Shri Mahendrakuamr G.Patel, Ahmedabad V. The Income tax Officer,Ward-4(4), Ahmedabad

ITA 111/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73013 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: ARTI N SHAH A R
• Keywords: Opportunity of being heard
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 111/AHD/2011 ASSESSMENT YEAR :2007-08 MAHENDRAKUMAR G. PATEL F/15, GIDC ESTATE, NARODA, AHMEDABAD V/S . INCOME TAX OFFICER, WARD-4(4) AHMEDABAD. PAN NO. A BVPP8942J (APPELLANT) .. (RESPONDENT) *+ , - & / BY APPELLANT SMT. ARTI N. SHAH, A.R. ./*+ , - & /BY RESPONDENT SHRI J. P. JHANGID, SR. D.R. 0 , 1%' /DATE OF HEARING 13.02.2014 234 , 1%' /DATE OF PRONOUNCEMENT 21.02.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A)-VIII, AHMEDABAD, ORDER DATED 24.12.2010 FOR A.Y. 2007-08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-VII, AHMADABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.3,83,428/- U/S. 14A OF THE INCOM E TAX ACT, 1961 MADE BY THE ASSESSING OFFICER. ITA NO. 111/AHD/2011 A.Y. 07-08 MAHENDRAKUMAR G. PATEL VS. ITO PAGE 2 ADDITIONAL GROUNDS 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-VII, AHMADABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION U/S. 14A OF THE IT ACT, 1961 OF RS.3,8 3,428/- BY APPLYING RULE 8D OF THE IT RULES WHEN THE SAID RULE CAME INTO APPLICATION FROM A.Y. 2008-09 ONWARDS ONLY. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VII, AHMADABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.3,74,785/- MADE BY THE ASSESSING OFFICER BY APPLYING RULE 8D OF THE IT RUL ES, THOUGH THE TOTAL INVESTMENTS OF RS.19,44,015/- ARE LESS THAN T HE OWN INTEREST FREE CAPITAL OF RS.58,65,623/-. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VII, AHMADABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.8,643/- MADE BY THE ASSESSING OFFICER BY APPLYING RULE 8D OF THE IT RULES, THOUGH NO EXPENDITURE EXCEPT INTEREST HAS BEEN CLAIMED IN THE RETURN OF I NCOME. ALL THE GROUNDS OF ASSESSEES APPEAL ARE REVOLVING AROUND DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D OF THE IT ACT. 2. THE A.O. OBSERVED THAT ASSESSEE HAD SHOWN DIVIDE ND INCOME OF RS.48,698/-. NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSEE U/S. 14A. THEREFORE, HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AFFORDED BY THE ASSESSEE. IT WAS SUBMITTED BEFORE THE A.O. THAT ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE AGAINST THE DIVIDEND INCOME OF RS.48,698/- EXEMPTED U/S. 10 OF THE ACT. AFTER CONSIDERING THE ASSESSEES REPLY, THE A.O. HELD THAT EVEN THERE IS NO EXPENDITURE INCURRED BY THE ASSESSEE ON EARNING OF DIVIDEND INCOME BUT AS PER SECTION 14A DISALLOWANCE CAN BE MADE ON ITA NO. 111/AHD/2011 A.Y. 07-08 MAHENDRAKUMAR G. PATEL VS. ITO PAGE 3 ACCOUNT OF EXEMPTED INCOME CLAIMED BY THE ASSESSEE. THUS, HE APPLIED RULE 8D AND CALCULATED THE DISALLOWANCE AT RS.3,83,428/- . 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD CONFIRMED THE ADDI TION BY OBSERVING AS UNDER: 2.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, FINDINGS OF THE A.O AS WELL AS THE SUBMISSION OF THE APPELLANT. IT IS A N ADMITTED FACT THAT THE ASSESSEE HAS THE CLOSING INVESTMENT IN TAX FREE SEC URITIES AMOUNTING TO RS. 1944015/-. THE AVERAGE INVESTMENT IN TAX FREE S ECURITIES WORKS OUT TO RS. 17,28,603/- AS CALCULATED BY THE A.O IN PARA -4 OF THE ASSESSMENT ORDER. IT IS ALSO UNDISPUTED FACT THAT ASSESSEE HAS INCURRED INTEREST EXPENDITURE OF RS. 6,01,315/- DURING THE YEAR UNDER CONSIDERATION. THE DISALLOWANCE UNDER RULE 8D R.W.S 14A(3) FROM A.Y. 2 007-08 ON -WARDS IS OF MANDATORY NATURE AND THEREFORE I AM OF THE OPINION THAT THE A.O HAS CORRECTLY DISALLOWED RS. 383428/- UNDER PROVISION O F SECTION 14A OF THE ACT. ACCORDINGLY, THE ADDITION MADE BY A.O IS CONFI RMED AND THE GROUND OF APPEAL IS DISMISSED. 4. NOW THE ASSESSEE IS BEFORE US. LD. A.R. FOR THE ASSESSEE CONTENDED THAT RULE 8D IS APPLICABLE FROM A.Y. 08-09 AS HELD BY THE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MFG CO. LTD. VS. DCIT, 328 ITR 81 (B OM). FURTHER, SHE HAS DRAWN OUR ATTENTION ON PAGE NO.10 OF THE PA PER BOOK THAT ASSESSEE HAS OPENING CAPITAL MORE THAN RS.52 LACS DURING THE YEAR AND CLOSING CAPITAL BALANCE WAS MORE THAN RS.58 LACS. AS PER PAGE NOS. 13 & 14 OF PAPER BOOK, TOTAL INVESTMENT IN SHARES AND SECURITIES WAS RS.19 .45 LACS AND INTEREST EXPENSES DURING THE YEAR WAS RS.6 LACS. IF THE INV ESTMENT IN LIC OF INDIAN AND PPF REDUCED FROM THE DETAILS OF INVESTMENT MADE DURING THE YEAR OF ITA NO. 111/AHD/2011 A.Y. 07-08 MAHENDRAKUMAR G. PATEL VS. ITO PAGE 4 RS.4,75,165/-, THE NET INVESTMENT DURING THE YEAR W AS MORE THAN RS.2.6 LACS SHE FURTHER HAS RELIED UPON FOLLOWING CASES: I. CIT VS. HERO CYCLES 323 ITR 518 (P&H) II. CIT VS. RAGHUVIR SYNTHETICS 354 ITR 222 (GUJ)(H C) III. CIT VS. RELIANCE UTILITIES & POWER LTD. 313 IT R 340 (BOM)(HC) IV. CIT VS. GUJARAT INDUSTRIAL CORPORATION LTD. 37 TAXMANN.COM 254 (GUJ)(HC) V. CIT VS. UTI BANK LTD. 32 TAXMANN.COM 370 (GUJ)(H C) VI. CIT VS. R L KALTHIA ENGINEERING & AUTOMOBILES ( P) LTD. 33 TAXMANN.COM 14 (GUJ) (HC) VII. CIT VS. SUZLON ENERGY LTD. 33 TAXMANN.COM 151 (GUJ)(HC) AND ARGUED THAT AS PER HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (SUPRA) INTEREST FR EE FUND AVAILABLE WITH THE ASSESSEE SHOULD BE ADJUSTED AGAINST THE INVESTMENT FIRST. THEREFORE, SHE REQUESTED TO DELETE THE ADDITION. AT THE OUTSET, L D. SR. D.R. RELIED UPON THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS HELD THAT RULE 8D IS OPERATIVE FROM A.Y. 08-09 NOT A.Y. 07-08 BY BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MFG CO LTD. VS. DCIT (SUPRA) BUT IT WAS ALSO HELD BY HONBLE BOMBAY HIGH COURT THAT A REASONABLE DISALLOWANCE CAN BE MADE AS PER SECTION 14A. DURIN G THE YEAR, ASSESSEE MADE INVESTMENT BUT HAD CAPITAL BALANCE. THEREFORE , WE DO NOT FIND ANY ITA NO. 111/AHD/2011 A.Y. 07-08 MAHENDRAKUMAR G. PATEL VS. ITO PAGE 5 JUSTIFICATION FOR DISALLOWANCE OF INTEREST BUT ADMI NISTRATIVE DISALLOWANCE MADE BY THE A.O. AT RS.8,643/-, IS CONFIRMED. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 21.02.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )