Prathista Industries Ltd., Sec'bad, Hanamkonda V. DCIT, Circle-16(3), Hyd, Hyderabad

ITA 1302/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6618 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B ANJANEYULU
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1302/HYD/2015 ASSESSMENT YEAR 2011-2012 PRATHISTA INDUSTRIES LTD., SECUNDERABAD. PAN AABCP2498R VS. THE DCIT, CIRCLE - 16(3), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. MURALI MOHAN RAO FOR REVENUE : MR. B. ANJANEYULU DATE OF HEARING : 04.04.2016 DATE OF PRONOUNCEMENT : 29 .04.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2011- 2012. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.4,37,222 UNDER SECTION 14A OF THE ACT AND ALSO I N NOT ADJUDICATING THE GROUNDS OF APPEAL ON CALCULATION O F THE TAX UNDER THE PROVISIONS OF SECTION 115JB OF THE AC T. 2 ITA.NO.1302/HYD/2015 PRATHISTA INDUSTRIES LTD., SECUNDERABAD. 2. THE GROUND AGAINST NON-ADJUDICATION OF THE GROUNDS OF APPEAL ON CALCULATION OF THE TAX UNDER T HE PROVISIONS OF SECTION 115JB OF THE ACT WAS RAISED A S AN ADDITIONAL GROUND OF APPEAL. IT WAS STATED THAT THO UGH ASSESSEE HAD RAISED THIS GROUND OF APPEAL BEFORE TH E LD. CIT(A), IT WAS NOT RAISED IN THE REGULAR GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL BY AN INADVERTENT MISTAKE AND THEREFORE THE SAME IS RAISED AS AN ADDITIONAL GROUN D OF APPEAL. 3. WE HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS FORM NO.35 AND THE GROUNDS OF APPEAL RAISED BY T HE ASSESSEE BEFORE THE CIT(A) AND WE ARE SATISFIED THA T THIS ISSUE IS ARISING OUT OF THE ASSESSMENT ORDER AND TH AT THE ASSESSEE HAD RAISED THE GROUND OF APPEAL BEFORE THE CIT(A). IN VIEW OF THE SAME, WE ARE INCLINED TO ADM IT THE ADDITIONAL GROUND OF APPEAL AND ADJUDICATE THE SAME AS UNDER. 4. LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE NET PROFIT AS PER THE P & L ACCOUNT WAS COMPUTE D AT RS.2,18,34,898 WHICH IS THE PROFIT BEFORE TAX AND F OR COMPUTING THE INCOME UNDER SECTION 115JB OF THE ACT , THE A.O. OUGHT TO HAVE TAKEN THE SAME AS THE BOOK PROFI T BEFORE MAKING THE ADJUSTMENTS THERETO AS PER THE EXPLANATION TO SECTION 115JB OF THE ACT. HE SUBMITT ED THAT THE A.O. HOWEVER, ERRONEOUSLY COMPUTED THE INC OME UNDER SECTION 115JB OF THE ACT BY TAKING THE FIGURE OF RS.4,72,06,235 BEFORE DEDUCTION OF R & D EXPENDITUR E 3 ITA.NO.1302/HYD/2015 PRATHISTA INDUSTRIES LTD., SECUNDERABAD. UNDER SECTION 35(2)AB OF THE I.T. ACT. HE HAS SUBMI TTED THAT THOUGH THE ASSESSEE HAS RAISED THE GROUND OF A PPEAL BEFORE THE CIT(A), THE CIT(A) HAS ERRED IN NOT ADJU DICATING THE SAME. ON PERUSAL OF THE RECORD, WE FIND THAT ASSESSEES CONTENTION IS CORRECT. IN VIEW OF THE SA ME, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FI LE OF THE A.O. TO RE-CONSIDER AND RE-COMPUTE THE INCOME OF TH E ASSESSEE UNDER SECTION 115JB OF THE ACT, AFTER VERI FYING THE CLAIM OF THE ASSESSEE. 5. AGAINST THE DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT, THE LD. COUNSEL FOR THE ASSESSEE, DRE W OUR ATTENTION TO THE FINDINGS OF THE A.O. THAT THE ASSE SSEE HAS MADE AN INVESTMENT OF RS.3,74,26,850 IN TWO COMPANI ES AND ON THIS GROUND ALONE THE A.O. HAS MADE DISALLOW ANCE UNDER SECTION 14A OF THE ACT WITHOUT EXAMINING WHET HER THE ASSESSEE HAS EARNED ANY INCOME FROM THE SAME WH ICH IS EXEMPT FROM TAX. HE SUBMITTED THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR AND THEREFORE, THE DISALLOWANCE UNDER SECTION 14A IS NO T CALLED FOR. HE HAS ALSO DRAWN OUR ATTENTION TO THE ASSESSE ES CONTENTIONS WHICH ARE RECORDED BY THE CIT(A) IN HER ORDER. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT SECTION 14A CLEARL Y STIPULATES THAT THE EXPENDITURE INCURRED FOR EARNIN G OF ANY INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ALONE CAN BE DISALLOWED. IN THE CASE BEFORE US, WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THERE CA N BE 4 ITA.NO.1302/HYD/2015 PRATHISTA INDUSTRIES LTD., SECUNDERABAD. NO DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE H ONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., RE PORTED IN (2015) 378 ITR 33 (DEL.) HAS HELD THAT SECTION 1 4A WILL NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR. IN VIEW OF THE SAME, ASSESSEES APPEAL ON THIS GROUND IS ALLOW ED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH APRIL, 2016 VBP/- COPY TO : 1. PRATHISTA INDUSTRIES LTD., SECUNDERABAD. C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. 2. THE DCIT, CIRCLE - 16(3), HYDERABAD. 3. CIT(A) - 4, 3 RD FLOOR, ANNEXE, AAYAKAR BHAVAN, BASHEEERBAGH, HYDERABAD. 4. PR. CIT - 4, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD. 6. GUARD FILE