The Spunpipe & Construction Co.(Baroda)Pvt.Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 14/AHD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 5386 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: A C SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA.NO.14 AND 1152/AHD/2016 / ASSTT. YEAR: 2011-2012 AND 2012-13 THE SPUNPIPE & CONSTRUCTION CO. (BARODA) P.LTD. A/505-506, ALKAPURI ARCADE 5 TH FLOOR OPP: HOTEL WELCOME GROUP R.C. DUTT ROAD, BARODA 390 007. PAN : AAAACT 6738 R VS ACIT, CIR.4 BARODA. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI A.C. SHAH, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 08/10/2018 / DATE OF PRONOUNCEMENT: 09 /10/2018 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF ASSESSEE AGAINST SEPARATE ORDERS OF THE LD.CIT(A) DATED 29.11.2015 A ND 31.3.2016 PASSED FOR ASSTT.YEAR 2011-12 AND 2012-13. 2. ISSUE AGITATED IN BOTH APPEALS ARE COMMON, THERE FORE, WE HEARD THEM TOGETHER AND DEEM APPROPRIATE TO DISPOSE OF THEM BY THIS COMMON ORDER. FIRST COMMON GROUND RELATES TO CONFIRMATION OF DISALLOWAN CE OF EXPENDITURE AMOUNTING TO RS.4,42,054/- AND RS.4,88,467/- UNDER SECTION 14A OF THE INCOME TAX ACT IN ASSTT.YEARS 2011-12 AND 2012-13 R ESPECTIVELY. ITA NO.14 AND 1152/AHD/2016 2 3. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ELEC TRONICALLY ON 27.9.2011 AND 28.9.2012 DECLARING TOTAL INCOME AT RS.6,22,40, 113/- AND RS.2,89,61,210/- IN THE ASSTT.YEARS 2011-12 AND 2012-13 RESPECTIVELY . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE IN BOTH ASSESSMENT YEARS. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO T HAT THE ASSESSEE HAS CLAIMED DIVIDEND INCOME AT RS.16,39,462/- AND RS.20 ,87,937/- IN THE ASSTT.YEARS 2011-12 AND 2012-13. IT HAS SHOWN PROF IT FROM PARTNERSHIP FIRM IN THE ASSTT.YEAR 2011-12. THE LD.AO OBSERVED THAT THE ASSESSEE DID NOT DISALLOW ANY EXPENDITURE FOR EARNING TAX FREE INCOM E, THEREFORE, EXPENDITURE RELATABLE TO EARNING TAX FREE INCOME REQUIRED TO BE WORKED OUT AND ADDED BACK UNDER SECTION 14A OF THE ACT. HE MADE AN ANALYSIS AND WITH THE HELP OF RULE 8D DISALLOWED A SUM OF RS.4,42,054/- AND RS.4,88,46 7/- IN THE ASSTT.YEARS 2011-12 AND 2012-13. IN THIS TOTAL DISALLOWANCE IN BOTH YEARS, A SUM OF RS.1,94,452/- AND RS.1,68,155/- REPRESENT ADMINISTR ATIVE EXPENSES ESTIMATED FOR DISALLOWANCE. REST RELATES TO INTEREST EXPENDI TURE. THE APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET SUBMITTED THAT WHILE CONFIRMING DISALLOWANCE THE LD.CIT(A) MADE REFERENC E TO THE CASH CREDIT ACCOUNT OF THE BANK. THE LD.CIT(A) HAS OBSERVED TH AT THERE WAS DEBIT BALANCE IN CASH CREDIT ACCOUNT BY RS.37,25,491/- ON 18.9.20 10. THE ASSESSEE HAS MADE INVESTMENT OF RS.37,70,000/- ON 13.9.2010. FR OM THESE DETAILS, THE LD.CIT(A) DREW AN INFERENCE THAT CASH CREDIT ACCOUN T WHICH IS INTEREST BEARING HAS BEEN USED BY THE ASSESSEE FOR MAKING INVESTMENT IN EARNING TAX FREE INCOME. HENCE, HE CONFIRMED THE DISALLOWANCE. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS ALLEGED CASH CR EDIT ACCOUNT AND POINTED OUT THAT THIS NEGATIVE BALANCE REMAINED ONLY FOR TW O DAYS. IF INTEREST TO BE ITA NO.14 AND 1152/AHD/2016 3 CALCULATED FOR THAT PERIOD, THEN IT AMOUNTS TO RS.2 ,449.64 IN THE ASSTT.YEAR 2011-12. SIMILARLY, HE DREW OUR ATTENTION TOWARDS PAGE NO.30 AND 31 OF THE PAPER BOOK IN THE ASSTT.YEAR 2012-13 WHEREIN BANK B ALANCE REMAINED NEGATIVE. IT REMAINED ON THIS ACCOUNT, BUT FOR A V ERY NOMINAL PERIOD I.E. 10 DAYS, 8 DAYS, 6 DAYS ETC. SUCH DETAILS HAVE BEEN C OMPILED IN TABULAR FORM BY THE LD.COUNSEL AND PLACED IT ON PAGE NO.31 OF THE P APER BOOK. THE DETAILS IN BOTH YEARS READ AS UNDER: DETAILS SHOWING NEGATIVE/POSITIVE C/C BALANCE @ THE TIME OF INVESTMENT IN BOND FOR THE F.Y.2010-2011 A/C.NO.30574671664 STATE BANK OF INDIA NEGATIVE BALANCE POSITIVE BALANCE NO.OF DAYS RATE INTEREST DEBIT BANK DATE BANK BALANCE BANK DATE BALANCE S.B.I.CC A/C 1230000.00 05-05-10 18277310.9 S.B.I.CC A/C 3770000.00 18-09-10 -3725491.01 20-09-10 1634638.99 2.00 12% 2449.64 TOTAL: -3725491.01 19911949.89 2449.64 DETAILS SHOWING NEGATIVE C/C BALANCE @ THE TIME OF INVESTMENT IN M/F FOR THE F.Y.2011-2012 A/C.NO.30574671664 STATE BANK OF INDIA NEGATIVE BALANCE POSITIVE BALANCE NO.OF DAYS RATE INTEREST DEBIT BANK DATE BANK BALANCE BANK DATE BALANCE S.B.I.CC A/C 4500000.00 08-04-11 -1164605.01 18-04-11 622852.27 10.00 12% 3828.84 S.B.I.CC A/C 2500000.00 18-05-11 -1198083.41 26-05-11 235589.59 8.00 12% 3151.12 S.B.I.CC A/C 1000000.00 08-06-11 -2933525.41 14-06-11 1229962.68 6.00 12% 5786.68 S.B.I.CC A/C 2500000.00 19-10-11 -31244.15 21-10-11 4895709.85 2.00 12% 20.54 S.B.I.CC A/C 2000000.00 03-12-11 -1346943.55 08-12-11 528282.45 5.00 12% 2214.15 S.B.I.CC A/C 600000.00 04-02-12 -69214.05 07-02-12 1226307.58 3.00 12% 68.27 TOTAL: -6743615.58 87 38704.42 15069.60 ITA NO.14 AND 1152/AHD/2016 4 5. ON THE STRENGTH OF THESE DETAILS, HE CONTENDED T HAT NO INTEREST BEARING FUNDS WERE USED BY THE ASSESSEE FOR MAKING INVESTME NT WHICH HAS RESULTED IN TAX FREE INCOME. THEREFORE, NO DISALLOWANCE OUT OF INTEREST EXPENDITURE SHOULD BE MADE. ON THE OTHER HAND THE LD.DR UNABLE TO CONTROVERT THIS SUBMISSION OF THE LD.COUNSEL FOR THE ASSESSEE. HE SIMPLY RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVE, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITION THAT SECTION 14A CONTEMPLATES THAT IF AN ASSESSEE HAS IN CURRED EXPENDITURE FOR EARNING TAX FREE INCOME, THEN THE EXPENDITURE ATTRI BUTABLE TO EARNING OF TAX FREE INCOME WOULD BE DISALLOWED TO THE ASSESSEE. T HE QUESTION IN THE PRESENT APPEAL RELATES TO, WHETHER THE ASSESSEE HAS INCURRE D ANY INTEREST EXPENDITURE FOR MAKING INVESTMENTS WHICH HAS RESULTED IN TAX FR EE INCOME. THE ASSESSEE HAS PLACED ON RECORD COPY OF COMPLETE BANK STATEMEN T IN BOTH THE ASSESSMENT YEARS, AND THEREAFTER CARVED OUT THE DETAILS ON WHI CH NEGATIVE BANK BALANCE WAS AVAILABLE IN ITS ACCOUNTS DURING THE YEAR. A P ERUSAL OF THE ABOVE TABLE WOULD INDICATE THAT NEGATIVE BALANCE WAS FOR A VERY NOMINAL PERIOD. IT COULD BE FOR THE PURPOSE OF BUSINESS ALSO. THUS, IT HAS DEMONSTRATED THAT NO INTEREST BEARING FUNDS HAVE BEEN USED FOR THE PURPOSE OF MAK ING INVESTMENT WHICH HAS RESULTED IN TAX FREE INCOME. WE ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE ADDED BY THE A O. IT AMOUNTS TO RS.2,44,602 IN THE ASSTT.YEAR 2011-12 AND RS.3,20,3 12/- IN THE ASSTT.YAR 2012-13. 7. SO FAR EXPENDITURE OF RS.1,97,452/- AND RS.1,68, 155/- REPRESENTING EXPENSES INCURRED ON ADMINISTRATIVE EXPENSES FOR TA KING CARE OF THE ABOVE INVESTMENT IS CONCERNED IN BOTH THE YEARS, THE LD.C OUNSEL FOR THE ASSESSEE ITA NO.14 AND 1152/AHD/2016 5 AGREED FOR CONFIRMATION OF THE ABOVE DISALLOWANCE. HENCE, DISALLOWANCE TO THE EXTENT OF RS.1,97,452/- AND RS.1,68,155/- UNDER SECTION 14A IS BEING CONFIRMED IN THE ASSTT.YEAR 2011-12 AND 2012-13 RES PECTIVELY. NO OTHER GROUND IS AVAILABLE IN THE ASSTT.YEAR 2012-13, HENC E, THIS APPEAL IS TREATED AS PARTLY ALLOWED. 8. SO FAR AS ASSTT.YEAR 2011-12 IS CONCERNED, THE A SSESSEE HAS FURTHER PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,657/- WHICH WAS DISALLOWED BY THE AO ON THE GROUND THAT T HE ASSESSEE FAILED TO DEPOSITS THE CONTRIBUTION OF EMPLOYEES UNDER ESIC W ITHIN TIME LIMIT. THIS GROUND WAS NOT PRESSED BY THE ASSESSEE, HENCE REJEC TED. 9. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH OCTOBER, 2016 AT AHMEDABAD. SD/- SD/- ( PRADIPKUMAR KEDIA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER