Govardhandas B.Shah (HUF), Jalgaon V. Income-tax Officer, Ward - 2(4), Jalgaon

ITA 1288/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2588 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 08-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1288/PUN/2018 / ASSESSMENT YEAR : 2013-14 GOVARDHANDAS B. SHAH (HUF), GUJARATHI GALLI, CHOPDA, DIST. JALGAON 425 107. PAN : AAEHS8978P. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 2(4), JALGAON. . / RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI RAJESH GAWALI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 2, NASHIK DAT ED 15.05.2018 FOR THE ASSESSMENT YEAR 2013-14. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN HUF STATED TO BE ENGAGED IN THE BUSINESS OF COTTO N GINNING PRESSING AND TRADING. ASSESSEE ELECTRONICALLY FILED I TS RETURN OF INCOME FOR A.Y. 2013-14 ON 30.09.2013 DECLARING TOTAL INCOM E AT RS.1,05,670/-. THE CASE WAS SELECTED FOR SCRUTINY AND TH EREAFTER / DATE OF HEARING : 22.01.2019 / DATE OF PRONOUNCEMENT: 07.03.2019 2 ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.11.02.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.5,78,250/-. AG GRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.C IT(A), WHO VIDE ORDER DT.15.05.2018 (IN APPEAL NO.NSK/CIT(A)-2/319/2015-1 6) DISMISSED THE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDE R OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS : 1. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.2,66,965/- U/S 14A RULE 8D OF THE ACT. HE FAI LED TO APPRECIATE THAT IN THE ABSENCE OF ANY EXEMPT INCOME SEC.14A/RULE D HAD NO APPLICATION. 2. THAT THE LEARNED CIT(A) OUGHT TO HAVE RESTRICTED TH E DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED WHICH WAS RS.NIL IN VIEW OF THE DECISIONS RELIED UPON BY THE APPELLANT. 3. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT C BDT CIRCULAR NO.5/2014 DT.11.02.2014 IS NOT IN LINE WITH THE PROVISIONS OF THE ACT AND JUDICIAL VIEW IN THIS REGARD AND AS SUCH MUST BE HELD TO BE BAD-IN-LAW. 4. THAT THE LEARNED CIT(A) ERRED IN NOT CONSIDERING TH E GROUND NO.4 STATED IN PARA 5 OF HIS ORDER AND CONFIRMING THE DISALLOWANCE U/S 14A WITHOUT DISPOSING OF THE SAID GROUND. 5. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE FACTS OF THE DECISION OF THE HONBLE SUPREME COURT IN MAXOPP INVESTMENTS LTD. VS. CIT (402 ITR 640) AND CIT VS. RAJENDRA PRASAD MODY, (115, IT R 519) WERE DISTINGUISHABLE AND CONSEQUENTLY ERRED IN CONFIRMIN G THE DISALLOWANCE U/S 14A RELYING UPON THE SAID DECISION. 6. THAT THE LEARNED CIT(A) OUGHT TO HAVE IGNORED THE I NVESTMENT OF RS.2.37 CRORE IN GROUP COMPANIES ON WHICH NO DIVIDEND WAS RECEIVED WHILE WORKING OUT DISALLOWANCE IN TERMS OF RULE 8D. 7. THAT THE LEARNED CIT(A) ERRONEOUSLY CONCLUDED THAT BORROWED FUNDS ON WHICH NET INTEREST OF RS.14,22,965/- WAS PAID WERE UTILIZED INTER-ALIA ON THE AMOUNT INVESTED IN GROUP COMPANIES. 8. THAT ASSUMING WITHOUT ADMITTING THAT RELEVANT PROVI SIONS OF SEC.14A RULE 8D ARE CAPABLE OF MORE THAN ONE INTERPRETATION, THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE ONE FAVOURABLE TO THE APPELLAN T. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ONLY ISSUE IS WITH RE SPECT TO DISALLOWANCE U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES. 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ASSESSEE HAD INVESTMENTS OF RS.2.37 CRORE IN THE SHARE S FOR VARIOUS COMPANIES WHICH WERE PURCHASED IN EARLIER YEARS. THE AS SESSEE WAS ASKED TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S 14A R.W. RULE 8D OF I.T. RULES NOT BE MADE. ASSESSEE INTER-ALIA SUBMITTED THAT IT H AS NOT EARNED ANY EXEMPT INCOME FROM THE AFORESAID INVESTMENTS AND TH EREFORE THERE CANNOT BE ANY DISALLOWANCE. THE SUBMISSIONS OF THE ASS ESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. AO WAS OF THE VIEW THAT EVE N IF ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, DISALLOWANCE U/S 14A R .W. RULE 8D OF I.T. RULES WAS REQUIRED TO BE MADE AND FOR THE AFORE SAID VIEW, HE RELIED ON CBDT CIRCULAR NO.5 DATED 11.02.2014. HE THEREAFTE R WORKED OUT THE DISALLOWANCE U/S 14A R.W. RULE 8D OF I.T. RULES AT RS.2,66,965/- AND DISALLOWED THE SAME. AGGRIEVED BY THE ORDER OF AO, AS SESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. A GGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT SINCE ASSESSEE HAS N OT EARNED ANY EXEMPT INCOME, NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR. IN SUPPORT OF HER CONTENTION THAT WHEN NO EXEMPT INCOME IS EARNED, THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT, SHE RELIED ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PCIT VS. STATE BANK OF PATIALA IN ITA NO.359 OF 2017 DT.14.11.2017 AND SUBMITTED THAT DISALLOWANCE U/S 14A OF THE ACT IS TO BE R ESTRICTED UPTO THE EXTENT OF EXEMPT INCOME ONLY AND NOT A HIGHER FIG URE. SHE FURTHER SUBMITTED THAT AGAINST THE AFORESAID DECISION OF PUNJAB A ND HARYANA HIGH COURT, REVENUE HAD FILED S.L.P. BEFORE THE HONBLE APEX COURT. SHE SUBMITTED THAT THE SAID S.L.P. WAS DISMISSED BY THE HONBLE APEX 4 COURT AND IS REPORTED IN (2018) 99 TAXMANN.COM 286. SHE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. SHE ALSO RE LIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVES T LIMITED VS. CIT REPORTED IN (2015) 378 ITR 33 FOR THE PROPOSITION THAT WHEN ASSESSEE HAS NOT EARNED EXEMPT INCOME, NO DISALLOWANCE U /S 14A OF THE ACT CAN BE WORKED OUT. SHE THEREFORE SUBMITTED THAT IN THE PRESENT CASE, THE DISALLOWANCE CANNOT EXCEED EXEMPT INCOME. LD.D.R . ON THE OTHER HAND, DID NOT CONTROVERT THE SUBMISSIONS MADE BY LD.A.R. BUT HOWEVER SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE U/S 14A R.W. RULE 8D OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS INCURRED EXPENDITURE ON ACCOUNT OF INTEREST ETC., FOR MAKING INVESTMENT IN SHARES OF VARIOUS COMPANIES TO THE EXTENT OF RS.2.37 CRORES AND HAS NOT EARNED ANY ANY EXEMPT INCOME. WE FIND THAT THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PC IT VS. STATE BANK OF PATIALA (SUPRA) HAS HELD THAT THE AMOUNT OF DISALLO WANCE U/S 14A OF THE ACT HAS TO BE RESTRICTED TO THE AMOUNT OF E XEMPT INCOME ONLY AND NOT AT A HIGHER FIGURE. WE FIND THAT AGAINST THE AFORE SAID ORDER OF PUNJAB AND HARYANA HIGH COURT, REVENUE FILED S.L.P. BEFORE T HE HONBLE APEX COURT AND THE S.L.P. WAS DISMISSED BY THE HONBLE A PEX COURT. WE FURTHER FIND THAT HONBLE DELHI HIGH COURT IN THE CASE O F PCIT VS CARAF BUILDERS & CONSTRUCTION (P) LTD., (2019) 101 TAXMANN.CO M 167 (DEL) AFTER CONSIDERING THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2018) 402 ITR 640, CHEMIN VEST VS. CIT (2015) 378 ITR 33 AND OTHER DECISIONS HAS HELD THAT DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME OF THE RELEVANT YE AR. IN THE 5 PRESENT CASE, SINCE ASSESSEE HAS NOT EARNED ANY EXEMP T INCOME FROM DIVIDENDS, NO DISALLOWANCE IS CALLED FOR IN THE PRESENT CASE. WE DIRECT ACCORDINGLY. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 7 TH DAY OF MARCH, 2019. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER PUNE; DATED : 7 TH MARCH, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4 5. 6. CIT(A) 2, NASHIK PR.CIT-2, NASHIK. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.