The Derabassi Primary Cooperative Agricultural Development Ltd., Derabassi V. ACIT, C-2(1), Chandigarh

ITA 1279/CHANDI/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1503 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-09-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 08-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: AMITAB KAMBOZ
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, SMC, CHANDIGARH , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 1279/CHD/2018 / ASSESSMENT YEAR : 2014-15 THE DERABASSI PRIMARY COOPERATIVE AGRICULTURAL DEVELOPMENT LTD., DERABASSI, MOHALI VS. THE ACIT, CIRCLE 2 (1), CHANDIGARH ./PAN NO. AAABT0240P / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI AMITAB KAMBOZ ' ! / REVENUE BY : SH. MANJIT SINGH CIT DR # $ % /DATE OF HEARING : 07.11.2019 &'() % / DATE OF PRONOUNCEMENT : 07.11.2019 / ORDER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 04.07.2018 OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-1, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS RELATI NG TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND FURT HER CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') WITH RESPECT TO THE EXPENDITURE INCURRED FOR EARNIN G OF TAX EXEMPT INCOME . THE ASSESSEE DURING THE YEAR EARNED A SUM OF RS. 5,00,383/- AS DIVIDEND FROM INVESTMENT IN SHARES OF ANOTHER COOPE RATIVE BANK. THE ITA NO. 1279-CHD-2018- THE DERABASSI PRIMACY COOPERATIVE AGRICULTURAL DEVP BOARD, DERABASSI 2 ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A OF THE I.T. ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 196 2 AND MADE THE DISALLOWANCE OF RS. 9,54,936/- ON ACCOUNT OF EXPEN DITURE WHICH THE ASSESSEE MIGHT HAVE INCURRED FOR EARNING OF TAX EXE MPT INCOME. 3. BEFORE THE LD. CIT(A), THE ASSESSEE MADE SUBMISS IONS THAT THE ASSESSEE WAS POSSESSED OF SUFFICIENT OWN FUNDS TO M EET THE INVESTMENT. IT WAS PLEADED BEFORE THE LD. CIT(A) THAT THE SHARE CAPITAL OF THE ASSESSEE WAS AT RS.2,39,50,000/- AND THE RESERVES AND SURPLUSES WERE AT RS. 7,40,18,113/-, WHEREAS, THE TOTAL INVESTMENT MA DE BY THE ASSESSEE DURING THE YEAR WAS AT RS. 1.33 CRORES WHICH WAS VE RY LESS AS COMPARED TO THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSES SEE. THE LD. CIT(A), HOWEVER, HELD THAT SINCE THE ASSESSEE HAD USED MIXE D FUNDS FOR INVESTMENT, HENCE, AS PER THE LAW LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S AVON CYCLES L TD [53 TAXMANN.COM 297], THE DISALLOWANCE U/S 14A WAS ATTRACTED. HE HOWEVER, AGREED WITH THE PLEA OF THE ASSESSEE THAT THE DISALLOWANCE U/S 14A OF THE ACT CANNOT EXCEED THE TOTAL TAX EXEMPT INCOME EARNED BY THE ASSESSEE. HE ACCORDINGLY RESTRICTED THE DISALLOWANC E TO THE TOTAL TAX EXEMPT INCOME OF THE ASSESSEE AT RS. 5,00,383/-. 4. BEING AGGRIEVED BY THE AFORESAID ORDER OF THE CI T(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. ITA NO. 1279-CHD-2018- THE DERABASSI PRIMACY COOPERATIVE AGRICULTURAL DEVP BOARD, DERABASSI 3 5. SO FAR AS THE PLEA OF THE ASSESSEE THAT THE ASSE SSEE WAS POSSESSED OF SUFFICIENT OWN FUNDS TO MEET THE INVESTMENT, THE ISSUE IS NO MORE RES INTGRA IN THE LIGHT OF THE LATEST DECISION OF THE C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESO URCES PVT LTD ITA NO. 470/CHD/2018 ORDER DATED 16.10.2018, AND THE LA TEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). HOWEVER, IT IS FOUND FROM THE RECORD THAT THE LD. CIT(A) HAS NOT EXAMINED THE FACTUAL FACT OF AVAILABILITY OF THE SU FFICIENT FUNDS WITH THE ASSESSEE. IN VIEW OF THIS, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION OF THIS LIMITED A SPECT OF AVAILABILITY OF OWN FUNDS TO MEET THE INVESTMENT AS WAS PLEADED BEFORE THE CIT(A). IF THE CONTENTION OF THE ASSESSEE IS FOUND CORRECT THEN NO DISALLOWANCE WILL BE ATTRACTED U/S 14A OF THE ACT IN THE LIGHT O F THE DECISION OF THE VARIOUS HIGHER COURTS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUS TRIES LTD. (SUPRA). WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASSE SSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING. SD/- ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 07. 11.2019 .. ITA NO. 1279-CHD-2018- THE DERABASSI PRIMACY COOPERATIVE AGRICULTURAL DEVP BOARD, DERABASSI 4 '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR .