RVR Infratructures Limited, Hyderabad, Hyderabad V. ITO, Ward-3(2), Hyderabad, Hyderabad

ITA 1667/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2562 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA. NO.1667/HYD/2016 ASSESSMENT YEAR: 2012 - 2013 M/S. RVR INFRASTRUCTURES LIMITED, PLOT NO.406A, ROAD NO.18, JUBILEE HI8LLS, HYDERABAD. PAN: AADCR 8231 L VS. INCOME TAX OFFICER, WARD - 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI MOHD. AFZAL FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 31.01.2018 DATE OF PRONOUNCEMENT : 31.01.2018 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE ASSESSEE - COMPANY IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 3, HYDERABAD. WE ARE CONCERNED WITH THE A.Y. 2012 - 2013. 2. IN THE GROUNDS OF APPEAL ANNEXED TO FORM NO.36, 5 GROUNDS WERE RAISED OUT OF WHICH GROUNDS NO.2 AND 3 ARE NOT PRESSED AND GROUNDS NO.1 AND 5 ARE GENERAL IN NATURE. ACCORDINGLY, THERE IS NO NEED TO RENDER ANY DECISION ON GROUNDS NO.1 AND 5 AND GROUNDS NO.2 AND 3 ARE REJECTED AS NOT PRESSED. THE ONLY S URVIVING GROUND IS GROUND NO.4 AND THE SAME READS AS UNDER: - 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,03,483/ - OUT OF THE ADDITION MADE U/S 14A OF THE IT ACT. 2 3. ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING T.V. CHANNEL NETWORK AND INTERNET SERVICES. THOUGH THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME FROM THE INVESTMENTS MADE, THE A.O. NOTICED THAT THE ASSESSEE BORROWED HUGE FUNDS FOR MAKING INVESTMENTS FOR PURCHASE OF SHARES AND THEREFORE PROVISIONS OF SECTION 14A RE AD WITH RULE 8D WERE INVOKED AND COMPUTED THE DISALLOWANCE ACCORDINGLY. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS AND HENCE DISALLOWANCE TOWARDS INTEREST PAYMENT IS NOT IN ACCORDANCE WITH LAW. IT WA S FURTHER CONTENDED THAT THAT THE ASSESSEE HAVING NOT EARNED ANY EXEMPT INCOME DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. UNDER CONSIDERATION, SECTION 14A DOES NOT GET ATTRACTED IN WHICH EVENT NO DISALLOWANCE IS MAINTAINABLE UNDER RULE 8D. 5. WE ARE CO NCERNED WITH THE ADDITION OF RS. 2,03,483/ - MADE BY THE A.O. UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962. THE ASSESSEES CASE BEFORE THE LD. CIT(A) WAS THAT IT HAD SUFFICIENT INTEREST FREES FUNDS TO MAKE INVESTMENT AND IT WAS ALSO CONTENDED THAT IN VESTMENTS WERE MADE IN SISTER CONCERNS THEREFORE IT WAS FOR THE PURPOSE OF BUSINESS. NO EXPENDITURE WAS INCURRED IN THE CURRENT YEAR. THE INVESTMENTS WERE MADE ONLY TO HAVE CONTROL IN THE SISTER CONCERNS. LASTLY IT WAS CONTENDED THAT THE INVESTMENTS WER E MADE OUT OF MIXED FUNDS. IT CANNOT BE PRESUMED THAT ONLY THE INTEREST - BEARING FUNDS WERE INVESTED SO AS TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT. 6. LD. CIT(A) OBSERVED THAT SO FAR AS THE MIXED FUNDS ARE CONCERNED, DECISION OF THE MUMBAI HIGH CO URT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD., IS APPLICABLE (313 ITR 340) AND ACCORDINGLY LD. CIT(A) DELETED THE ADDITION OF RS. 8,41,775/ - . WITH REGARD TO THE APPLICATION 3 OF THIRD LIMB OF RULE 8D(2), LD. CIT(A) OBSERVED THAT EVEN WHEN THERE IS N O EXEMPT INCOME, DISALLOWANCE CAN BE MADE BY APPLYING RULE 8D. IN THIS REGARD, LD. CIT(A) REFERRED TO THE DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF BELLWEATHER MICRO FINANCE LTD., AS WELL AS M/S. SPANDANA SPHOORTHY FINANCIAL LTD. 7. AGGRIEVED BY THE DISALLOWANCE OF RS. 2,03,483/ - , ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 8. THE LIMITED PLEA OF THE ASSESSEE IS THAT THE CASE LAW RELIED UPON BY THE LD. CIT(A) ARE DISTINGUISHABLE ON FACTS. RELIANCE WAS PLACED UPON THE LATEST DECISION O F THE ITAT, HYDERABAD A BENCH DATED 24.01.2018, WHEREIN THE BENCH OBSERVED (IN THE CASE OF M/S. VASANTHA TRADERS ITA NO. 343/HYD/2017) THAT RULE 8D CANNOT BE MADE APPLICABLE IN THE ABSENCE OF EXEMPT INCOME. LD. DR COULD NOT PLACE ANY DECISION WHEREIN A CONTRARY VIEW WAS TAKEN EVEN IN A CASE WHERE THERE WAS NO EXEMPT INCOME. SUCH BEING THE CASE, CONSISTENT WITH THE VIEW TAKEN BY THE ITAT, HYDERABAD BENCH (SUPRA), WE SET ASIDE THE DISALLOWANCE OF RS. 2,03,484/ - AND ALLOW GROUND NO.4 OF THE ASSESSEE - COMP ANY. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE - COMPANY IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 31 ST JANUARY, 2018. S D / - S D / - ( D.S. SUNDER SINGH ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED: 31 ST JANUARY, 2018. OKK, SR.PS 4 COPY TO 1. MD. AFZAL, ADVOCATE, 11 - 5 - 465, SHERSONS RESIDENCY, FLAT NO.402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD 500 004. 2. INCOME TAX OFFICER, WARD 3(2), SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 3. CIT (A) - 3, HYDERABAD. 4. PR. COMMISSIONER OF INCOME TAX - 3, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE