DCIT, Circle-1(1), Hyderabad V. M/s. Andhra Pradesh Gas Power Corporation Ltd, Hyderabad

ITA 1367/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66146 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M DAYAKAR
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 1367/HYD/2011 ASSESSMENT YEAR 2007-08 DCIT CIRCLE-1(1) HYDERABAD VS. M/S. A.P. GAS POWER CORPORATION LTD., HYDERABAD PAN: AABCA9105C APPELLANT RESPONDENT APPELLANT BY: SRI M. DAYAKAR RESPONDENT BY: SRI V. SIVA KUMAR DATE OF HEARING: 18.07.2012 DATE OF PRONOUNCEMENT: 10.08.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, HYDERABAD DATED 1.6.2011 FOR ASSESSMENT YEAR 2007-08. 2. THE REVENUE RAISED THE GROUND WITH REGARD TO DELETI ON OF ADDITION OF RS. 12,45,843 MADE U/S. 14A OF THE INCOME-TAX ACT, 1961. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE CIT(A) OBSERV ED THAT NO BORROWED FUNDS WERE UTILIZED FOR INVESTMENT IN MUTU AL FUNDS WHICH HAS BEEN VERIFIED FROM THE STATEMENT OF ACCOUNTS FILED BEFORE HIM. IT IS NOTICED BY THE CIT(A) THAT ALL THE LOANS AMOUNTING TO RS. 1 8,75,78,468 HAVE BEEN REPAID DURING THE YEAR. THE RESERVES AND SURPLUS ST OOD AT RS. 131,28,71,800 AS AGAINST EARLIER YEARS FIGURES, I.E. RS. 126,47,98,5 77 WORKING CAPITAL LOANS FROM ANDHRA BANK AND UNSECURED LOANS FROM IDBI BANK LTD AMOUNTING TO RS. 18,75,78,468 HAVE BEEN REPAID DURING THE YEAR AND N O NEW LOANS HAVE BEEN TAKEN EITHER. MOREOVER, ON THE IDENTICAL FACTS, TH E CONTENTION OF THE ASSESSEE WAS ACCEPTED IN THE PRECEDING YEAR AND NO DISALLOWA NCE WAS MADE ON ACCOUNT OF INTEREST U/S 14A. SINCE THE ASSESSEE HAD SUBSTANTIAL SURPLUS FUNDS I.T.A. NO. 1367/HYD/2011 M/S. A.P. GAS POWER CORPORATION LTD. ============================= 2 TO INVEST IN THE MUTUAL FUNDS AND THERE ARE NO NEW LOANS TAKEN FOR THE PURPOSE OF INVESTING IN MUTUAL FUNDS DURING THE YEA R, THERE IS NO JUSTIFICATION TO MAKE DISALLOWANCE U/S 14A READ WIT H RULE 8D ON ACCOUNT OF INTEREST RELATABLE TO EXEMPT INCOME. THEREFORE, TH E CIT(A) DELETED THE DISALLOWANCE OF RS. 12,45,843. AGAINST THIS, THE R EVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS SEEN FROM THE FACTS OF THE CASE, THERE SHOULD BE CERTAIN EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS EARNING OF EXEMPTE D INCOME AND THAT PORTION OF EXPENDITURE INCURRED BY THE ASSESSEE TOW ARDS EARNING OF EXEMPTED INCOME HAS TO BE DISALLOWED AFTER IDENTIFY ING THE SAME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO EXA MINE THE ISSUE AFRESH IN THE LIGHT OF THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. WALLFORT SHARES AND STOCK BROKERS PVT., LTD., REPORTED IN 32 6 ITR 1. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE ISSUE REMI TTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-CONSIDERATION IN THE LIGHT OF OUR DIRECTION AND ALSO THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT V S. WALLFORT SHARES AND STOCK BROKERS PVT. LTD., (CITED SUPRA). 5. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 10 TH AUGUST, 2012 TPRAO COPY FORWARDED TO: 1. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1( 1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. M/S. A.P. GAS POWER CORPORATION LTD., 2 ND FLOOR, MY HOME SAROVAR PLAZA, SECRETARIAT ROAD, HYDERABAD. 3. THE CIT(A)-II, HYDERABAD. 4. THE CIT-I, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD