Dy. Commissioner of Income Tax, Circle-1(1)(2)., Ahmedabad V. M/s. D.B.Corporation Ltd., Ahmedabad

ITA 1306/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8148 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHIRAL SHAH
• Keywords: Earning of tax free income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1306/AHD/2015 ( / ASSESSMENT YEAR : 2010-11) DCIT(OSD) RANGE 1, AHMEDABAD / VS. M/S. D. B. CORPORATION LTD. 280, SARKHEJ GANDHINAGAR HIGHWAY, NEAR YMCA CLUB, MARKABA, AHMEDABAD - 380051 ./ ./ PAN/GIR NO. : AACCM 5772 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MUDIT NAGPAL, SR. DR / RESPONDENT BY : SHRI DHIRAL SHAH, AR / DATE OF HEARING 11/10/2017 !'# / DATE OF PRONOUNCEMENT 22/11/2017 $% / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, AHMEDABAD, D ATED 25/02/2015 FOR THE ASSESSMENT YEAR (AY) 2010-11, O N THE FOLLOWING GROUNDS: THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.3,35,93,617/- MADE U/S.14A OF THE ACT WITHOUT CONSIDERING THE FACT ITA NO.1306/AHD /2015 DCIT VS. M/S. D.B. CORPORATION LTD. ASST.YEAR 2010-11 - 2 - THAT THE ASSESSEE MUST HAVE INCURRED ADMINISTRATIVE EXPENSES TO EARN THE EXEMPT INCOME. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE ASSESSEE COMPANY HAS MADE INVESTMENT FOR EARNI NG THE EXEMPT INCOME. IT IS SEEN THAT THE ASSESSEE HAS INV ESTMENT TO THE TUNE OF RS.94,32,86,000/- AS AT 31/03/2009 WHILE THE VALUE OF INVESTMENT WAS RS.91,07,86,000/- AS AT 31/03/2010. THE ISSUE OF EX PENSES INCURRED FOR EARNING EXEMPT INCOME WAS DISCUSSED WITH THE ASSESS EE AND SHOW CAUSED NOTICE WAS ISSUED TO THE ASSESSEE. ASSESSEE REPLIED THE COMPANY OVER THE LAST FEW YEARS HAS BEEN GROWING RAPIDLY. THE TURNOV ER INCREASED TO RS.1026.14 CRORES (APPROXIMATELY A 10 PERCENT INCRE ASE OVER AY 2009- 10). THIS INCREASE CAN BE ATTRIBUTED TO THE MASSIVE EXPANSION PROGRAMS UNDERTAKEN BY THE COMPANY. FOR THE PURPOSE OF BUSINESS EXPANSION, THE COMPANY HAS AVAILED LOANS FROM VARIOUS BANKS. DURING THE SUBJECT ASSESS MENT YEAR, THE COMPANY HAS INCURRED AN INTEREST EXPENSE OF RS.30.9 6 CORES TO SERVICE THE LOANS TAKEN BY THE COMPANY. THE SAID LOANS HAVE BEE N USED FOR THE PURPOSE OF PURCHASE OF FIXED ASSETS AND EXPANSION/S ETUP OF BUSINESS UNITS. THE SAME IS ALSO EVIDENT FROM VARIOUS LOANS SANCTION LETTERS. IT IS ALSO SUBMITTED THAT DURING THE SUBJECT ASSESSMENT Y EAR, DBCL HAS NOT ITA NO.1306/AHD /2015 DCIT VS. M/S. D.B. CORPORATION LTD. ASST.YEAR 2010-11 - 3 - EARNED DIVIDEND INCOME FROM THE INVESTMENTS MADE IN SHARES AND SECURITIES. IT IS FURTHER SUBMITTED THAT DISALLOWAN CE U/S.14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. SINCE DBCL HAS NOT EARNED ANY EXEMPT INCOME DURING THE SAID FINANCIAL YEAR, THERE CAN BE NO DISALLOWANCE U/S.14A OF THE ACT AND ALSO STATED THA T ALL INVESTMENTS MADE BY THE COMPANY ARE FROM THE COMPANYS OWN FUNDS. AS PER THE AUDITED ACCOUNTS, THE COMPANY HAD AVERAGE OWNED FUNDS OF RS .526 CRORES VIS-- VIS AN AVERAGE TOTAL INVESTMENT OF RS.92.7 CRORES A S ON 31/03/2010. BUT LD. AO WAS NOT CONVINCED WITH THE PLEA OF THE A SSESSEE. HENCE HE MADE DISALLOWANCE OF RS.3,35,93,617/-. 3. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. THE AO INVOKED MANDATORY PROVISIONS OF RULE 8D THER EAFTER WITHOUT CONSIDERING ANY OF APPELLANTS CONTENTION AND WORKE D OUT THE DISALLOWANCE OF RS.3,35,93,617/-. AS PER STATEMENT OF COMPUTATION OF TOTAL INCOME FOR THE IMPUGNED PREVIOUS YEAR (SUBMIT TED BY APPELLANT) THERE IS NOT INCOME WHICH HAS BEEN CLAIMED AS EXEMP T BY APPELLANT. AUDITED FINANCIAL ACCOUNT DATED 27/05/2010 REFLECT INVESTMENT AS ON 31/03/2009 AT RS.94.33 LACS WHILE AS ON 31/03/2010 THE SAME IS RS.91.08 LAC. IN THE AUDITED PROFIT AND LOSS A/C UNDER THE H EAD OTHER OPERATING INCOME (SCHEDULE 17) OF RS.12,37,20,771/-, IT DOES NOT HAVE ANY EXEMPT ITA NO.1306/AHD /2015 DCIT VS. M/S. D.B. CORPORATION LTD. ASST.YEAR 2010-11 - 4 - INCOME. THE REDUCTION IN INVESTMENT IS ON ACCOUNT O F CONVERSION/REDEMPTION OF DEBENTURE AND DIMINUTION O F INVESTMENT. IN OUR CONSIDERED OPINION AO WAS NOT JUSTIFIED IN INVOCATI ON OF RULE 8D AS PER RATIO OF HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CORRTECH ENERGY (P) LTD. (SUPRA) AND OTHER JUDICIAL PRONOUNC EMENT, THE FIRST REQUIREMENT FOR DISALLOWANCE U/S.14A OF THE ACT IS TO IDENTIFY THE INCOME WHICH IS NOT FORMING PART OF TOTAL INCOME I.E. EXEM PT INCOME. IN THE ABSENCE OF THE SAME, FURTHER REQUIREMENT OF IDENTIF ICATION OF EXPENSES RELATABLE TO SUCH INCOME AND ITS DISALLOWANCE CANNO T BE PROCEEDED. THEREFORE, IN OUR CONSIDERED OPINION THIS GROUND OF THE REVENUE IS DESERVES TO BE DISMISSED. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 22 / 11 /201 7 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/11/2017 PRITI YADAV, SR.PS ITA NO.1306/AHD /2015 DCIT VS. M/S. D.B. CORPORATION LTD. ASST.YEAR 2010-11 - 5 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-GANDHINAGAR, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 21/11/2017 (DICTATION-PAD 3 PAGE S ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21/11/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER