M/s Trident Limited, Ludhiana V. DCIT, C-1, Ludhiana

ITA 1615/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2240 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE CIT DR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NO. 1615/CHD/2017 ASSESSMENT YEAR : 2012-13 M/S TRIDENT LIMITED E-212, KITCHLU NAGAR LUDHIANA, PUNJAB THE DCIT, C-1, RISHI NAGAR LUDHIANA, PUNJAB PAN NO: AABCA4139J APPELLANT RESPONDENT ITA NO. 1590/CHD/2017 ASSESSMENT YEAR : 2012-13 THE DCIT, C-1, LUDHIANA, PUNJAB M/S TRIDENT LIMITED E-212, KITCHLU NAGAR LUDHIANA, PUNJAB PAN NO: AABCA4139J APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. ASHWANI KUMAR #!' REVENUE BY : SHRI. G.S. PHANI KISHORE CIT (DR) $ %! & DATE OF HEARING : 30/10/2018 '()*! & DATE OF PRONOUNCEMENT : 31/10/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THESE ARE APPEALS FILED BY THE ASSESSEE AND THE REV ENUE AGAINST THE ORDER OF THE LD. CIT(APPEALS)-1 LUDHIANA DT. 29/09/ 2017 ON THE FOLLOWING RESPECTIVE GROUNDS: ITA NO. 1615/CHD/2017: THAT ORDER PASSED UNDER SECTION 250(6) OF THE INCOM E TAX ACT, 1961 BY THE LD. CIT(A)-1, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD DISALLOWANCE MADE B Y THE LD. ASSESSING OFFICER UNDER SECTION 36(1)(III) OF RS. 1,87,28,165/- ON AC COUNT OF INTEREST ON INVESTMENTS. ITA NO. 1590/CHD/2017: 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A WAS JUSTIFIED IN LAW IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOM E TAX RULES 1962? 2. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AN D THAT OF THE ASSESSING OFFICER BE RESTORED. 2 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF 2. THE LD. AR ADDRESSING THE GROUNDS RAISED BY THE PARTIES SUBMITTED THAT THE POINTS AT ISSUES WERE FULLY COVERED IN FAVOUR OF TH E ASSESSEE. INVITING ATTENTION TO THE ASSESSEE'S GROUNDS, IT WAS SUBMITTED THAT THE F ACTS HAVE BEEN DISCUSSED BY THE CIT(A) AT PAGE 13 PARA 11 WHEREIN THE CIT(A) RE LYING UPON THE PROCEEDINGS HELD IN ASSESSEE'S OWN CASE IN 2011-12 ASSESSMENT YEAR SUSTAINED THE ADDITION MADE BY THE AO. FOR READY REFERENCE, PARA 13 OF THE CIT(A) IS REPRODUCED HEREUNDER : THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDE RED. IN THE APPELLANT'S CASE FOR A.Y.2011-12, SIMILAR ADDITION WAS CONFIRMED VID E ORDER DATED 28/12/2015 IN APPEAL NO.. 06/IT/CIT (A)-L/LDH/2014-15. FOLLOWING THE SAME PRECEDENCE, THE DISALLOWANCE OF RS. 73,61,265/-IS UPHELD. IT IS ORD ERED ACCORDINGLY. THE GROUND OF APPEAL PERTAINING TO THIS ADDITION IS, THUS, DISMIS SED. 3. INVITING ATTENTION TO THE COPY OF THE ORDER OF THE ITAT AVAILABLE IN ASSESSEE'S OWN CASES WHEREIN THE ITAT VIDE ITS ORDE R DATED 29.11.2017 AND 20/03/2018 CONSIDERING THE IDENTICAL ISSUES ALLOWED RELIEF TO THE ASSESSEE ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE ISSUE I S COVERED IN ASSESSEE'S FAVOUR. 4. FOR THE SAKE OF BREVITY THE RELEVANT PART OF THE ORDER DATED 20/03/2018 IS REPRODUCED BELOW: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE WAS CONSIDERED BY THE CIT(A) RE LYING UPON THE POSITION TAKEN IN 2011-12 ASSESSMENT YEAR ON SAME SET OF FACTS AND CI RCUMSTANCES. THE SAID CASE HAD COME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH AND CONSIDERING THE FACTS AND POSITION OF LAW THEREON, ADDITION WAS DIRECTED TO BE DELETED. IN THE ABSENCE OF ANY INFIRMITY EITHER ON FACTS OR CHANGE IN POSITION OF LAW, WE FIND NO GOOD REASON TO VARY. RESPECTFULLY FOLLOWING THE ORD ER OF THE ITAT, GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS ALLOWED. SPECIFIC RE ASONING TAKEN BY THE ITAT WHICH IS BEING FOLLOWED IN THE PRESENT PROCEEDINGS IS REP RODUCED IN PARA 10 OF THE SAID ORDER. 5. ADDRESSING THE SOLE ISSUE RAISED BY THE REVENUE IN THE PRESENT PROCEEDINGS. THE LD. AR SUBMITTED THAT IN THE FACTS OF THE PRESE NT CASE, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME WHICH FACT HAS BEEN TAKEN NOTE OF BY THE AO AS WELL AS BY THE CIT(A). ACCORDINGLY, RELYING UPON THE POS ITION OF LAW, AS HAS BEEN CONSISTENTLY CONSIDERED BY VARIOUS COURTS AND FOLLO WED BY THE ITAT ALSO, IN THE FACTS AS THEY STAND, IT WAS HIS SUBMISSION THAT THE RELIEF GRANTED BY THE CIT(A) DESERVES TO BE UPHELD. RELIANCE WAS PLACED UPON THE ORDER DATED 22.04.2016 IN ITA 545/CHD/2015 AND ITA 428/CHD/2015 IN THE CROSS APPEALS IN THE CASE OF M/S VARDHMAN CHEMTECH PVT. LTD. 5.1 THE LD. CIT-DR RELIES UPON THE ASSESSMENT ORDER . NO CONTRARY DECISION OR FACT WAS BROUGHT TO OUR NOTICE. 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES O F THE CASE, WHERE ADMITTEDLY THERE IS NO EXEMPT INCOME, POSITION OF LAW AS CONSI DERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS LAKHANI MARKETING IN IT A 970/2008 AND DECISION OF THE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., WE FIND THAT THE DEPARTMENTAL APPEAL CANNOT SURVIVE. ACCORDINGLY, UPHOLDING THE C ONCLUSION ARRIVED AT FOR THE REASONS SET OUT HEREIN ABOVE, DEPARTMENTAL APPEAL I S DISMISSED AND ASSESSEE'S 3 APPEAL IS ALLOWED. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 5. FOLLOWING THE ABOVE RATIONALE THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. REGARDING THE ADDITION OF RS. 1,87,28,165/- , T HE ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF INTEREST ON INVESTMENTS BY RESORTING TO PROVISIONS OF SECTION 36(1)(III) OF INCOME TAX ACT,1961. THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE HAD TOTAL INVESTMENTS OF RS. 55.64 CRORES AND THESE INVESTMENTS ARE NOT RELATED TO THE CORE BUSINESS OF THE ASSESSEE. THE L D. CIT(A) HAS CONFIRMED THE ADDITION BASED ON THE EARLIER ORDER FOR THE A.Y. 20 11-12. HE SUPPORTED THE ARGUMENT OF THE ASSESSING OFFICER THAT SINCE THE IN VESTMENTS WERE MADE OUT OF COMPOSITE FUNDS IT WOULD BE DIFFICULT TO APPORTIONE D THE NON INTEREST BEARING FUNDS WHICH HAVE BEEN PURPORTEDLY SAID TO HAVE BEEN UTILIZED FOR THE PURPOSE OF MAKING THE INVESTMENTS IN A SITUATION WHERE THE ASS ESSEE HAD RAISED SECURE AS WELL AS UNSECURED LOANS ON WHICH THE INTEREST WAS P AID. 7. BEFORE US, THE LD. AR SUBMITTED THAT THESE INVES TMENTS WERE MADE OUT OF SHARE CAPITAL, RESERVES AND SURPLUS AND INTEREST FR EE FUNDS AVAILABLE WITH THE ASSESSEE AND HENCE IT CANNOT BE SAID THAT THE INTER EST BEARING FUNDS HAVE BEEN UTILIZED FOR MAKING THE INVESTMENTS. THIS MATTER HA S BEEN DEALT IN THE CASE OF THE ASSESSEE BY THIS TRIBUNAL FOR THE A.Y. 2011-12 WHER EIN THE SAID ADDITION WAS DELETED ON THE GROUNDS THAT WHEN THE ASSESSEE HAS G OT SUFFICIENT OWN FUNDS AVAILABLE AT THEIR DISPOSAL NO DISALLOWANCE IS CALL ED FOR. FOR READY REFERENCE THE RELEVANT PARA OF THE ORDER OF THE ITAT, CHANDIGAR B ENCH IN ITA NO. 189/CHD/2016 IS REPRODUCED HEREUNDER: 10. CRISPLY TO SAY THAT THE DISALLOWANCE OF INTERES T UNDER SECTION 36(1)(III) ON ADVANCES CONFIRMED BY THE LD. CIT(A) IS ON THE PRIN CIPLE THAT THE ASSESSEE UTILIZED MIXED FUNDS FOR INVESTMENT. THE LD. CIT(A) RELIANCE THAT THE FUNDS UTILIZED BY THE ASSESSEE ARE MIXED FUNDS IT CANNOT BE DISTINGUISHED WHETHER SURPLUS FUNDS OR BORROWED FUNDS ARE USED FOR THE SAID INVESTMENTS CA NNOT BE ACCEPTED IN VIEW OF THE FURTHER DEVELOPMENT OF THE JUDICIAL PRONOUNCEME NTS ON THE ISSUE. WHEN THE ASSESSEE HAS GOT OWN FUNDS AVAILABLE AT THEIR DISPO SAL NO DISALLOWANCE IS CALLED FOR AS ENUNCIATED IN VARIOUS JUDGMENTS. IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS. CIT (PUNJAB & HARYANA HIGH COURT IN ITA NO. 224 /2013 DT. 24/07/2015 IT WAS HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABL E THEN IT WILL BE PRESUMED THAT THESE HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. SI MILAR VIEW WAS HELD IN THE CASE OF CIT VS. KAPSONS ASSOCIATES INVESTMENT PVT. LTD. [2015] 381 ITR 204 (P&H) WHEREIN, THE HONBLE COURT HAS HELD THAT INTEREST O N INVESTMENT IN OTHER PROPERTIES NOT FOR BUSINESS PURPOSE CANNOT BE DISAL LOWED IF THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL. SIM ILAR VIEW WAS TAKEN IN THE CASE OF HERO CYCLES PVT. LTD. 63 TAXMAN 308 (SUPREME COURT) 2015 WHEREIN THE HONBLE SUPREME COURT HELD THAT ONCE IT IS A ESTABLISHED TH AT THERE IS A NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS NO DISALLOWANCE IS CALLED FOR. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN B Y THE VARIOUS JUDICIAL PRONOUNCEMENTS, THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST IS HEREBY DELETED . 4 8. FOLLOWING THE ABOVE RATIONALE THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 31/10/2018 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE