Sh. Ramesh Kumar Dudani, Mohali V. DCIT, Mohali

ITA 1147/CHANDI/2011

• Counselvise Citation: 114721514 RSA 2011
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILESH KUMAR GUPTADR
• Assessee Lawyers: SUNIL KUMAR
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1147/CHD/2011 (ASSESSMENT YEAR : 2008-09) SHRI RAMESH KUMAR DUDANI, V DCIT, CIRCLE 6(1), PROP. TECHNICAL PRODUCTS CORP., MOHALI PLOT NO. C-104, INDUSTRIAL AREA, MOHALI PAN: ABBPD-0633J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL KUMAR RESPONDENT BY : SHRI AKHILESH KUMAR GUPTA,DR DATE OF HEARING : 18.01.2012 DATE OF PRONOUNCEMENT : 30.01.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 01.09.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. GROUND NO.1 RAISED BY THE ASSESSEE BEING GENERA L IS DISMISSED. 3. GROUND NOS.2 TO 5 RAISED BY THE ASSESSEE ARE AS UNDER: 2. THAT THE LRD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD. AO WHO HAS WRONGLY APPLIED THE PROVISIONS O F SECTION 80IC(7) OF THE INCOME-TAX ACT,1961 AND HAS WRONGLY DENIED DEDUCTION U/S 80IC TO THE TUNE OF RS.43,62,257/-. 3. THAT THE LRD. CIT(A) HAS MISINTERPRETED THE PROV ISIONS OF SECTION 80IC(7) AND WRONGLY LED TO THE CONCLUSION T HAT SINCE THE UNIT AT THEOG, SHIMLA AND UNIT AT MOHALI ARE OF THE SAME PERSON, THEREFORE THE PROVISIONS OF SECTION 80IC(7) ARE ATTRACTED AND HAS ERRED IN REDUCING DEDUCTION U/S 8 0IC OF THE ACT BY RS.43,62,257/-. 4. THAT THE LRD. CIT(A) HAS BEEN UNJUSTIFIED IN UPH OLDING THE ORDER OF THE LRD AO WHO HAS WRONGLY APPLIED THE SALES 2 RATIO IN APPORTIONING THE TOTAL EXPENSES INCURRED F OR BOTH UNITS WITHOUT APPRECIATING THE FACT THAT THE EXPENS ES INCURRED FOR BOTH UNITS ARE EXCLUSIVELY INCURRED FOR THEM AN D THERE WAS NO CAUSE TO APPORTION THE EXPENSES AS THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNTS FOR BOTH UNIT S. 5. THAT THE LRD. CIT(A) HAS BEEN UNJUSTIFIED IN UPH OLDING THE ORDER OF THE LRD. AO WHO HAS WRONGLY APPLIED SA LES RATIO TO APPORTION THE TOTAL EXPENSES WHICH INCLUDES MANUFAC TURING, ADMINISTRATION AND DEPRECIATION ON FIXED ASSETS IF BOTH UNITS WITHOUT APPRECIATING THE NATURE OF EXPENDITURE INCU RRED AND HAS ERRED IN APPORTIONING THE EXPENSES TO THE TUNE OF RS.43,62,257/- TO THE UNIT AT THEOG, SHIMLA WHICH W AS ALLEGED TO HAVE BEEN BOOKED IN UNIT AT MOHALI. 4. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUES IN GROUND NOS.2 TO 5 ARE IDENTICAL DECIDED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL. WE FIND THAT THE ISSUES RAI SED VIDE PRESENT GROUND NOS.2 TO 5 WERE DECIDED BY TRIBUNAL AGAINST THE ASS ESSEE IN ASSESSEES APPEAL BEARING NO.113/CHD/2010 VIDE ORDER DATED 30. 3.2011. THE SAID RATIO WAS FOLLOWED BY THE TRIBUNAL IN ASSESSEES OW N APPEAL IN ITA NO.597/CHD/2011 RELATING TO ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 29.7.2011. FOLLOWING THE ABOVE SAID PRECEDENT AND IN VIEW OF THE SUBMISSION MADE BY THE LEARNED A.R. FOR THE ASSESSE E, GROUND OF APPEAL NOS.2 TO 5 RAISED BY THE ASSESSEE ARE THUS DISMISSE D. 5. GROUND NOS.6 AND 7 RAISED BY THE ASSESSEE ARE AS UNDER: 6. THAT THE LRD. CIT(A) HAS NOT BEEN JUSTIFIED IN UPHOLDING THE ODER OF THE LRD AO WHO HAS WHO HAS GROSSLY ERRED IN ADDING BACK AN AMOUNT OF RS.7,04,265/- AS DISALLOWANCE U/S 14A AS THE INVESTMENT IN SHARES AND MUTUAL FUNDS HAS BEEN MADE BY THE ASSESSEE OUT OF HIS PERSONAL CAPITAL AND NO EXPENSES HAS BEEN INCURRED BY THE ASSESSEE AGAINST EXEMPT INCOME. 7. THAT THE LRD. CIT(A) HAS NOT BEEN JUSTIFIED IN UPHOLDING THE ORDER OF THE LRD AO WHO HAS WHO HAS GROSSLY ERRED IN CALCULATIONS IN MAKING DISALLOWANCE U/S 14A READ WITH RULE 8D OF INCOME TAX RULES. 3 6. THE ISSUE IN GROUND NOS.6 AND 7 RAISED BY THE AS SESSEE IS IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF T HE ACT. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTED THAT THE ASSESSEE HAD DECLARED EXEMPT INCOME OF RS. 35,21,234/- ON ACCOUNT OF DIVIDEND FROM MUTUAL FUNDS AND SHARES. APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT, THE ASSESSIN G OFFICER COMPUTED THE DISALLOWANCE IN VIEW OF THE PROVISIONS OF RULE 8D READ WITH SECTION 14A AND DISALLOWED A SUM OF RS.7,04,265/-. THE SAI D DISALLOWANCE WAS UPHELD BY THE CIT (APPEALS) REJECTING THE CLAIM OF THE ASSESSEE THAT THERE WAS NO NEXUS BETWEEN THE BORROWED FUNDS AND I NVESTMENT MADE TO EARN EXEMPT INCOME. 7. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID DISALLOWANCE MADE BY THE CIT (APPEALS). THE LEARNED A.R. FOR THE ASS ESSEE STRESSED THAT IN THE ABSENCE OF ANY NEXUS BEING ESTABLISHED BETWEEN BORROWED FUNDS AND INVESTMENT MADE BY THE ASSESSEE, INCOME FROM WHICH WAS EXEMPT, THERE WAS NO MERIT IN THE AFORESAID DISALLOWANCE. RELIAN CE WAS PLACED ON THE RATIO LAID DOWN IN THE CASE OF CIT VS. WINSOM TEXTI LE INDUSTRIES [319 ITR 204 (P&H)]. 8. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE CIT (APPEALS) THE ASSESSEE HAS FURNISHED ANY EVIDENCE TO ESTABLISH ITS CLAIM. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY, EXCEPT FOR MAKING THE CLAIM THAT IT HAD NOT UTILIZED BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN SEC URITIES, INCOME FROM WHICH EXEMPT, NO FURTHER EVIDENCE WAS FURNISHED BY THE ASSESSEE TO ESTABLISH THAT IT HAD UTILIZED OWN FUNDS FOR THE PU RPOSE OF ABOVE SAID INVESTMENT. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE CLAIM OF 4 THE ASSESSEE. THE PROVISIONS OF SECTION 14A OF THE ACT FOR COMPUTING DISALLOWANCE OF EXPENDITURE VIS--VIS EXEMPT INCOME ARE ATTRACTED IN THE CASE. THE ASSESSING OFFICER HAD APPLIED THE PROVIS IONS OF RULE 8D OF THE ACT INCOME TAX RULES TO COMPUTE THE AFORESAID D ISALLOWANCE. THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO POINT O UT ANY DISCREPANCY IN THE AFORESAID WORKING OF THE DISALLOWANCE. IN VIEW THEREOF, WE UPHOLDING THE ORDER OF THE CIT (APPEALS), DISMISS G ROUND NOS. 6 AND 7 OF APPEAL RAISED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF JANUARY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH JANUARY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH