEGH INDUSTRIAL ESTATE SARKHEJ-BAVLA NATIONAL HIGHWAY-8A CHANGODAR, AHMEDABAD 382 213. PAN : AAEFV 9722 A VS. ACIT, CIR.6 AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI T.P. HEMANI, AR REVENUE BY : MS.SONIA KUMAR, ADDL.CIT(DR) ! / DATE OF HEARING : 09/08/2017 '#$ ! / DATE OF PRONOUNCEMENT: 09/10/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL AGAINST ORDER OF LD.CIT(A)-13 , AHMEDABAD DATED 4.3.2015 PASSED FOR THE ASSTT.YEAR 2010-2011. 2. IN GROUND NO.1, THE ASSESSEE HAS PLEADED THAT TH E LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF INTEREST AM OUNTING TO RS.59,449/- WHICH WAS DISALLOWED BY THE AO WITH THE AID OF SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. ITA NO.1108/AHD/2015 2 3. WITH THE ASSISTANCE OF THE LD.REPRESNTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT THE LD.AO HAS DISALLOWED THIS INTEREST AMOUNT ON TH E GROUND THAT THE ASSESSEE HAS MADE ADDITION TO THE FIXED ASSETS AMOUNTING TO RS.147,34,908/-. THIS ASSET WAS ACQUIRED IN THE MO NTH OF FEBRUARY, 2010 AND IT WAS SHOWN UNDER THE HEAD UND ER INSTALLATION/ERECTION. THE AO WAS OF THE OPINION THAT THIS ASSET WAS NOT PUT TO USE, AND THEREFORE, INTEREST ATTRIBU TABLE FOR ACQUISITION OF THESE ASSETS DESERVES TO BE DISALLOW ED UNDER SECTION 36(1) OF THE INCOME TAX ACT. APPEAL TO THE LD.CIT( A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE HAS RA ISED TWO FOLD SUBMISSIONS. IN HIS FIRST FOLD OF CONTENTIONS, HE SUBMITTED THAT THE INTEREST UNDER SECTION 36(III) COULD BE DISALLOWED IF THE ASSET IS ACQUIRED FOR EXPANSION OF THE BUSINESS OR PROFESSIO N. THE ASSESSEE NEITHER EXPANDED BUSINESS NOR CONCERNED AS SET HAS BEEN ACQUIRED FOR THE PURPOSE OF EXPANSION OF EXISTING B USINESS. HENCE, PROVISO TO SECTION 36(III) IS NOT APPLICABLE. IN H IS ALTERNATIVE CONTENTIONS, HE SUBMITTED THAT WHEN THE ASSESSEE AC QUIRED ASSET IT HAS RS.2,30,86,166/- INTEREST FREE AMOUNTS WITH IT. THEREFORE, IT CANNOT BE ALLEGED THAT THE ASSESSEE HAS USED INT EREST BEARING FUND FOR ACQUIRING THIS ASSET. IN SUPPORT OF THE C ONTENTIONS, HE RELIED UPON THE FOLLOWING DECISIONS: CIT VS TORRENT POWER LTD., 363 ITR 474 (GUJ) CIT VS. SUZLON ENERGY LTD., 354 ITR 630 (GUJ) CIT VS. GUJARAT POWER CORPORATION LTD., 352 ITR 583 (GUJ) ITA NO.1108/AHD/2015 3 CIT VS. HITACHI HOME & LIFE SOLUTIONS INDIA LTD., 4 1 TAXMANN.COM 540 (GUJ) CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 34 0 (BOM) MUNJAL SALES CORPORATION VS. CIT, 298 ITR 298 (SC) 5. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDE RS OF THE REVENUE AUTHORITIES. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM RECORD T HAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS WHICH CAN TAKE C ARE OF THE ALLEGED INVESTMENT IN THE ASSETS. THEREFORE, NO IN TEREST OUGHT TO HAVE BEEN ALLOCATED BY THE AO FOR MAKING A DISALLOW ANCE UNDER SECTION 36(1)(III) OF THE ACT. WE ALLOW FIRST GROU ND OF APPEAL AND DELETE DISALLOWANCE. 7. IN THE FIRST GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.3,67,291/- WHICH WAS DISALLOWED BY THE AO WITH T HE AID OF UNDER SECTION 14A OF THE ACT. 8. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.2.00 CRORES IN RELIANCE UTILITY FUN D AND SHOWN DIVIDEND INCOME OF RS.1,22,231/-. THE LD.AO HAS IN VOKED SECTION 14A AND MADE DISALLOWANCE OF RS.3,67,291/-. APPEAL TO THE LD.CIT(A) DID BRING ANY RELIEF TO THE ASSESSEE. 9. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT T HE ASSESSEE HAS MADE INVESTMENT ON SEVEN OCCASIONS DURING THE Y EAR. ON EVERY DAY, THERE WAS CREDIT BALANCE IN THE OVERDRAF T ACCOUNT. THE ITA NO.1108/AHD/2015 4 ASSESSEE HAS NOT USED INTEREST BEARING FUND. HENCE , NO DISALLOWANCE OUT OF INTEREST OUGHT TO BE MADE. ALT ERNATIVELY, HE CONTENDED THAT DISALLOWANCE CANNOT EXCEED THE EXEMP T INCOME I.E. RS.1,22,231/-. IN RESPECT OF HIS CONTENTIONS, HE RELIED UPON THE ORDER OF THE ITAT PASSED IN ITA NO.1715/AHD/201 1. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDERS OF THE LD.CIT(A). 10. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, WE FIND THAT THE ASSESSEE HAS MADE FIRST INVESTMENT ON 14.5 .2009. THE BALANCE IN THE BANK ACCOUNT PRIOR TO THE INVESTMENT WAS RS.29,91,287/-. THE ASSESSEE HAS MADE INVESTMENT O F RS.20 LAKHS. THIS POSITION HAS BEEN SHOWN BY THE ASSESSE E ON PAGE NO.89 OF THE PAPER BOOK. SIMILAR IS THE POSITION W ITH REGARD TO OTHER INVESTMENT MADE DURING THE YEAR. IT SHOWS TH AT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS. HOWEV ER, WE ARE OF THE VIEW THAT ON ACCOUNT OF ADMINISTRATIVE EXPENSES AND OTHER EXPENSES SIMILAR DISALLOWANCE OUGHT TO HAVE BEEN MA DE BY THE ASSESSEE. THEREFORE, CONSIDERING THE ORDER OF THE ITAT IN THE CASE OF MADHUSUDAN INDUSTRIES LTD. QUANTUM OF INVESTMENT MADE BY THE ASSESSEE, AND RESULTANT EXEMPT INCOME, THE DISA LLOWANCE BE RESTRICTED TO RS.1,00,000/- OUT OF TOTAL DISALLOWAN CE MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A). 11. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOW ANCE OF RS.3,08,043/- OUT OF AGGREGATE AMOUNT OF RS.18,48,2 61/-. 12. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSE E HAS DEBITED AN AGGREGATE AMOUNT OF RS.18,48,261/- TOWAR DS VEHICLES EXPENSES TO THE PROFIT AND LOSS ACCOUNT. THE ASSES SEE WAS ASKED ITA NO.1108/AHD/2015 5 TO SUBSTANTIATE ITS CLAIM BY PROVIDING DETAILS LIKE LOG BOOK ETC., AS IN THE OPINION OF THE AO, PERSONAL ELEMENT OF THE E XPENSES CANNOT BE RULED OUT. HOWEVER, THE ASSESSEE COULD NOT SUBM IT THE SAME, AND THEREFORE, THE AO RESTRICTED THE EXPENSES EQUIV ALENT TO ONE- SIX OF THE TOTAL EXPENSES I.E. RS.3,08,043/-. THIS DISALLOWANCE WAS CONFIRMED BY THE LD.CIT(A). BEFORE US ALSO, THE ASS ESSEE COULD NOT BRING MATERIAL TO SUPPORT THE CLAIM OF THE ASSE SSEE SO AS TO CONVINCE US TO TAKE A DIFFERENT VIEW THAN THAT OF T HE REVENUE AUTHORITIES. THEREFORE, WE ARE NOT INCLUDED TO DIS TURB ORDER OF THE REVENUE AUTHORITIES ON THIS ISSUE, WHICH IS CONFIRM ED AND THE DISALLOWANCE IS CONFIRMED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH OCTOBER, 2017. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER