M/s. K P Corporate Solutions Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1616/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9505 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 25-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: N O N E
• Keywords: Earning of tax free income
• Section: 43B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI RAJESH KUMAR, AM . / ITA NO . 1616 /P U N/201 4 / ASSESSMENT YEAR : 20 08 - 09 M/S. KP CORPORATE SOLUTIONS LTD., KPIT CAMPUS, SDB - II C - WING, PLOT NO. 35 & 36, RAJIV GANDHI I N FOTECH PARK, PHASE - I, HINJEWADI, PUNE 411057 PAN : AABCK6559L . / APPEL LANT VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE . / RESPONDENT / APPELLANT BY : N O N E / RESPONDENT BY : MS. ANN KAPTHUAMA / DATE OF HEARING : 0 4 .05. 201 7 / DATE OF PRONOUNCEMENT: 05 . 0 5 .201 7 / ORDER PER RAJESH KUMAR, A M : TH E APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - I, PUNE DATED 30 - 05 - 2014 FOR THE ASSESSMENT YE AR 20 08 - 09 ARISING OUT OF ASSESSMENT ORDER PASSED U/S. 14 3(3) O F THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT). ITA NO . 1616/PUN/2014 2 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : ON FACTS AND IN LAW, 1] THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED A.O. ULS.14A OF RS. 99,350/ - . 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT SINCE THE ASSESSEE COMPANY HAD EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND AND HENCE, THE DISALLOWANCE MADE BY THE LEARNED A.O. U/S. 14A WAS JUSTIFIED IN LAW. 3] THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE TO EARN DIVIDEND INCOME AND IN THE ABSENCE OF PROPER SATISFACTION ARRIVED AT BY THE LEARNED A.O., THE DISALLOWANCE MADE U/S. 14A WAS NOT WARRANTED. 4] THE LEA RNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD NOT UTILISED ANY BORROWED FUNDS FOR MAKING INVESTMENTS IN TAX FREE SECURITIES AND ACCORDINGLY, THE DISALLOWANCE MADE U/S. 14A IN RESPECT OF THE INTEREST EXPENDITURE SHOULD BE DELETED. 5] WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT THE DISALLOWANCE MADE U/S. 14A MAY KINDLY BE REDUCED SUBSTANTIALLY. 6] THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF EMPLOYEES' CONTRIBUTION TO PF OF RS . 62,339/ - ON THE GROUND THAT THE SAID CONTRIBUTION WAS PAID BY THE ASSESSEE BEYOND THE DUE DATE PRESCRIBED UNDER THE PF ACT. 7] THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD MADE THE ABOVE PAYMENT OF 62,339/ - BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND HENCE, THE DISALLOWANCE MADE BY THE LEARNED A.O. WAS NOT JUSTIFIED AT ALL. 8] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION FOR ADJOURNM ENT WAS RECEIVED. WE ARE , THEREFORE , DECIDING THE APPEAL ON MERIT AFTER HEARING THE LD. DR. 4. THE SOLE ISSUE RAISED BY THE ASSESSEE IN GROUND NOS. 1 TO 5 RELATES CONFIRMATION OF DISALLOWANCE OF RS.99,350/ - WHICH WAS MADE BY THE ASSESSING OFFICER U/S. 14 A OF THE ACT R.W. RULE 8D . ITA NO . 1616/PUN/2014 3 5. THE B RIEF FACT S OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EXEMPT INCOME BY WAY OF DIVIDEND FROM MUTUAL FUND S OF RS.13,15,000/ - WHICH WAS CLAIMED AS EXEMPT WITHOUT ATTRIBUTING ANY EXPENSES IN RESPECT THE SAID EXEMPT INCOME . T HE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE AS TO WHY A SUM OF RS.99,350/ - SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE AS EXPENSES U/S. 14A R.W. RULE 8D WHIC H COMPRISED RS.21,787/ - AS INTEREST UNDER RULE 8D(2)(II) AND RS.77,563/ - @ 0.5% OF THE AVERAGE INVESTMENTS UNDER RULE 8D(2)(III ) RELATING TO EARN ING THE EXEMPT INCOME . THE ASSESSEE REPLIED THE SHOW CAUSE NOTICE VIDE LETTER DATED 16 - 11 - 2010 SUBMITTING TH AT NO INTEREST EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE ON THE INVESTMENTS IN THE MUTUAL FUNDS AS APPARENT FROM SCHEDULE 14 OF THE ANNUAL AUDITED ACCOUNTS WHICH SHOWED INTEREST ON VEHICLE LOAN OF RS.27,386/ - ONLY. THE LD. AR OF THE ASSESSEE FURT HER SUBMITTED THAT NO FURTHER INDIRECT EXPENSES WERE INCURRED ON EARNING THE EXEMPT INCOME AND, NO DISALLOWANCE WAS CALLED FOR. THE ASSESSING OFFICER, NOT CONVINCED WITH THE REPLY OF THE ASSESSEE, ADDED SUM OF RS.99,350/ - TO THE INCOME OF THE ASSESSEE BY APPLYING PROVISIONS OF SECTION 14A OF THE ACT RULES 8D. 6. THE COMMISSIONER OF INCOME TAX (APPEALS ) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION BEFORE MAKING THE ADDITION AND ALSO THAT THE A SSESSEE HAS FAILED TO MAKE ANY SUO MOTO DISALLOWANCE IN TERMS OF PROVISIONS OF SECTION 14A R.W. RULE 8D AND THEREFORE, THE ASSESSING OFFICER RIGHTLY DISALLOWED AND ADDED RS.99,350/ - TO THE INCOME OF THE ASSESSEE . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW . WE FIND FROM THE ARGUMENTS OF THE LD. AR AND ALSO FROM THE RECORDS THAT THE ASSESSEE HAS DEBITED INTEREST OF RS.27,386/ - WHICH RELATES TO VEHICLE AND IS A TERM LOAN US ED FOR THE PURPOSE ITA NO . 1616/PUN/2014 4 OF PURCHASE OF VEHICLE AND THERE WAS NO OTHER LOAN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN OUR VIEW SINCE, MONEY WAS BORROWED FOR THE PURCHASE OF VEHICLE AND THEREFORE, THERE WAS NO ELEMENT RELATING TO THE INVESTMENTS YIELDING TAX F REE INCOME. IN VIEW OF THESE FACTS THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT SO FAR AS THE CONFIRMATION OF DISALLOWANCE OF RS.21,787/ - UNDER RULE 8D (2)(II) IS CONCERNED AND SAME IS DELETED . SO FAR AS THE DISALLOWANCE OF RS.77,563/ - UNDER RULE 8D(2)( III ) IS CONCERNED WE ARE IN AGREEMENT WITH THE LD . CIT(A) ON THIS ISSUE THAT ASSESSEE HAS NOT ATTRIBUTED ANY EXPENSES AND THEREFORE, THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) APPEARS TO BE CORRECT AND ACCORDINGLY SUSTAINED ON ADD ITION UNDER RULE 8D(2)(III). ACCORDINGLY GROUND NOS. 1 TO 5 ARE PARTLY ALLOWED BY DELETING THE ADDITION OF RS.21,787/ - AND THE ASSESSEE GETS RELIEF OF RS. 21,787. THE AO IS DIRECTED ACCORDINGLY. 8. THE ISSUE RAISED IN GROUND NO. 6 IS AGAINST THE CONFIRMA TION OF DISALLOWANCE BY THE COMMISSIONER OF INCOME TAX (APPEALS) A S MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF OF RS.62,339/ - . 9. THE UNDISPUTED FACT ARE THAT THE EMPLOYEES PROVIDENT FUND DUES FOR TWO MONTHS APRIL, 2007 AN D MAY 2007 W ERE NOT PAID WITHIN THE DUE DATES AS PROVIDED UNDER THE AS PER THE PROVISIONS OF RELEVANT ACT WHICH WERE DUE TO BE PAID ON 21 - 05 - 2007 AND 21.6.2007. THE DUES FOR APRIL 2007 AND MAY 2007 WERE MADE IN THE SAME MONTH BUT AFTER TWO DAYS ON 23 - 05 - 2007 AND ON 29 - 06 - 2007 RESPECTIVELY MEANING THEREBY THERE WAS A DELAY BY TWO DAYS FOR APRIL AND OF 8 DAYS FOR MAY, 2007 BUT THESE WERE PAID WELL BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. THE ASSESSING OFFICER DISALLOWED AND ADDED THE SAME TO TH E INCOME OF THE ASSESSEE ON THE GROUND THAT THESE ARE NOT COVERED BY THE PROVISIONS OF SECTION 43B OF THE ACT BUT ARE GOVERNED BY THE RESPECTIVE ACT. THE SAME WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE SAME PARITY OF REASONING AND ACCOR DINGLY DISMISSED . ITA NO . 1616/PUN/2014 5 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE ISSUE BEFORE US IS WHETHER THE EMPLOYEES CONTRIBUTION IN RESPECT OF PROVIDENT FUND , WHICH IS PAID LATE IS ALL OWABLE AS DEDUCTION OR NOT? THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ALOM EXTRUSIONS LTD. REPORTED AS 319 ITR 306. WE, THEREFORE, RESPECTFULLY, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE APEX COURT DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE TOWARDS EMPLOYEES CONTRIBUTION AS THE SAME WAS PAID WELL BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 2017. SD/ - SD/ - ( SUSHMA CHOWLA ) ( RAJESH KUMAR ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE ; DATED : 5 TH MAY, 201 7 . RK / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I, PUNE ; 4. / THE CIT - I, PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER, // // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE