The Asstt. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. M/s. Gujarat State Investments Ltd., Ahmedabad

ITA 1398/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8658 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 08-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: ARTI N SHAH A R
• Keywords: Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER &SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO.1398/AHD/2017 ( / ASSESSMENT YEAR:2013-14) ACIT CIRCLE-2(1)(1), AHMEDABAD ROOM NO. 103, FIRST FLOOR, NAVJEEVAN TRUST BUILDING, AHMEDABAD- 380014 / VS. GUJARAT STATE INVESTMENTS LTD. 6THFLOOR, H.K. HOUSE, ASHRAM ROAD, AHMEDABAD ./ ./PAN/GIR NO. : AAB CG4 649 M ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI O. P. SHARMA, CIT DR / RESPONDENTBY: SMT. ARTI N. SHAH,AR !' /DATE OFHEARING 03/07/2019 #$!' / DATE OF PRONOUNCEMENT 12/07/2019 %& /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE REVENUE FOR A.Y. 2013-14, A RISE FROM ORDER OF THE CIT(A)-2, AHMEDABAD DATED 17.03.2016, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS FILED AGAINST THE DECISION OF LD. CIT(A) IN RESTRICTING THE DISALLOWANCE UNDER SEC . 14A R.W.R. 8D TO RS. 34,28,519/- AS AGAINST RS. 7,40,32,030/- MADE BY TH E AO. 3. THE FACT IN BRIEF IS THAT THE CASE OF THE ASSESSE E WAS SUBJECT TO SCRUTINY AND ASSESSMENT ORDER UNDER SEC. 143(3) WAS PASSED ON 01 .12.2015. DURING THE COURSE ITA NO. 1398/AHD/2017 A.Y. 2013-14 2 OF ASSESSMENT THE AO HAS OBSERVED THAT ASSESSEE HAD INVESTED AN AMOUNT OF RS. 17,08,94,70,223 IN SHARES/SECURITIES OF DIFFERENT C OMPANIES. THE ASSESSEE HAS CLAIMED DIVIDEND INCOME OF RS. 56,23,73,561/- AS EX EMPT FROM TAX. HOWEVER IT HAS ONLY MADE DISALLOWANCE OF RS. 4,89,304/- UNDER SEC. 14A OF THE ACT. THEREFORE, THE AO HAS ASKED THE ASSESSEE TO EXPLAIN WHY NOT DISALLOWANCE OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME SHOULD BE COMPUTED AS PER SEC. 14A R.W.R 8D OF THE I. T. RULE 1962. THE ASSESSEE HAS R ESPONDED THAT IT HAS NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE FOR EARNING EXEM PT INCOME. THE ASSESSEE HAS ALSO STATED REGARDING LOAN FROM GOVERNMENT FROM GUJ ARAT OF RS. 550 CRORES WHICH WAS BORROWED ON 30.03.2012 AT 9% PER ANNUM RATE OF INTEREST WHICH AMOUNT TO RS.49,77,04,918/-. IT IS FURTHER SUBMITTED THAT TH IS LOAN WAS GIVEN TO GUJARAT FINANCIAL SERVICES LIMITED (GSFSL) AS INTER-CORPORAT E DEPOSIT ON WHICH IT HAS EARNED INTEREST BETWEEN 8% TO 9% AND IT HAD OFFERED TO TAX AN AMOUNT OF RS. 65,31,75,375/-. IT IS FURTHER STATED THAT AFORESAI D LOAN OF RS. 550 CRORES RECEIVED FROM GOVERNMENT OF GUJARAT WAS NOT INVESTED IN ANY EQUITY SHARE OR ANY OTHER TAX FREE INCOME, THEREFORE NO DISALLOWANCE UNDER SEC. 1 4A R.W.R. 8D SHOULD BE MADE. THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSES SEE. HE HAS STATED THAT ASSESSEE HAS GIVEN ONLY GENERAL EXPLANATION THAT IT HAS NOT INCURRED ANY EXPENSES RELATING TO ANY EXEMPT INCOME. THE AO HAS STATED T HAT ASSESSEE HAS NOT SUBMITTED ANY PROOF OR SPECIFIC EXPLANATION AND DAY-TO-DAY FU ND FLOW STATEMENT TO PROVE THAT NO INTEREST BEARING FUND HAS BEEN USED IN MAKING IN VESTMENT IN SHARES FROM WHICH EXEMPT INCOME WAS EARNED. THEREFORE, THE AO HAS COM PUTED THE DISALLOWANCE AS PER SEC. 14A R.W.R. 8D OF THE ACT TO THE AMOUNT OF RS. 7,40,32,030/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD . CIT(A). LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF TOTAL EXPENDITURE OF RS. 39,87,823/- CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCO UNT. SINCE THE ASSESSEE HAS VOLUNTARY MADE THE DISALLOWANCE OF RS. 4,89,304/-, THEREFORE, THE LD. CIT(A) HAS ITA NO. 1398/AHD/2017 A.Y. 2013-14 3 CONFIRMED THE DISALLOWANCE UNDER RULE 8D(2)(III) R. W.S. 14A TO THE AMOUNT OF RS. 34,28,519/-. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT DURING THE YEAR UNDER CONSI DERATION THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES TO THE AMOUNT OF RS. 38,65,626/- A ND THE DEPRECIATION TO THE AMOUNT OF RS. 52,197/- IN THE PROFIT AND LOSS ACCOU NT. WE HAVE PERUSED THE DECISION OF THE LD. CIT(A) LIMITING THE DISALLOWANCE U/S. 14A TO THE EXTENT OF TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE AFTER REDUCING AN AMOUNT OF RS. 4,89,304/- SUO MOTU DISALLOWED BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACT WE CONSIDER THAT TH E IMPUGNED DISALLOWANCE CANNOT EXCEED THE TOTAL AMOUNT OF VARIOUS EXPENDITU RE DEBITED IN THE PROFIT AND LOSS ACCOUNT AS ELABORATED IN THE FINDINGS OF THE LD. CIT( A). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A). ACCORDI NGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUEIS DISMI SSED. SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNT ANT MEMBER AHMEDABAD: DATED 12/07/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. % / ASSESSEE 3. '( ! )! / CONCERNED CIT 4. )! - / CIT (A) 5. *+, ! ( , ' ( , -.%'% / DR, ITAT, AHMEDABAD 6. ,/ 0 / GUARD FILE. BY ORDER / %& , 1 / - ' ( , -.%'% 2 THIS ORDER PRONOUNCED IN OPEN COURT ON 1 2/07/2019