The ACIT, Circle-4, Ahmedabad V. Gujarat State Investments Ltd., Ahmedabad

ITA 1284/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9747 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAHIL
• Assessee Lawyers: M G PATEL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER GUJARAT STATE INVESTMENT LTD, 6 TH FLOOR, H.K. HOUSE, ASHRAM ROAD, AHMEDABAD - 380009, PAN: AABCG4649M (APPELLANT) VS THE INCOME TAX OFFICER, WARD - 4(1), AHMEDABAD (RESPONDENT) THE ACIT, CIRCLE - 4, AHMEDABAD, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD (APPELLANT) VS GUJARAT STATE INVESTMENT LTD, 6 TH FLOOR, H.K. HOUSE, ASHRAM ROAD, AHMEDABAD - 380009, PAN: AABCG4649M (RESPONDENT) REVENUE BY : S H RI SA MIR VAHIL , SR. D . R. ASSESSEE BY: S H RI M.G. PATEL , A.R. DATE OF HEARING : 05 - 1 1 - 2 015 DATE OF PRONOUNCEMENT : 20 - 01 - 2 016 I T A NO . 1264 & 1265 / A HD/20 12 A S SESSMENT YEAR 200 2 - 03 & 2005 - 06 ITA NO. 1283 & 1284 /AHD/20 12 A SSESSMENT YEAR 200 2 - 03 & 2005 - 06 I.T.A NO S . 1264 - 1265 & 1283 - 1284 /AHD/20 12 A.Y. 2002 - 0 3 & 2006 - 07 PAGE NO GUJARAT STATE INVESTMENT LTD VS. ITO & ACIT VS. GUJARAT STATE INVESTMENT LTD 2 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS IS A BATCH OF FOUR CASES. THE ASSESSEE AND REVENUE HAVE FILED TWO CROSS APPEALS EACH I.E. ITA NOS. 1264 AND 1283/AHD/2012 FOR ASSESSMENT YEAR 2002 - 03 AGAINST THE ORDER DATED 29 - 03 - 2012 PASSED BY THE CIT(A) - VIII, AHMEDABAD IN CASE NO. CIT(A) - VIII/ITO.4(1)/482/10 - 11 . LATTER ASSESSMENT YEAR 2005 - 06 INVOLVES IDENTICAL APPEALS ITA NOS. 1265 AND 1284/AHD/2012 DIRECTED AGAINST THE CIT(A) - VIII, AHMEDABAD ORDER OF EVEN DATED IN CASE NO. CIT(A) - VIII/ITO.4( 1)/483/10 - 11 . THE RELEVANT PROCEEDINGS ARE U/S. 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . WE HAVE HEARD BOTH SIDES. 2. A CO M BINED PERUSAL OF THE CASE FILES REVEALS THAT THE ASSESSEE S PLEADINGS THEREIN CHALLENGE SECTION 14A DIS ALLOWANCES OF RS. 26,28,414/ - AND RS. 11,68,830/ - ; RESPECTIVELY QUA PROPORTIONATE EXPENDITURE COMPUTED IN RESPECT OF ADM INISTRATIVE AND OTHER EXPENSES. THE REVENUE S GRIEVANCE IN THE TWO IMPUGNED ASSESSMENT YEARS SEEKS TO RESTORE ASSESSING OFFICER S ACTION DISALLOWING SUMS OF RS. 2,25,20,176/ - AND RS. 2,50,85,863/ - U/S.14A R.W. RULE 8D OF THE INCOME TAX RULES RESPECTIVELY. BOTH PARTIES REITERATE THEIR RESPECTIVE PLEADINGS IN THE COURSE OF HEARING. I.T.A NO S . 1264 - 1265 & 1283 - 1284 /AHD/20 12 A.Y. 2002 - 0 3 & 2006 - 07 PAGE NO GUJARAT STATE INVESTMENT LTD VS. ITO & ACIT VS. GUJARAT STATE INVESTMENT LTD 3 3. THE ASSESSEE IS AN INVESTMENT COMPANY. THE STATE GOV ERNMENT HOLDS THE ASSESSEE - ENTITY MAKING SHARE INVESTMENTS IN VARIOUS COMPANIES. ITS GROSS RECEIPTS IN THE THESE TWO IMPUGNED ASSESSMENT YEARS ARE OF RS. 12,08,61,000/ - AND RS. 40,54,52,000/ - . THE SAME COMPRISED OF EXEMPT DIVIDEND INCOME OF RS. 11,26,09 , 983/ - AND RS. 13,59,06,057/ - . RELEVANT EXPENDITURE CLAIMED IN THE TWO IMPUGNED ASSESSMENT YEAR TURNS OUT TO BE THAT OF RS. 28,21,000/ - AND RS. 34,87,000/ - ; RESPECTIVELY. THE ASSESSEE DID NOT ALLOCATE ANY EXPENDITURE IN RELATION TO ITS ABOVE STATED EXEMPT INCOME. THE ASSESSING OFFICER INVOKED RULE 8D TO COMPUTE SECTION 14A DISALLOWANCES OF RS. 2,25,20,176/ - AND RS. 2,50,85,863/ - IN THE TWO IMPUGNED ASSESSMENT YEARS. 4. THE ASSESSEE PREFERRED SEPARATE APPEALS. THE CIT(A) UPHOLDS ITS LEGAL ARGUMENT THA T RULE 8D DOES NOT APPLY IN ASSESSMENT YEAR PRECEDING TO ASSESSMENT YEAR 2008 - 09 AS PER HON BLE B OMBAY HIGH COURT DECISION IN GODREJ AND BOYCE MANUFACTURING CO. LTD VS. DCIT (2010) 328 ITR 81 (BOM). HE THEREAFTER PROCEEDS TO COMPUTE PROPORTIONATE DISALLOW ANCE OF EXPENDITURE FORMING SUBJECT MATTER OF ADJUDICATION IN ASSESSEE S APPEALS. THIS LEAVES BOTH THE PARTIES AGGRIEVED. 5. FIRST , WE COME TO REVENUE S GRIEVANCE SEEKING TO INVOKE RULE 8D PRIOR TO ASSESSMENT YEAR 2008 - 09. IT FAILS IN REBUTTING HON B LE BOMBAY HIGH COURT DECISION HEREINABOVE HOLDING RULE 8D OF THE INCOME TAX RULES TO BE APPLICABLE ONLY FROM ASSESSMENT YEAR 2008 - I.T.A NO S . 1264 - 1265 & 1283 - 1284 /AHD/20 12 A.Y. 2002 - 0 3 & 2006 - 07 PAGE NO GUJARAT STATE INVESTMENT LTD VS. ITO & ACIT VS. GUJARAT STATE INVESTMENT LTD 4 09. ITS SOLE SUBSTANTIVE GROUND IDENTICAL IN BOTH APPEALS FAILS. SO IS THE OUTCOME OF ITAS 1283 AND 1284/AHD/2012. 6. W E COME TO ASSESSEE S APPEALS NOW. IT STRONGLY ARGUES THAT BOTH THE LOWER AUTHORITIES HAVE NOWHERE REJECTED ITS ACCOUNTS STIPULATED U/S. 14A(2). IT STATES TO HAVE INCURRED THE IMPUGNED EXPENSES SUBJECT MATTER OF ADJUDICATION AS DISALLOWED ON PROPORTIONATE BASIS TO HAVE BEEN INCURRED FOR EARNING TAXABLE INCOME ONLY. NATURE OF THESE SUMS IS FOUND TO BE STAFF AND OTHER EXPENSES, RENT AND TAXES, INSURANCE, CONSULTANCY, TELEPHONE AND CONVEYANCE ETC AS GIVEN IN PARA 11 OF THE PAPER BOOK. THE ASSESSEE SUBMITS T HAT THE IMPUGNED PROPORTIONATE DISALLOWANCE IS SUSTAINABLE ONLY IF THE EXPENDITURE IN QUESTION CANNOT BE WHOLLY ALLOCATED TO TAXABLE INCOME. THE REVENUE SUPPORTS THIS DISALLOWANCE IN BOTH ASSESSMENT YEARS. 7 . WE HAVE HEARD RIVAL CONTENTIONS. THERE IS NO DISPUTE BETWEEN PARTIES ABOUT FACTS AND FIGURES NARRATED HEREINABOVE. THE CIT(A) HAS INVOKED PROPORTIONATE DISALLOWANCE QUA ASSESSEE S DIVIDEND INCOMES EARNED IN THE TWO IMPUGNED ASSESSMENT YEARS. THERE IS NO DISPUTE THAT THE ASSESSEE IS ALREADY AN I NVESTMENT COMPANY ONLY DERIVING EXEMPT INCOME TO THE TUNE OF ALMOST 90% OF THE GROSS RECEIPTS IN FORMER ASSESSMENT YEAR. WE OBSERVE IN THESE FACTS THAT IT HAS FAILED TO ATTRIBUTE WHOLE OF THE EXPENDITURE AMOUNTING G TO RS. 28,21,000/ - QUA EARNING OF THE R EMAINING MINISCULE TAXABLE INCOME. THIS HAS MADE THE CIT(A) TO INVOKE THE IMPUGNED PROPORTIONATE DISALLOWANCE IN VIEW OF THESE FACTS AND CIRCUMSTANCES. THE ASSESSE E HAS RELIED I.T.A NO S . 1264 - 1265 & 1283 - 1284 /AHD/20 12 A.Y. 2002 - 0 3 & 2006 - 07 PAGE NO GUJARAT STATE INVESTMENT LTD VS. ITO & ACIT VS. GUJARAT STATE INVESTMENT LTD 5 UPON A CATENA OF CASE OF LAW IN SUPPORT OF ITS CONTENTIONS OPPOSING PROPORTIO NATE DISALLOWANCE. NONE OF THE SAID CASES SEEM TO INVOLVE AN INVESTMENT COMPANY ALIKE THE ASSESSEE. WE HOLD IN OTHER WORDS THAT THE ASSESSEE COMPANY INCURS ITS EXPENDITU RE IN MAKING SHARE INVESTMENTS ONLY KEEP ING IN MIND ITS BUSINESS AND EXEMPT INCOME OF MORE THAN 90% OF THE GROSS RECEIPTS . WE FIND NO MERITS IN ASSESSEE S SOLE SUBSTANTIVE RAISED IN BOTH IMPUGNED ASSESSMENT YEARS. THE CIT(A) S FINDINGS UNDER CHALLENGE THEREIN ARE UPHELD. ITAS 1264 AND 1265/AHD/2012 ARE REJECTED. 8 . ALL THESE FOUR APP EALS I.E. ITAS 1264 & 1265/AHD/2012 (ASSESSEE S CASES) AND ITAS 1283 AND 1284/AHD/2012 FILED AT REVENUE S BEHEST ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 01 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20 /01/2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , I.T.A NO S . 1264 - 1265 & 1283 - 1284 /AHD/20 12 A.Y. 2002 - 0 3 & 2006 - 07 PAGE NO GUJARAT STATE INVESTMENT LTD VS. ITO & ACIT VS. GUJARAT STATE INVESTMENT LTD 6 / ,