Unison Metal Limited, Ahmedabad V. The Dy. CIT, Circle-4(1)(2), Ahmedabad

ITA 170/AHD/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4310 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (THROUGH WEB-BASED VIDEO CONFERENCING PLATFORM) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NOS. 169 & 170/AHD/2019 ASSESSMENT YEARS : 2013-14 & 2014-15 UNISON METAL LIMITED, PLOT NO.5015, PHASE IV, RAMOL CHAR RASTA, GIDC, VATVA, AHMEDABAD-382445 PAN : AAACU 2489 A VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(2), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI R.R. MAKWANA, SR DR / DATE OF HEARING : 04/10/2021 / DATE OF PRONOUNCEMENT: 05/10/2021 / O R D E R PER RAJPAL YADAV, VICE PRESIDENT : THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANC E OF THE ASSESSEE AGAINST SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)- 8, AHMEDABAD (CIT(A) IN SHORT) DATED 03.12.2018 A ND 19.12.2018 PASSED FOR ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVE LY. 2. FIRST WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2013-14, I.E. ITA NO.169/AHD/2019. 3. IT IS PERTINENT TO OBSERVE THAT THESE APPEALS WE RE LISTED ON EARLIER OCCASION, I.E. ON 20 TH APRIL 2021. THE ASSESSEE FILED A LETTER REQUESTIN G FOR ADJOURNMENT ON THAT DATE AND THE HEARING WAS ACCORD INGLY ADJOURNED TO 17 TH JUNE 2021. ON 17 TH JUNE 2021, THE BENCH DID NOT FUNCTION AND THE HEAR ING ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 2 WAS ADJOURNED TO 15 TH JULY 2021 AND A FRESH NOTICE WAS ISSUED TO THE ASSESSEE. THE ASSESSEE AGAIN FILED AN ADJOURNMENT A PPLICATION AND THE HEARING WAS ADJOURNED TO 4 TH OCTOBER 2021. THIS DATE WAS DULY COMMUNICATED IN THE COURSE OF HEARING AND ALSO DISP LAYED IN THE CAUSE LIST. A FRESH NOTICE WAS ALSO ISSUED TO THE ASSESSEE IN T HIS REGARD; BUT, INSPITE OF THIS, NO ONE HAS COME PRESENT BEFORE THE TRIBUNAL O N BEHALF OF THE ASSESSEE; THEREFORE, WITH THE ASSISTANCE OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE, WE HAVE GONE THROUGH THE RECORD CAREFULLY AND PROCE ED TO DECIDE THE APPEAL ON MERIT. 4. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL. IN GROUND NO.1, THE ASSESSEE HAS PLEADED AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN PASSING EX-P ARTE ORDER OBSERVING THAT ON THE DATE OF HEARING ON 11.10.2018, THERE WAS NO RESPONSE BUT FOR THE AFORESAID HEARING THERE WAS TELEPHONIC CALL OF FIXING THE HEARING ON 24.10.2018 INSTEAD OF 11.10.2018 AND OUR REPRESENTA TIVE VISITED AND CONFIRMED THE SAME AND THEN ON 24.10.2018, A ADJOUR NMENT APPLICATION WAS SENT BUT THE EX-PARTE ORDER IS PASS ED ON 03.12.2018. 5. A PERUSAL OF THE ORDER WOULD REVEAL THAT, LIKE I N THE TRIBUNAL, THE ASSESSEE HAS SOUGHT ADJOURNMENT BEFORE THE LEARNED FIRST APPELLATE AUTHORITY AND DID NOT MAKE SUFFICIENT AND SINCERE E FFORTS TO PRESENT ITS CASE; AND, THEREFORE, LEARNED FIRST APPELLATE AUTHORITY H AS TO DECIDE THE APPEAL EX-PARTE. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARN ED CIT(A) ON THIS POINT; HENCE, THIS GROUND OF APPEAL IS REJECTED. 6. IN GROUND NOS. 2 & 3, THE ASSESSEE HAS PLEADED A S UNDER:- 2. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISAL LOWANCE OF ADMINISTRATIVE EXPENSES PERTAINING TO INVESTMENT MA DE IN PARTNERSHIP FIRM AS THE ASSESSEE HAVING BEEN TAXED ON INTEREST RECEIVED FROM SUCH PARTNERSHIP FIRM, THE PROVISION OF SECTION 14A IS N OT APPLICATION. ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 3 3. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF ADMINISTRATIVE EXPENSES ON INVESTMENT IN SHARES TOT ALING TO RS.32,000/-, AS THE ASSESSEE HAVING NOT RECEIVED AN Y DIVIDEND, IN VIEW OF DECISION OF GUJARAT HIGH COURT IN THE CASE OF CI T VS. CORRTECH ENERGY PVT LTD AND OTHER DECISIONS, THE PROVISION O F SECTION 14A DO NOT APPLY. 7. WITH THE ASSISTANCE OF LEARNED DEPARTMENTAL REPR ESENTATIVE, WE HAVE PERUSED THE ASSESSMENT ORDER. THE FINDINGS OF THE LEARNED ASSESSING OFFICER ON THIS POINT READ AS UNDER:- 6. DISALLOWANCE U/S 14A R.W.R. 8D 6.1 THE ASSESSEE WAS ASKED VIDE ORDER SHEET NOTING DATED 04.02.2016 TO PROVIDE FOR THE APPLICABILITY OF DISALLOWANCE U/S. 14A R.W.R. 8D. 6.2 THE REPLY OF THE ASSESSEE IN THIS REGARD VIDE S UBMISSION DATED 'NIL' IS KEPT ON RECORD. ON PERUSAL OF THE SAME, IT IS NOTED THAT ASSESSEE H AS NOT MADE ANY DISALLOWANCE W.R.T RULE 8D (III). MAKING MAINTENANC E AND DISPOSAL OF INVESTMENTS, ALWAYS ENTAIL CERTAIN ADMINISTRATIVE E XPENDITURE. THEREFORE DISALLOWANCE U/S. 14A IS REQUIRED TO BE MADE IN THI S CASE. RELIANCE IN THIS REGARD IS PLACED ON FOLLOWING JUDGMENTS: (1) CHEMINVEST LTD. VS. ITO, 124 TTT 577 (2009) (DE L.) (SB) (2) DAGA CAPITAL MANAGEMENT PVT LTD., (2008) 117 IT D169 (MUM) (SB) (3) RAJASTHAN STATE WAREHOUSING CORP. LTD. V/S. CIT , 242 ITR 450 (RAJ.) (4) MARUTI UDYOG LTD. VS. DEP. COM. (DELHI), 92 TTJ 987 (5) WIPRO INFORMATION TECHNOLOGY VS. DEP. CIT (BANG ) 88 TTJ 378 (6) DEP. COMM. OF I.T. VS. SHREE SYNTHETICS LTD. ( INDORE) 88 TTJ 717. (7) HARISH K. BHATT VS. ITO 85TTJ 872. IN VIEW OF THE ABOVE, DISALLOWANCE U/S. 14A T.W.R 8 D IS WORKED OUT AS UNDER:- (A) DIRECT EXPENSES - RS. NIL/- (B) DISALLOWANCES OUT OF INTEREST - RS. NIL/- (C) HALF PERCENT OF AVERAGE INVESTMENT - 0.5% OF 4, 71,38,527/-. = RS.2,35,692/- DISALLOWANCE U/S. 14A = A+B+C = RS.2,35,692/- ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 4 IN VIEW OF THE ABOVE AN AMOUNT OF RS.2,35,692/- IS ADDED TO THE INCOME OF THE ASSESSEE. [ADDITION OF RS.2,35,692] 8. THOUGH THIS ASPECT DOES NOT THROW MUCH LIGHT ON THE REASONING WHAT WEIGHED WITH THE ASSESSING OFFICER WHILE CALCULATIN G THE DISALLOWANCE FOR THE PURPOSE OF SECTION 14A; HOWEVER, A PERUSAL OF H IS RELIANCE UPON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF CHEMINVEST LTD VS. ITO, REPORTED IN 124 TTJ 577 (DEL) (SB) AS WELL AS HIS FINDINGS IN AY 2014-15, WE FIND THAT THE LEARNED ASSESSING OFFICER WAS FOR THE VIEW THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IS TO BE MADE BY KEEPING IN MIND THE REASONING THAT THE EXPENDITURE IN RELATION TO T HE EXEMPT INCOME IS REQUIRED TO BE DISALLOWED AND NOT TO EXAMINE WHETHE R THE EXPENDITURE INCURRED BY THE ASSESSEE HAS RESULTED INTO EXEMPT I NCOME OR TAXABLE INCOME. ACCORDING TO HIM, WHAT IS RELEVANT IS TO WORK OUT T HE EXPENDITURE IN RELATION TO THE EXEMPT INCOME AND NOT TO EXAMINE WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE HAS RESULTED INTO EXEMPT INCOME OR TAXABLE INCOME. FIRSTLY THE SPECIAL BENCH DECISION OF THE TRIBUNAL PUT INTO SERVICE BY THE ASSESSING OFFICER AT SERIAL NO. 1 AMONGST OTHER DECISIONS IN THE FINDINGS EXTRACTED SUPRA IS CONCERNED, THIS DECISION HAS BEEN REVERSED BY THE HONBLE DELHI HIGH COURT. SIMILARLY, IN THE GROUNDS OF APPEAL, TH E ASSESSEE HAS PLEADED THAT IT HAS NO EXEMPT INCOME; AND, IN VIEW OF THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CO RRTECH ENERGY PVT LTD, REPORTED IN 372 ITR 97, NO DISALLOWANCE SHOULD HAVE BEEN MADE. THE INVESTMENT IN THE SHARES HAS BEEN PLEADED BY THE AS SESSEE AT RS.32,000/- IN THIS YEAR. THOUGH IT IS NOT VERIFIABLE FROM THE FI NDINGS OF ANY OF THE AUTHORITIES BELOW, BUT, CONSIDERING THE PLEADINGS O F THE ASSESSEE THAT IT HAS NO TAXABLE INCOME, WE ALLOW THIS GROUND OF APPEAL A ND DELETE THE DISALLOWANCE. WE ARE DOING THIS BECAUSE IN ASSESSM ENT YEAR 2014-15, THE ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 5 ASSESSEE HAS EXEMPT INCOME OF RS.1,81,315/- WHEREAS THE ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE AT RS.2,21,640/-, I .E. MORE THAN THE EXEMPT INCOME. THIS ASPECT GIVES US GUIDANCE THAT THE ASS ESSING OFFICER HAS NOT CONSIDERED THE FIGURE; HE SIMPLY PROCEEDED WITH THE FORMULA OF RULE 8D I.E. 0.5% OF THE TOTAL INVESTMENT. HE DISALLOWED TAKIN G A LEAD FROM THERE. WE, THEREFORE, FIND FORCE IN THE GROUND OF APPEAL RAISE D BY THE ASSESSEE AND THE STATEMENT OF FACTS MADE THEREIN. THEREFORE, THE GR OUND NO.2 & 3 OF THE APPEAL ARE ALLOWED. THE DISALLOWANCE MADE UNDER SE CTION 14A OF THE ACT AND CONFIRMED BY THE LEARNED CIT(A) IN ASSESSMENT Y EAR 2013-14 IS THUS DELETED. 9. IN GROUND NO.4, THE ASSESSEE HAS PLEADED THAT TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF TRAVELLING EXPENSES AMOUNTING TO RS.1,34,066/-. 10. A PERUSAL OF THE IMPUGNED ORDER WOULD REVEAL TH AT THESE EXPENDITURES WERE INCURRED IN ASSESSMENT YEAR 2012- 13. IT WAS CRYSTALLIZED IN THAT YEAR. THEREFORE, ACCORDING TO THE REVENUE A UTHORITIES, IT SHOULD HAVE BEEN CLAIMED IN THE EARLIER YEAR. THE ASSESSEE HAS PLEADED THAT SINCE THERE IS A SAME RATE OF TAXES; THEREFORE, THIS EXPENDITURE S HOULD BE ALLOWED IN THIS YEAR ALSO. WE DO NOT FIND ANY FORCE IN THIS CONTE NTION OF THE ASSESSEE; BECAUSE IF THAT BE SO, THEN IT WILL BE AT THE SWEET WILL OF THE ASSESSEE TO DECLARE THE QUANTUM OF INCOME IN ANY ASSESSMENT YEA R. THE ASSESSEE MAY SHOW HIGHER INCOME IN A PARTICULAR YEAR AND LOWER I NCOME IN ANOTHER YEAR. IT HAS TO BE ADHERED TO THE ACCOUNTING PRINCIPLES A S CONTEMPLATED UNDER SECTION 145 OF THE INCOME-TAX ACT AND COMPUTE THE T RUE INCOME ASSESSABLE IN A PARTICULAR YEAR. THE REVENUE AUTHORITIES HAVE RIGHTLY DISALLOWED THIS ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 6 EXPENDITURE AND NO INTERFERENCE IS CALLED FOR. AC CORDINGLY, GROUND NO.4 IS REJECTED. 11. NOW WE TAKE UP ITA NO.170/AHD/2019 FOR ASSESSME NT YEAR 2014-15. 12. AS FAR AS THE DATE OF HEARING IS CONCERNED, BOT H THE APPEALS WERE LISTED TOGETHER BEFORE THE TRIBUNAL IN THE PAST AND HEARING WAS ADJOURNED ON THE REQUEST OF THE ASSESSEE. INSPITE OF SPECIFIC R EQUEST FOR 4 TH OCTOBER 2021, NO ONE HAS COME PRESENT BEFORE THE TRIBUNAL ON BEHA LF OF THE ASSESSEE. WE, THEREFORE, WITH THE ASSISTANCE OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE, PROCEED TO DECIDE THE APPEAL EX-PARTE QUA THE ASSESSEE. 13. AS FAR AS GROUND NO.1 IS CONCERNED, THE ASSESSE E HAS CHALLENGED THE EX-PARTE PROCEEDINGS TAKEN BY THE LEARNED FIRST APPELLATE AU THORITY. AFTER GOING THROUGH THE RECORDS, WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE LEARNED FIRST APPELLATE AUTHORITY. GROUND NO.1 IS , THEREFORE, REJECTED. 14. IN GROUND NOS. 2 & 3, THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME-TAX ACT. IN T HIS YEAR, WE FIND THAT THE ASSESSEE HAS CLAIMED TAX-FREE INCOME OF RS.1,81 ,315/-. THE ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE AT RS.2,21, 640/- WITH THE HELP OF FORMULA PROVIDED IN RULE 8D. THE ASSESSING OFFICER HAS WORKED OUT ONLY ADMINISTRATIVE EXPENSES @ HALF PERCENTAGE OF AVERAG E INVESTMENT. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DISALLOWANCE IN ANY CASE CANNOT EXCEED THE EXEMPT INCOME IN ITSELF. THE EXPENDITURE IS TO BE DISALLOWED RELATABLE TO EA RNING OF EXEMPT INCOME. SO, IT CANNOT BE ASSUMED THAT RS.2,21,640/- COULD B E INCURRED FOR EARNING TAX-FREE INCOME OF RS.1,81,315/-. THIS IS AN ERRON EOUS APPROACH AT THE END ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 7 OF THE ASSESSING OFFICER MORE PARTICULARLY IN VIE W OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. CORRTECH ENERGY PVT LTD, REPORTED IN [2015] 372 ITR 97 (GUJARAT). THE ASSESSEE HAS DISALLOWED RS.2,000/- ITSELF ON ADMINISTRATIVE EXPE NSES. TO OUR MIND, THAT IS ALSO ON THE LOWER SIDE LOOKING TO THE AVERAGE OF INVESTMENTS CONSIDERED BY THE ASSESSING OFFICER AT RS.4,39,28,004/-. CONS IDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THIS DIS ALLOWANCE TO RS.20,000/- KEEPING IN VIEW THE MEAGER EXEMPT INCOME OF RS.1,81 ,315/-. 15. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND OF RS.45,164/-. THE ASSESSEE HAS CONTENDED THAT THOUGH THIS AMOUNT WAS PAID AFTER DUE DATE PRO VIDED IN THE PF ACT, BUT IT WAS PAID PRIOR TO THE DUE DATE OF FILING OF THE RETURN. THIS EXPLANATION DID NOT MEET THE APPROVAL OF HONBLE HIGH COURT OF GUJA RAT AS REPORTED IN THE CASE OF CIT VS. GSRTC [2014] 366 ITR 170 (GUJ.) THE LEARNED FIRST APPELLATE AUTHORITY HAS FOLLOWED THIS DECISION AND, TO OUR MI ND, LEARNED FIRST APPELLATE AUTHORITY HAS NOT COMMITTED ANY ERROR IN UPHOLDING THE DISALLOWANCE. ACCORDINGLY, THIS GROUND OF APPEAL O F THE ASSESSEE IS REJECTED. 16. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 5 TH OCTOBER 2021 AT AHMEDABAD. SD/- SD/- (WASEEM AHMED) (R AJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT AHMEDABAD, DATED 05/10/2021 *BT ITA NOS. 169 & 170/AHD/2019 UNISON METAL LTD VS. DCIT AY : 2013-14 & 2014-15 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ) ( / THE CIT(A)- 5. , , /DR,ITAT, AHMEDABAD, 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) ITAT, AHMEDABAD 1. DATE OF DICTATION- 04.10.2021 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04.10.2021 OTHER MEMBER 04.10.2021. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 05.10.2021 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REG ISTRAR FOR SIGNATURE ON THE ORDER 8. DATE OF DESPATCH OF THE ORDER