CLP India Pvt. Ltd., Ahmedabad V. The DCIT., Circle-1(1)(2), Ahmedabad

ITA 1163/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5767 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMAIR TEKRIWALA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 1163 & 1186/AHD/2018 (ASSESSMENT YEAR: 2013-14) CLP INDIA PVT. LTD. (FORMERLY KNOWN AS GUJARAT PAGUTHAN ENERGY CORPORATION PVT. LTD. ) 6 TH FLOOR, CHANAKYA BUILDING, OFF ASHRAM ROAD, AHMEDABAD JCIT(OSD), CIRCLE-1(1)(2), AHMEABAD V/S V/S DCIT CIRCLE-1(1)(2), AHMEDABAD CLP INDIA PVT. LTD. (FORMERLY KNOWN AS GUJARAT PAGUTHAN ENERGY CORPORATION PVT. LTD. ) 6 TH FLOOR, CHANAKYA BUILDING, OFF ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACG 7999P APPELLANT BY : SHRI S.N. SOPARKAR, AR RESPONDENT BY : SHRI SMAIR TEKRIWALA CIT & SHRI VIDHYUT TRIVEDI, SR. D.R. ( )/ ORDER ITA NOS. 116 3 & 1186/AHD/2018 . A.Y. 2013-1 4 2 DATE OF HEARING : 28 -01-202 0 DATE OF PRONOUNCEMENT : 30 -01-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. ITA NOS. 1163/AHD/2018 & 1186/AHD/2018 ARE CROSS AP PEALS BY THE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE ORDE R OF THE LD. CIT(A)-1, AHMEDABAD DATED 27.02.2018 PERTAINING TO A.Y. 2013- 14 AND ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCE OF THE CASE OF APPELLANT, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING DISALLOWANCE OF RS. 57,72,000 BEING 1% OF CERTAIN ADMINISTRATIVE EXPENDITURE INCURRED BY APPELLANT UN DER SECTION 14A R. W. RULE 8D(2)(III) OF THE ACT, WHEN NO SUCH DISALLOWANCE IS CALLED FOR. 1.1 THE LD. CIT(A) OUGHT TO HAVE APPRECIATE T HAT DISALLOWANCE U/S.14A R. W. RULE 8D CANNOT EXCEED EXEMPT INCOME O F RS.50,000/-EARNED DURING THE YEAR. 2. THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW CHARGING INTEREST U/S 234A, 234B, 234C AND 234D WHEN NO SUCH INTEREST IS LEVIAB LE. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST. 2. FACTS OF THE CASE ARE THAT ON VERIFICATION OF THE B OOKS OF ACCOUNTS OF THE ASSESSEE, IT IS NOTICED THAT ASSESSEE HAS MADE INVE STMENT IN SHARES AND RECEIVED DIVIDEND AMOUNTING TO RS. 50,000/- WHICH IS EXEMPT FROM TAX AND NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ASSESSEE SUBMITTED THAT ITS EXEMPT INCOME IS NOT MO RE THAN 50,000/- AND SAME IS ALSO EVIDENT FROM HIS BOOKS OF ACCOUNTS. BUT LD. A.O. MADE ADDITION OF RS. 17,02,77,850/- WITH THE HELP OF FOLLOWING CHART: ITA NOS. 116 3 & 1186/AHD/2018 . A.Y. 2013-1 4 3 (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME; 0 (II) IN A CASE WHERE THE ASSESSES HAS INCURRED EXPENDITU RE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHIC H IS NOT DIRECTLY A TTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, ART AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY - A X B/C - WHERE (A) AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCU RRED DU RING THE PREVIOUS YEAR; 0 0 (B) THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHI CH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INC OME, AS APPEARING IN TH E BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; P.Y. INVEST 31138510000 C.Y. INVEST 36972630000 TOTAL 68111140000 2 34055570000 PY+CY (C) THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BAL ANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND TH E LAST DAY OF THE PRE VIOUS YEAR; P.Y, ASSETS 53958710000 C.Y. ASSETS 59509940000 TOTAL 113468650000 2 56734325000 PY+CY (A) (B) (C) AXB/C INTEREST. EXP. JA) 0 AVG. INVEST. 