Dy.C.I.T.-1, Agra V. Sh. Sanjeev Mittal, Agra

ITA 135/AGR/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0746 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 135/AGRA/ 2013 ASSESSMENT YEAR 2008-09 DY. COMMISSIONER OF INCOME TAX-1, VS. SH. SANJEEV MITTAL, AGRA 62-B, NEHRU NAGAR, AGRA (PAN AAUPM 8355 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. MISHRA, JR. D.R. RESPONDENT BY : SHRI SAHIB P. SATSANGEE, C.A. DATE OF HEARING : 11.07.2013 DATE OF PRONOUNCEMENT : 26.07.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER DATED 13.12.2012 PASSED BY THE LEARNED CIT(A)-I, AGRA FOR A.Y. 2008-09. 2. THE GROUNDS RAISED IN THIS APPEAL ARE REPRODUCED AS BELOW:- 1. THAT THE CIT(A)-I, AGRA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.10,54,804/- OUT OF TOTAL ADDITION OF RS.15,71,354/- MADE ON ACCOUNT OF INTEREST DISALLOWED U/S 36(1) (III) ON THE LOAN AND ADVANCES WITHOUT APPRECIATING THE FACTS OF THE CASE . ITA NO.135 /AGRA./2013, A.Y. 2008-09 2 2. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR ALTER OR MODIFY ANY ONE OR MORE GROUND(S) OF APPEAL DURIN G THE APPELLATE PROCEEDINGS. 3. THAT THE ORDER OF THE CIT(A)-1, AGRA BEING ERRONEOU S IN LAW AND ON FACTS BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE ISSUES ARE THAT DURING THE A SSESSMENT PROCEEDINGS, A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.51,51,343/-. AS AGAINST INTEREST PAYMENT OF RS.5 1,51,343/-, THE AMOUNT OF INTEREST RECEIVED ON LOANS AND ADVANCES ETC, HAVE B EEN SHOWN AT RS.35,79,989/- ONLY. THE A.O. NOTICED THAT THERE IS A LOSS OF RS.15,71,354/- ON ACCOUNT OF INTEREST ELEMENT RELATABLE TO LOAN & ADVANCES ON WHICH EITHER NO INTEREST HAS BEEN CHARGED OR INTEREST CHARGED IS AT LESSER RATE AND INVESTMENT INCOME OF WHICH IS NOT FORMING PART OF T OTAL INCOME. THE A.O. AFTER CONSIDERING THE ASSESSEES SUBMISSION HELD TH AT SINCE THE ASSESSEE HAS BEEN PAYING INTEREST @ 12% ON THE BORROWING MADE, T HEREFORE, IT IS EASILY CONCLUDED THAT THE AMOUNT OF EXPENDITURE ON ACCOUNT OF INTEREST DIRECTLY RELATABLE TO THE INVESTMENTS WHICH DO NOT FORM PART OF TOTAL INCOME WOULD WORK OUT TO RS.13,12,867/- ON APPLYING INTEREST RAT E OF 12% ON THE AMOUNT OF INVESTMENT OF RS.1,09,40,564/- MADE DURING THE Y EAR AS ASSESSEE MUST HAVE PAID INTEREST @12% ON THE BORROWINGS UTILIZED FOR INVESTMENT IN SHARES, LIP & IN FIRM ATUL ICE & COLD STORAGE. IF T HE AMOUNT OF SHORT CHARGE OF INTEREST FROM SUCHI MITTAL AND ATUL GENERATOR & PIPE CO. IS ALSO ADDED TO ITA NO.135 /AGRA./2013, A.Y. 2008-09 3 THE ABOVE FIGURE, THE TOTAL INTEREST RELATABLE TO I NVESTMENTS AND LOAN AND ADVANCES, WOULD EXCEED RS.15,71,354/-. THE A.O. FOU ND THAT THE AMOUNT OF RS.15,71,354/- WAS LOSS ON ACCOUNT OF DIFFERENCE OF INTEREST PAID AND INTEREST RECEIVED. THE A.O. HELD THAT THE EXPENDITURE OF RS. 15,71,354/- BEING THE DIFFERENCE BETWEEN INTEREST PAID AND RECEIVED WAS N OT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, THEREFORE, THE SAME IS NOT ADMISSIBLE AS EXPENDITURE U/S 36(1 )(III) OF THE I.T. ACT. 4. THE CIT(A) ALLOWED RELIEF OF RS.10,54,804/- AS U NDER :- (CIT(A) PAGE NOS. 12 & 13) SUCH APPROACH OF THE AO FOR DISALLOWING THE ENTIRE AMOUNT OF EXCESSIVE INTEREST AS WORKED OUT BY HIM, HAS NOT BEEN FOUND TO BE CORRECT BECAUSE THE ASSESSEE (APPELLANT) BEING I N THE FINANCE BUSINESS AND ALSO MAKING INVESTMENT IN SHARES/COMMO DITY TRADING AND SPECULATION HAS MADE INVESTMENT IN SHARE AND OT HER INSTRUMENT OF INVESTMENT AND FOR THE PURPOSE OF SUC H INVESTMENT, IF ANY DISALLOWANCE IS REQUIRED TO BE MADE, IT SHOULD BE MADE AS PER THE SECTION 14A OF THE INCOME-TAX ACT, 1961, WHICH PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDI TURE INCURRED BY THE ASSESSEE IN RELATION INCOME WHICH DO NOT FOR M PART OF THE TOTAL INCOME UNDER THIS ACT. THEREFORE, FOR SUCH IN VESTMENT FOR WHICH, THE INCOME EARNED DO NOT FORM PART OF THE TO TAL INCOME, THE INTEREST CHARGEABLE AT CERTAIN RATE ON SUCH INVESTM ENT CANNOT BE TOTALLY DISALLOWED AND FOR THE WORKING OUT THE REQU IRED DISALLOWANCE, THE COMPUTATION HAS TO BE MADE AS PER RULE 8D READ WITH SECTION 14A AND, THEREFORE, IN VIEW OF THE QUE RY RAISED BY THE AO VIDE ORDER SHEET ENTRY DATED 20.12.2010, THE ASS ESSEE HAS FURNISHED THE AMOUNT TO BE DISALLOWED U/S 14A READ WITH RULE 8D AT RS.67,718/- WHICH HAS NOT BEEN CONSIDERED BY THE AO STATING THAT THE ASSESSEE HAS NOT AGREED TO THIS DISALLOWANCE. H OWEVER, THE DECISION IS TO BE TAKEN, NOT AS PER THE AGREEMENT W ITH THE ITA NO.135 /AGRA./2013, A.Y. 2008-09 4 ASSESSEE(APPELLANT) BUT THE DECISION SHOULD BE TAKE N AS PERMISSIBLE UNDER LAW AND, THEREFORE, IF ANY DISALLOWANCE IS RE QUIRED TO BE MADE FOR THE PART OF INVESTMENT ON WHICH THE INCOME DOES NOT FORM PART OF TOTAL INCOME, THE NECESSARY DISALLOWANCE SH OULD BE MADE AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND NOT THE ENTIRE AMOUNT OF INTEREST CHARGEABLE ON SUCH INVEST MENT SHOULD BE DISALLOWED, IF THE INVESTMENT IS MADE OUT OF MIXED FUND PARTLY USED IN BUSINESS AND PARTLY USED FOR INVESTMENT. THEREFO RE, I FIND THAT THE AO IS NOT CORRECT IN COMPUTING THE INTEREST @ 1 2% ON THE TOTAL AMOUNT OF INVESTMENT OF RS.1,09,40,564/- COMING TO RS.13,12,867/- . ON EXAMINATION, I FIND THAT THE OUT OF RS.1,09,40 ,564/-, THE ASSESSEE (APPELLANT) HAS ALREADY TAKEN THE SHORT CH ARGING OF INTEREST ON CAPITAL INVESTMENT IN M/S. ATUL ICE & C OLD STORAGE AT RS.34,926/- WHICH HAS NOT BEEN DISPUTED BY THE AO I N THE ASSESSMENT ORDER, WHILE CONSIDERING THE TOTAL DISAL LOWABLE AMOUNT, OUT OF HIS INTEREST EXPENSES U/S. 36(1)(III). FOR T HE BALANCE AMOUNT, SINCE THESE INVESTMENTS ARE EXEMPT U/S.10 AND NOT F ORMING PART OF THE ASSESSEE(APPELLANT) INCOME, THE NECESSARY DISAL LOWANCE WOULD BE MADE AS PER PROVISIONS OF SECTION 14A AND THE ASSESSEE(APPELLANT) HAS GIVEN THE COMPUTATION OF DI SALLOWANCE TO BE MADE U/S.14A AT RS.67,718/- IN THE SUBMISSION MA DE DURING ASSESSMENT PROCEEDING, WHICH HAS BEEN CONSIDERED BY THE AO BUT HE HAS NOT MADE THIS ADDITION BECAUSE THE ASSESSEE HAS NOT AGREED TO THE ABOVE DISALLOWANCE. FOR THE BALANCE AMOUNT O F LOAN AND ADVANCES AS SHOWN BY THE AO IN THE TABLE MADE ON PA GE NO.2 OF THE ASSESSMENT ORDER, THE ASSESSEE(APPELLANT) HAS G IVEN THE TOTAL AMOUNT OF DISALLOWABLE INTEREST AT RS.4,13,906/-(EX CLUDING THE INTEREST CHARGEABLE TO M/S. ATUL ICE & COLD STORAGE AT RS.34,926/-) AND THE SAME HAS NOT BEEN DISPUTED BY THE AO. THERE FORE, THE NECESSARY DISALLOWANCE OUT OF INTEREST PAID BY THE ASSESSEE (APPELLANT) SHOULD BE RESTRICTED TO THE AMOUNT OF R S.4,48,832/- (RS.4,13,906 + RS.34,926 CHARGEABLE TO M/S. ATUL IC E & COLD STORAGE) ONLY. TAKING INTO ACCOUNT MY ABOVE FINDING , THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S. 36(1)(II I) UPTO RS.4,48,832/- AND THEREAFTER RS.67,718/- SHOULD BE ADDED FOR DISALLOWANCE TO BE MADE U/S.14A AND THUS, THE TOTAL DISALLOWANCE OF INTEREST WOULD COME TO RS.5,16,550/- (RS.4,48,83 2/- + RS.67,718/-)INSTEAD OF RS.15,71,354/- AS MADE IN TH E ASSESSMENT ORDER AND HENCE, THE ASSESSEE (APPELLANT) WOULD GET A RELIEF OF RS.10,54,804/- AND ACCORDINGLY, GROUND NO.2 IS PART LY ALLOWED. ITA NO.135 /AGRA./2013, A.Y. 2008-09 5 5. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. THE CIT(A) HELD THAT THE A.O. WAS NOT CORRECT IN DI SALLOWING INTEREST CLAIM OF THE ASSESSEE UNDER SECTION 36(1)(III) BECAUSE TH E ASSESSEE BEING IN THE FINANCE BUSINESS AND ALSO MAKING INVESTMENT IN SHAR ES, COMMODITY, TRADING AND HAS MADE INVESTMENT IN SHARE AND OTHER INSTRUME NT OF INVESTMENT, WHICH IS PERTAINING TO BUSINESS OF THE ASSESSEE. THE CIT( A) FOUND THAT AT THE MOST DISALLOWANCE CAN BE MADE BY INVOKING SECTION 14A OF THE ACT. THE BUSINESS OF THE ASSESSEE IS FINANCE AND SHARES/COMMODITY TRA DING AND SPECULATION AND ALSO EARNED INCOME FROM CAPITAL GAIN AND OTHER SOUR CES. SINCE SO CALLED INVESTMENT POINTED OUT BY THE A.O. IS INVESTMENT IN SHARES, LIP AND OTHERS RELATED TO BUSINESS OF THE ASSESSEE. AS THE ASSESSE E IS DOING BUSINESS OF FINANCE, SHARES COMMODITY TRADING AND SPECULATION E TC., WE, THEREFORE, FIND THAT THE A.O. HAS WRONGLY CALCULATED AMOUNT OF DISA LLOWANCE UNDER SECTION 36(1)(III) OF THE ACT. WE NOTICE THAT CIT(A) HAS AP PRECIATED THE FACTS AND FOUND THAT AT THE MOST INTEREST IS DISALLOWABLE INV OKING SECTION 14A OF THE ACT. THE CIT(A) HAS RIGHTLY DIRECTED THE A.O. TO RE STRICT THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT UPTO RS.4,48,83 2/- AND RS.67,718/- FOR DISALLOWANCE MADE BY UNDER SECTION 14A. THUS, THE T OTAL DISALLOWANCE RESTRICTED BY THE CIT(A) OF RS.5,16,550/-, WE FIND THAT THE CIT(A) HAS RIGHTLY ALLOWED THE RELIEF OF RS.10,54,804/-. THE R EVENUE HAS FAILED TO POINT ITA NO.135 /AGRA./2013, A.Y. 2008-09 6 OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT (A). WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ORDE R OF THE CIT(A) IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT.) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- APPELLANT/RESPONDENT/CIT (APPEALS) CONCERNED CIT CONCERNED/D.R., ITAT, AGRA BENCH, AGRA GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY