Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 1674 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-09-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
06-09-2019
Assessment Year
2013-2014
Appeal Filed On
20-06-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.1554/PUN/2017 / ASSESSMENT YEAR : 2013-14 SUYASH AUTO PRESS COMPONENTS AND ASSEMBLYS PVT. LTD., 215-216, DECISION TOWER, SATARA ROAD, PUNE 411037 PAN : AACCS5937P VS. DCIT, CIRCLE-6, PUNE / ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, PUNE ON 31 -01-2017 IN RELATION TO THE ASSESSMENT YEARS 2013-14. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMA TION OF ADDITION OF RS.9,74,568/-. U/S.14A R.W. RULE 8D. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E MADE INVESTMENTS IN MUTUAL FUNDS AND PARTNERSHIP FIRMS AMOUNTING TO RS.3,54,93,466/-. DISALLOWANCE U/S.14A WAS OFFERED FOR A SUM OF RS.32,499/-. THE ASSESSING OFFICER (AO), AFTER GETTING S ATISFIED ABOUT ASSESSEE BY SHRI SHARAD SHAH REVENUE BY SHRI SUDHENDU DAS DATE OF HEARING 06-09-2019 DATE OF PRONOUNCEMENT 09-09-2019 ITA NO. 1554/PUN/2017 SUYASH AUTO PRESS COMPONENTS & ASSEMBLYS PVT. LTD., 2 THE NON-OFFERING OF PROPER DISALLOWANCE U/S.14A, WENT ON TO COMPUTE DISALLOWANCE AS PER RULE 8D TOTALLING TO RS.9,74,568/- COMPRIS ING OF RS.8,29,597/- UNDER RULE 8D(2)(II) AND RS.1,77,470/- U NDER RULE 8D(2)(III). THE LD. CIT(A) SUSTAINED THE DISALLOWANCE AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. THE DISALLOWANCE HAS BEEN MADE IN TWO PARTS. THE FIRST COMPONENT OF DISALLOWANCE AMOUNTING TO RS.8,29,597 /- IS ON ACCOUNT OF INTEREST U/S.14A R.W. RULE 8D(2)(II). IT HAS BEE N BROUGHT TO OUR NOTICE THAT THE SHAREHOLDERS FUND OF THE ASSESSEE INCLUD ING RESERVE AND SURPLUS AS ON 31-03-2013 STANDS AT RS.342, 85,75,403/- AS AGAINST THE TOTAL AMOUNT OF INVESTMENTS STANDING AT RS.3.54 CR ORE. 5. THIS ISSUE IS NOW NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT DELIVERED BY THE HON'BLE SUPREME COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT (2017) 394 ITR 449 (S C) , UPHOLDING THE VIEW OF THE LOWER AUTHORITIES THAT WHEN INTEREST F REE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES ETC. ARE MORE THAN THE AMOUNT OF INVESTMENT, THEN NO DISALLOWANCE OF INTEREST CAN B E MADE U/S 14A. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. (2014) 366 ITR 515 (BOM). THE HON'BLE KARNATAKA HIGH COURT IN CIT & ANR VS. MICROLABS (2016) 383 ITA NO. 1554/PUN/2017 SUYASH AUTO PRESS COMPONENTS & ASSEMBLYS PVT. LTD., 3 ITR 490 (KAR) HAS ALSO HELD THAT WHEN INVESTMENTS ARE MADE FROM A COMMON POOL AND NON-INTEREST BEARING FUNDS ARE MORE THAN THE INVESTMENT IN TAX FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A CAN BE MADE. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE ORDER TO DELETE THE DISALLOWANCE UNDER RULE 8 D(2)(II) TO THE TUNE OF RS.8,29,597/-. 6. IN SO FAR AS THE SECOND PART OF THE DISALLOWANCE UNDE R RULE 8D(2)(III) AMOUNTING TO RS.1,77,470/- IS CONCERNED, IT IS S EEN THAT ORDINARILY THE DISALLOWANCE IS MADE AT 0.5% OF THE AVERAGE V ALUE OF INVESTMENTS, AS HAS BEEN DONE BY THE AO. HOWEVER, IN THIS REGARD, IT IS RELEVANT TO NOTE THAT THE HONBLE DELHI HIGH COURT IN ACB INDIA LTD. VS. CIT (2015) 374 ITR 108 (DEL) HAS HELD THAT THE AVERAGE VALUE OF INVESTMENTS, FOR THE PURPOSES OF RULE 8D(2)(III), SHOU LD BE CONFINED TO THOSE SECURITIES IN RESPECT OF WHICH EXEMPT INCOME IS EARN ED AND NOT THE TOTAL INVESTMENTS. SIMILAR VIEW HAS BEEN TAKEN BY THE S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENTS (P) LTD. (2017) 165 ITD 27 (DEL) (SB) HOLDING THAT ONLY THOSE INVESTMENTS SHOULD BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVE STMENTS WHICH YIELD EXEMPT INCOME DURING THE YEAR. ITA NO. 1554/PUN/2017 SUYASH AUTO PRESS COMPONENTS & ASSEMBLYS PVT. LTD., 4 7. THE LD. AR CONTENDED THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME FROM THE PARTNERSHIP FIRMS AND HENCE SUCH INVESTME NTS SHOULD BE EXCLUDED. SINCE THE RELEVANT FACTS FOR DETERMINING THIS ISSU E ARE NOT AVAILABLE ON RECORD, WE SET-ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR ASCERTAINING IF ANY EXEMPT INCOME WAS EARNED BY THE ASSESSEE FROM INVESTMENTS IN PARTNERSHIP FIR MS. IN CASE, THE ASSESSEES CAPITAL CONTRIBUTION IN THE FIRMS YIELDED SOME EXEMPT INCOME, THEN THE AMOUNT OF INVESTMENTS IN THE FIRMS SHOULD B E INCLUDED FOR THE PURPOSE OF CALCULATING 0.5% OF THE AVERAG E VALUE OF THE INVESTMENTS FOR THE DISALLOWANCE UNDER RULE 8D(2)(III). I N THE OTHERWISE SCENARIO, THE AMOUNT OF SUCH INVESTMENTS NOT YIELDIN G ANY EXEMPT INCOME, SHOULD BE EXCLUDED FOR THE PURPOSE OF C ALCULATION OF THE AMOUNT TO BE DISALLOWED. IT IS FURTHER MADE CLEAR THAT THE R ESULTING DISALLOWANCE SHOULD BE REDUCED BY THE AMOUNT SUO MOTU DISALLOWED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH SEPTEMBER, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 09 TH SEPTEMBER, 2019 ITA NO. 1554/PUN/2017 SUYASH AUTO PRESS COMPONENTS & ASSEMBLYS PVT. LTD., 5 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-4, PUNE 4. 5. 6. THE CIT-3, PUNE , , / DR B, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 06-09-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06-09-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *
