Associate Co-Operative Bank Ltd., Surat V. The Dy. CIT, Circle-2, Surat

ITA 1110/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1996 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

ASSOCIATES CORPORATE BANK LTD. V. DCIT-2 SURAT /I.T.A. NO.1110 /AHD/2016/A.Y.:10-11 PAGE 1 OF 4 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.1110 /AHD/2016 / A.Y.:2010-11 M/S. ASSOCIATES CO - OPERATIVE BANK LTD. IST FLOOR , VANKAR SANGH BUILDING OPP. RESHAMWALA MARKET RING ROAD SURAT 395002 PAN: AAAAA1521H V S . DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -2 SURAT APPELLANT /RESPONDENT /ASSESSEE BY SHRI RASESH SHAH, CA /REVENUE BY SHRI DILIP KUMAR, SR. D.R. / DATE OF HEARING: 09.10.2018 /PRONOUNCEMENT ON 09 .10.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (IN SHORT THE CIT (A)) DATED 24.02.2016 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -2, SURAT (IN SHORT THE AO) DATED 22.11.2012 UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). ASSOCIATES CORPORATE BANK LTD. V. DCIT-2 SURAT /I.T.A. NO.1110 /AHD/2016/A.Y.:10-11 PAGE 2 OF 4 2. GROUND NO. 1 STATES THE CIS HAS ERRED IN CONFIRMING DISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS.1,19,644 BY INVOKING THE PROVISIONS SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.2, 37, 07,529 ON BANK DEPOSITS OWNED LOANS /FUNDS AND EARNED DIVIDEND INCOME TO THE TUNE OF RS.28, 421ON THE INVESTMENTS MADE. HOWEVER, NO DISALLOWANCE ARE MADE BY THE ASSESSEE SUO-MOTO U/S. 14A OF THE ACT. THE AO, THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE IN RELATION TO EXEMPT INCOME SHOULD NOT BE MADE AS PER PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D. TAKING INTO CONSIDERATION OF ALL THE FACTS AND SUBMISSIONS OF THE ASSESSEE OF AND THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A R. W. RULE 8D, THE AO HAS WORKED OUT TO THE TUNE OF RS.1,19,644 AND SAME WAS DISALLOWED U/S.14A OF THE ACT. 4. BEING AGGRIEVED, WITH THE ORDER THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). IT WAS CLAIMED BEFORE THE CIT (A) THAT INVESTMENT IN SHARES IS OUT OF NON-INTEREST BEARING FUNDS IN THE FORM OF CAPITAL RESERVE WHICH ARE IN EXCESS OF INTEREST-FREE INVESTMENT. HOWEVER, CIT (A) OBSERVED THAT THE AO HAS GIVEN FINDING THAT INVESTMENT EARNING EXEMPT INCOME AS WELL AS BUSINESS INCOME WERE MADE FROM COMMON FUNDS AND THE APPELLANT HAS PAID INTEREST ON SUCH FUNDS. THEREFORE, THE CIT (A) ASSOCIATES CORPORATE BANK LTD. V. DCIT-2 SURAT /I.T.A. NO.1110 /AHD/2016/A.Y.:10-11 PAGE 3 OF 4 UPHELD THAT THE AO WAS CORRECT AND DISALLOWANCE OF RS.1,19,644 MADE BY APPLYING RULE 8D (2)(II) WERE CONFIRMED. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. A.R. RELYING RELIED IN THE CASE OF PR. CIT V. SINTEX INDUSTRIES LTD. [2018] 93 TAXMANN.COM 24 (SC) SUBMITTED THAT WHERE THE ASSESSEE HAS ITS SURPLUS FUNDS AGAINST WHICH MANNER INVESTMENT WAS MADE, NO DISALLOWANCE OF QUESTION OF MAKING ANY DISALLOWANCE OF EXPENDITURE IN RESPECT OF INTEREST AND ADMINISTRATIVE EXPENSES U/S. 14A AROSE AND THEREFORE, THERE WAS NO QUESTION OF ANY ESTIMATION OF EXPENDITURE IN RESPECT OF INTEREST AND ADMINISTRATIVE EXPENSES UNDER RULE 8D IS REQUIRED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOTED THAT THE ASSESSEE EARNED THE DIVIDEND AT INCOME OF RS.28, 421/-. HOWEVER, THE EXPENDITURE INCURRED IN RELATION TO EARNING, SUCH EXEMPT INCOME HAS NOT QUANTIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO INVOKED THE PROVISIONS OF RULE 8D AND WORKED OUT THE DISALLOWANCE OF RS.1,19,644/-. HOWEVER, THE ASSESSEE WAS NOT ABLE TO JUSTIFY THAT INVESTMENT IS MADE OUT OF INTEREST-FREE FUNDS AVAILABLE, AS THE COMMON FUNDS ARE AVAILABLE WITH THE ASSESSEE. HENCE, DECISION OF HON`BLE SUPREME COURT (SUPRA) IS DISTINGUISHABLE. HOWEVER, THE ASSESSEE BEING A BANK, HENCE, INTEREST ASSOCIATES CORPORATE BANK LTD. V. DCIT-2 SURAT /I.T.A. NO.1110 /AHD/2016/A.Y.:10-11 PAGE 4 OF 4 EXPENDITURE CANNOT BE ATTRIBUTABLE TO EXEMPT INCOME EARNED AND INVESTMENT MADE THEREON. WE THEREFORE, OF THE VIEW THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST COMPONENT CAN BE MADE. HOWEVER, WE FIND THAT THAT DISALLOWANCE ON INTEREST @ 0.5% HAS BEEN WORKED OUT AT RS. 12,500. THEREFORE, CONSIDERING THE FACTS OF THE CASE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO RS. 12,500 AS AGAINST RS. 1,19,644 MADE BY HIM. IN VIEW OF THIS MATTER, THIS GROUNDS OF APPEAL IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.10.2018 SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER SURAT 09.10.2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ) ( / THE CIT(A), 4. PR. CIT 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT