Goyal & Co. (Const.) Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 1545/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1851 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: P M MEHTA WITH GULAB THAKO R
• Keywords: Rectification of order; Earning of tax free income
• Section: 80HHC; 14A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1545/AHD/2012 (ASSESSMENT YEAR: 2009-10) GOYAL & CO. (CONST.) PVT. LTD. COMMERCE HOUSE. OPP. RAJVANSH APARTMENT, JUDGE BUNGLOW ROAD, BODAKDEV, AHMEDABAD V/S ACIT, CIRCLE-4, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCG5459R APPELLANT BY :SHRI P.M. MEHTA WITH GULAB THAKOR, AR RESPONDENT BY : SHRI NARENDRA SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 31 -03-201 6 DATE OF PRONOUNCEMENT : 05 -04-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF LD. CIT(A)-VIII, AHMEDABAD DATED 18.05.201 2 PERTAINING TO A.Y. 2009-10. ITA NO. 1545 /AHD/2012 . A.Y. 2009-1 0 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 46,96,902/- MADE BY THE A.O U/S. 14A OF THE ACT. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT. THE ASSESSEE COMPANY HAS ALSO MADE INV ESTMENT IN SHARES AND IN PARTNERSHIP FIRMS. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FOUND THAT THE ASSESSEE HAS NOT OFF ERED DISALLOWANCE AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. TH E ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE EXPENDITURE INCURRED SHOULD NOT BE ADDED TO ITS TOTAL INCOME AS WORKED OUT AS PER SECT ION 14A OF THE ACT READ WITH RULE 8D. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O PROCEEDED BY COMPUTING THE DISALLOWANCE MADE U/S. 14A READ WI TH RULE 8D. 4. AGGRIEVED BY THE ASSESSMENT MADE, THE ASSESSEE CARR IED THE MATTER BEFORE THE LD. CIT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) HELD AS UNDER:- 3.6 THE ABOVE CASE LAWS HAVE BEEN GONE THROUGH CAREFULL Y TO DECIDE THE ISSUE INVOLVED IN THE APPELLANT'S CASE. AFTER GOING THROU GH BOTH THE CASES, THE RATIO CANNOT BE APPLIED IN THE INSTANT CASE WHERE THE ISSUE OF THE DISALLOWANCE U/S 14A OF THE IT ACT READ WITH RULE 8D OF THE IT RULES IS BEING DISCUSSED. BO TH THE CASES ARE DISCUSSING AND DELIBERATING ISSUES OTHER THAN DISALLOWANCE U/S 14A OF THE IT ACT READ WITH RULE 8D OF THE IT RULES, THE CASE OF ASSOCIATES CAPSULES PVT. LTD, THE ISSUE IS RELATED TO THE COMPUTATION OF DEDUCTION OF SECTION 80HHC OF THE I.T. ACT. THE SAME PRINCIPAL AND THE SAME RATIO CANNOT BE APPLIED IN THE INSTANT ISSUE OF CALCULATI ON U/S. 14A OF THE I.T. ACT. IN VIEW OF THE ABOVE, THE ARGUMENT OF THE APPELLANT IS REJECTED TH AT FOR THE PURPOSE OF DISALLOWANCE ONLY NET INTEREST EXPENDITURE COULD BE CONSIDERED. THE A .O IS DIRECTED TO GIVE RELIEF (AS DISCUSSED IN PARA 3.4 OF THIS ORDER) OF RS. 1,00,00 0/- FROM THE TOTAL DISALLOWANCE OF RS. 46,96,902/- DETERMINED IN RECTIFICATION ORDER U/S. 154 OF THE I.T. ACT OF THE A.O DATED 24.02.2012. THE APPELLANT GETS THE PARTIAL RELIEF O N THIS POINT. ITA NO. 1545 /AHD/2012 . A.Y. 2009-1 0 3 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE STATED THAT THERE ARE CERTAIN APPARENT ERR ORS MADE IN COMPUTING THE DISALLOWANCE. THE LD. COUNSEL POINTED OUT THAT THE A.O HAS CONSIDERED THE INVESTMENT IN PARTNERSHIP FIRMS WHICH HAVE RESULTED INTO TAXABLE INCOME AND, THEREFORE, SHOULD NOT HAVE BEEN CONSIDERED FOR THE PURPOSES OF CONSIDERING THE INVE STMENTS IN RESPECT OF EXEMPT INCOME. 6. THE LD. COUNSEL FURTHER STATED THAT EVEN THE INTERE ST COMPONENT CONSIDERED BY THE A.O FOR THE PURPOSES OF THE DISAL LOWANCE IS NOT CORRECT. IT IS THE SAY OF THE LD. COUNSEL THAT THE A.O SHOULD HAVE TAKEN THE NET INTEREST I.E. INTEREST CREDITED MINUS INTER EST DEBITED IN THE ACCOUNTS. THE LD. COUNSEL CONCLUDED BY SAYING THAT IF THESE FACTORS ARE CONSIDERED THEN THE DISALLOWANCE WOULD BE SUBSTANTI ALLY REDUCED. 7. PER CONTRA, THE LD. D.R. STRONGLY RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 8. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFUL LY PERUSED THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLA TE AUTHORITY. WITH THE ASSISTANCE OF THE LD. COUNSEL WE HAVE ALSO GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AN D REFERRED TO DURING THE COURSE OF THE PROCEEDINGS. 9. A PERUSAL OF SCHEDULE-E OF INVESTMENTS SHOWS THAT T HE ASSESSEE IS HAVING INVESTMENTS AS UNDER:- (A) MOVABLE PROPERTY BEING SHARES: RS. 66,00,000/- (B) IMMOVABLE PROPERTY RS. 26,11,52,492/- (C) INVESTMENTS IN PARTNERSHIP FIRM (I) SAFAL ESTATE RS. 1,75,85,525/- ITA NO. 1545 /AHD/2012 . A.Y. 2009-1 0 4 (II) K.S. ASSOCIATES RS. 1,63,40,110/- (III)WHITE FIELD PROJECTS RS. 40,000/- (IV) GALAXY DEVELOPERS RS. 88,67,500/- (V) GOKULDAM DEVELOPERS RS. 19,55,23,667/- (VI) SHAHIBAUG ORCHID DEVELOPERS RS. 9,49,94,264/- 10. IF THE AFOREMENTIONED INVESTMENT IN THE PARTNERSHI P FIRMS ARE CONSIDERED IN THE LIGHT OF THE COMPUTATION OF INCOM E. WE FIND THAT THE ASSESSEE HAS RECEIVED TAXABLE INTEREST INCOME FROM GOKULDAM DEVELOPERS RS. 3,17,75,410/-, THEREFORE, INVESTMENT S IN GOKULDAM DEVELOPERS CANNOT BE CONSIDERED FOR THE PURPOSES OF COMPUTING THE DISALLOWANCE U/S. 14A OF THE ACT. SIMILARLY, THE A SSESSEE HAS SHOWN TAXABLE INTEREST FROM M/S. SAFAR ESTATE, M/S. K.S. ASSOCIATES ALSO, THEREFORE, THESE TWO FIRMS SHOULD ALSO BE EXCLUDED FOR THE PURPOSES OF COMPUTATION OF THE DISALLOWANCE U/S. 14A. IN THE CA SE OF M/S. SHAHIBAUG ORCHID DEVELOPERS, WE FIND THAT ON 31 ST MARCH, THE PROFIT HAS BEEN CREDITED AT RS. 5,03,17,187/-. WE ALSO FIN D THAT WHILE CONSIDERING THE INVESTMENTS IN THIS FIRM, THE NET P ROFIT CREDITED ON THE LAST DAY OF THE ACCOUNTING YEAR HAS ALSO BEEN CONSI DERED AS PART OF THE INVESTMENT. IN OUR CONSIDERED VIEW, THIS WILL BECO ME INVESTMENT FOR THE NEXT FINANCIAL YEAR AND NOT FOR THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DIRECT THE A.O TO EXCLUDE RS. 5,03,17,18 7/- FROM THE CLOSING BALANCE OF M/S. SHAHIBAUG ORCHID DEVELOPERS. 11. FOR THE SAKE OF COMPLETENESS INVESTMENTS IN M/S. GO KULDAM DEVELOPERS, M/S. SAFAL ESTATE AND M/S. K.S. ASSOCIA TES HAVE TO BE EXCLUDED AND INVESTMENT IN SHAHIBAUG ORCHID DEVELOP ERS HAS TO BE REDUCED BY RS. 5,03,17,187/- FOR THE PURPOSES OF TH E COMPUTATION OF DISALLOWANCE U/S. 14A OF THE ACT. THE A.O IS DIRECT ED TO RECOMPUTE THE DISALLOWANCE AS PER ABOVE DIRECTION. ITA NO. 1545 /AHD/2012 . A.Y. 2009-1 0 5 12. IN SO FAR AS, THE INTEREST COMPONENT IS CONCERNED, WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS DEBITED INTEREST AT RS. 3,29,79,330/-. WE ALSO FIND THAT THE CREDIT ENTRIES ON ACCOUNT OF INTEREST IS AT RS. 2,13,45,546/-. IN OUR CONSIDERED OPINION, THE A.O OUGHT TO HAVE TAKEN INTO CONSIDERATION, THE NET INT EREST OF RS. 1,16,33,784/- FOR THE PURPOSES OF COMPUTING THE DIS ALLOWANCE AS PER RULE 8D. WE ACCORDINGLY DIRECT THE A.O TO TAKE INTE REST OF RS. 1,16,33,784/- FOR THE PURPOSES OF THE CONSIDERATION OF DISALLOWANCE AS PER RULE 8D. 13. WITH THE AFOREMENTIONED DIRECTIONS, WE DIRECT THE A .O TO RE- COMPUTE THE DISALLOWANCE; APPEAL FILED BY THE ASSES SEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 05- 04 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD