Sagar Yeswantrai Mehta, Ahmedabad V. ACIT, Circle-2(1)(2)., Ahmedabad

ITA 1684/AHD/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3780 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.S.A. KHAN
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ I.T.A. NO.1684/AHD/2018 ( / ASSESSMENT YEAR : 2015-16) SAGAR YESWANTRAI MEHTA LAXMI HOUSE SWAGAT CROSS ROAD HOTEL ROCK REGENCY C.G. ROAD, AHMEDABAD / VS. THE ACIT CIRCLE-2(1)(2) AHMEDABAD ./ ./ PAN/GIR NO. : ACCPM 8669 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MEHUL K. PATEL, AR / RESPONDENT BY : SHRI M.S.A. KHAN, CIT-DR / DATE OF HEARING 18/02/109 !'# / DATE OF PRONOUNCEMENT 19/02/2019 / O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABA D [CIT(A) IN SHORT] DATED 07/06/2018 PASSED FOR ASSESSMENT YEAR (AY) 2015-16. 2. IN THE FIRST GROUND OF APPEAL, ASSESSEE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN DECIDING HIS APPEAL EX-PARTE WITHOUT GIVING PROPER OPPORTUNITY OF HEARING. ITA NO.1684/AHD /2018 SAGAR YESWANTRAI MEHTA VS. ACIT ASST.YEAR 2015-16 - 2 - 3. HOWEVER, AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENT ON THIS ISSUE. HENCE, IT IS REJECTED. 4. IN GROUND NO.2, THE ASSESSEE HAS PLEADED THAT LD .CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.8,05,.856/- WHICH WAS ADDED BY THE ASSESSING OFFICER WITH THE HELP OF SECTION 14A R.W. R.8D OF THE INCOME TAX RULES, 1962. 5. WITH THE ASSISTANCE OF LD.REPRESENTATIVE, WE HAV E GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECO RD THAT ASSESSEE HAS FILED HIS RETURN OF INCOME ON 30/10/2015 DECLARING TOTAL INCOME OF RS.1,57,94,530/-. THE CASE WAS SELECTED FOR SCRUTI NY ASSESSMENT AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESS ING OFFICER THAT ASSESSEE HAS DECLARED DIVIDEND INCOME OF RS.22,697/- WHICH W AS CLAIMED AS EXEMPT FROM TAXES U/S.10(35) OF THE ACT. THE LD.AO MADE AN ANALYSIS OF THE EXPENDITURE REQUIRED TO BE DISALLOWED FOR EA RNING THIS TAX FREE INCOME. HE WORKED OUT THE DISALLOWANCE WITH THE HE LP OF RULE 8D OF THE INCOME TAX RULES, 1962. SUCH DISALLOWANCE HAS BEEN WORKED OUT AT RS.8,05,856/-. IT IS PERTINENT TO OBSERVE THAT THE HONBLE GUJARAT HIGH COURT ON THE ISSUE IN THE CASE OF CIT VS. CORRTECH ENERGY PVT.LTD. REPORTED IN (2014) 223 TAXMAN 0130 AND HONBLE DELH I HIGH COURT IN THE CASE CHEMINVEST LTD. VS. CIT REPORTED IN 378 IT R 033 HAVE ITA NO.1684/AHD /2018 SAGAR YESWANTRAI MEHTA VS. ACIT ASST.YEAR 2015-16 - 3 - CONCURRED WITH EACH OTHER THAT IF THERE IS NO DIVID END INCOME OR TAX FREE INCOME IN A YEAR, THEN NO DISALLOWANCE U/S.14A CAN BE MADE. THIS EXPLICATION WAS AMPLIFIED AND EMPLOYED SUBSEQUENTLY BY THE ITAT TO CONSTRUE THAT WORKING OF EXPENDITURE FOR DISALLOWAN CE U/S.14A OF THE ACT SHOULD NOT EXCEED MORE THAN DIVIDEND INCOME ITSELF. IN THE CASE OF JOINT INVESTMENTS PVT.LTD. VS. CIT (ITA NO.117/AHD/2015 D ECIDED ON 25/02/2015), THE HONBLE DELHI HIGH COURT HAS OBSER VED THAT BY NO STRETCH OF IMAGINATION SECTION 14A OR RULE 8D COULD BE INTERPRETED SO AS TO MEAN THAT ENTIRE TAX-FREE INCOME IS TO BE DISALL OWED. THE ITAT AHMEDABAD HAS RESTRICTED THE DISALLOWANCE EQUIVALEN T TO EXEMPT INCOME (A REFERENCE COULD BE MADE TO ITA NO.3266/AHD/2015 DECIDED ON 7/12/2016 AND ITA NO.750/AHD/2016 IN THE CASE OF CI T VS. NIRMA CHEMICAL WORKS PVT.LTD. DECIDED ON 03/12/2018). 6. FOLLOWING THE ABOVE, WE ARE OF THE VIEW THAT END S OF JUSTICE WOULD MEET IF WE RESTRICT THE DISALLOWANCE EQUIVALENT TO THE TAX-FREE INCOME SHOWN BY THE ASSESSEE I.E. RS.22,697/-. THIS GROUN D IS ACCORDINGLY PARTLY ALLOWED. THE LD.AO CONSIDER THE DISALLOWANCE AT R S.22,697/- INSTEAD OF RS.8,05,856/-. 7. IN GROUND NO.3, THE ASSESSEE HAS PLEADED THAT TH E LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.10,80,088/-. WITH THE ASSISTANCE OF LD.REPRESENTATIVE, WE HAVE GONE THROUGH THE RECO RD CAREFULLY. THE LD.AO HAS RECORDED A FINDING THAT ASSESSEE FAILED T O MAKE PAYMENT OF ITA NO.1684/AHD /2018 SAGAR YESWANTRAI MEHTA VS. ACIT ASST.YEAR 2015-16 - 4 - EMPLOYEES CONTRIBUTION TO PF ACCOUNT WITHIN THE DU E DATE PROVIDED UNDER THE PF ACT. HENCE, HE DISALLOWED THE CLAIM O F THE ASSESSEE WITH THE HELP OF SECTION 36(1)(VA) R.W.S.2(24)(X) OF THE ACT. 8. ON APPEAL, THE LD.CIT(A) CONFIRMED THIS DISALLOW ANCE FOLLOWING THE JUDGEMENT OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. GSRTC REPORTED IN 366 ITR 170 (GUJ.). SINCE THE L D.FIRST APPELLATE AUTHORITY HAS BASED HIS ORDER ON THE DECISION OF HO NBLE GUJARAT HIGH COURT AND HONBLE HIGH COURT HAS HELD THAT IF AN AS SESSEE FAILED TO PAY EMPLOYEES CONTRIBUTION TO PF AND ESI ACCOUNT WITHI N THE DUE DATE PROVIDED UNDER THOSE ACTS, THEN ASSESSEE WILL NOT B E ENTITLED FOR DEDUCTION OF SUCH EXPENDITURE. THE LD.CIT(A) HAS R IGHTLY PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH CO URT AND NO INTERFERENCE IS CALLED FOR IN THE FINDING OF THE LD .CIT(A). ACCORDINGLY THIS GROUND OF APPEAL IS REJECTED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH FEBRUARY - 2019 AT AHMEDABAD. SD/- SD/- ( AMARJIT SINGH ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 19/ 02 /2019 &.., .(../ T.C. NAIR, SR. PS ITA NO.1684/AHD /2018 SAGAR YESWANTRAI MEHTA VS. ACIT ASST.YEAR 2015-16 - 5 - !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-2, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..18.2.19 (DICTATION-PAD 8- PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..18.2.19 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.19.2.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 19.2.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER .. 10. DATE OF DESPATCH OF THE ORDER