34055570000 AVG. ASSETS (C) 56734325000 TOTAL - AXB/C 0 (B) (III) AN AMOUNT EQUAL TO ONE - HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTM ENT, INCOME FROM WHICH DOES RIOT OR SHALL NOT FORM PART OF THE TOTAL INCOM E, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY OF THE PREVIOUS YEAR, .. 17027 7850 AVQ. INVESTMENT 34055570000 I 0.5 100 | 17 0277850 | 170277850 AGGREATEOF(I)+(II) (IIL) 17027 7850 3. AGAINST THE SAID ADDITION, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE LD. A.O.. TH EREAFTER ASSESSEE PREFERRED SECOND STATUTORY APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. AT THE OUTSET, LD. A.R. SHRI S.N. SOPARKAR STATED THAT PRESENT CAS E IS CLEARLY COVERED BY ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN TAX APPEAL NO. 486 OF 2017 IN THE MATTER OF CIT-VADODARA-2 VS. VISION FINSTOCK LTD. W HEREIN SIMILAR FACTS AND CIRCUMSTANCES APPEAL OF THE REVENUE WAS DISMISSED W ITH FOLLOWING OBSERVATION: 1. THE REVENUE HAS CHALLENGED THE JUDGEMENT OF THE INCOME TAX APPELLATE TRIBUNAL DATED 07.07.2016 RAISING FOLLOWING QUESTIO NS FOR OUR CONSIDERATION: ITA NOS. 116 3 & 1186/AHD/2018 . A.Y. 2013-1 4 4 'A. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ITAT WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE MADE OF R S. 1,02,82,049/- U/S. 14A TO THE EXTENT OF EXEMPT INCOME OF RS. 55,604/- ONLY? B. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ITAT WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE OF RS. 1, 02,82,049/- MADE U/S. 14A OF THE ACT TO THE EXTENT OF INCOME EARNED OF RS. 55,604/- WITHOUT APPRECIATING THAT THE ASSESSEE HAD PAID INTEREST OF RS. 1,45,52,632/- ON BORROWED FUNDS?' 2. FROM THE RECORD IT EMERGES THAT, DURING THE PERI OD RELEVANT TO THE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS. 55,604/-. AS AGAINST THAT, THE ASSESSING OFFICER HAD WORKED OUT THE DISA LLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D TO RS. 1,0 2,82,049/-. THE TRIBUNAL, WHILE RESTRICTING THE DISALLOWANCE TO RS. 55,604/-, RELIE D ON THE DECISION OF DELHI HIGH COURT IN CASE OF JOINT INVESTMENTS (P) LTD VS. CIT REPORTED IN 372 ITR 694 HOLDING THAT DISALLOWANCE OF EXPENDITURE IN TERMS OF SECTIO N 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INCOME ITSELF. OUR HIGH CO URT HAS ALSO ADOPTED THE SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX VS. CORRTECH ENERGY PVT. LTD. REPORTED IN 372 ITR 97. 3. TAX APPEAL IS, THEREFORE, DISMISSED. 5. AS WE CAN SEE, ASSESSEE TOTAL DIVIDEND INCOME IS RS . 50,000/- SO THERE CANNOT BE DISALLOWANCE OF RS. MORE THAN 50,000/-. RESPECTF ULLY FOLLOWING THE ABOVE QUOTED JUDGMENT, WE ALLOW THE APPEAL OF THE ASSESSE E. 6. NOW WE COME TO ITA NO. 1186/AHD/2018, THE REVENUE H AS TAKEN FOLLOWING GROUNDS OF APPEAL: (1) THAT THE LD.CIT(A) ERRED IN LAW AND ON FA CTS IN RESTRICTING THE DISALLOWANCE U/S 14A OF RS.L7,02,77,850/- TO RS.57,72,000/-. (2) THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NOS. 116 3 & 1186/AHD/2018 . A.Y. 2013-1 4 5 7. SINCE ALREADY WE HAVE GIVEN RELIEF TO THE ASSESSEE IN CONNECTED APPEAL WHEREIN WE HAVE HELD THAT THERE CANNOT BE DISALLOWANCE OF R S. MORE THAN 50,000/-. THUS IN PARITY WITH THE ABOVE SAID ORDER, WE DISMIS S THE APPEAL OF THE REVENUE AND DELETE THE ADDITION MADE BY THE AUTHORITIES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 1163/AHD/2018 IS ALLOWED AND APPEAL FILED BY THE REVENUE IN ITA NO. 1186/AHD/2018 IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30- 01- 2020 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 30 /01/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD