A.P. State Agro Industries Development Corporation Limited, Hyderabad V. Dy. Commissioner of income Tax, Circle-1(1), Hyderabad

ITA 1708/HYD/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9032 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Earning of tax free income; Revised return
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1708/HYD/2013 ASSESSMENT YEAR 2009-2010 M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., HYDERABAD. PAN AABCA7378R VS. DCIT, CIRCLE 1(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 11.12.2014 DATE OF PRONOUNCEMENT : 02.01.2015 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL IS AGAINST THE ORDER OF LD. CIT(A)-II , HYDERABAD DATED 24.09.2013 FOR A.Y. 2009-2010. 2. BRIEFLY STATED, ASSESSEE IS A PUBLIC SECTOR UNDERTAKING OF THE GOVERNMENT OF ANDHRA PRADESH IN BUSINESS OF TRADING IN AGRICULTURAL IMPLEMENTS, FERTILIZERS AND DEVELOPMENT ACTIVITIES. ASSESSEE FILED ORIGINAL RET URN AND REVISED RETURN AND ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) DETERMINING THE INCOME AT RS.12,66,29,761 MA KING SEVERAL ADDITIONS. ASSESSEE PREFERRED APPEALS BEFOR E THE LD. CIT(A) AND LD. CIT(A) DISPOSED OF THE APPEAL BY CON FIRMING THE ADDITIONS AND GIVING DIRECTIONS ON SOME ISSUES. 2 ITA.NO.1708/HYD/2013 M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., HYDERABAD. 3. ASSESSEE IS AGGRIEVED ON THREE ISSUES AND RAISE D FIVE GROUNDS OUT OF WHICH, GROUND NOS. 1 AND 3 ARE GENERAL IN NATURE. 4. WE HAVE HEARD THE LD. COUNSEL AND LEARNED D.R. 5. GROUND NO.2 PERTAINING TO THE CLAIM OF RS.1,51,36,282 BEING AMOUNT PAID TOWARDS LEAVE ENCA SHMENT FUND. ASSESSEE STATED BEFORE THE LD. CIT(A) THAT TH IS AMOUNT HAS BEEN PAID TOWARDS GROUP LEAVE ENCASHMENT FUND A ND HAS NOT CLAIMED IN THE P & L ACCOUNT DUE TO OMISSION. S INCE THE AMOUNT WAS NOT CLAIMED IN THE ORIGINAL RETURN AND I SSUE IS NOT EXAMINED BY A.O., LD. CIT(A) DIRECTED TO VERIFY THE ALLOWABILITY OF THIS AMOUNT KEEPING IN VIEW THE PROVISIONS OF SE CTION 43B. ASSESSEE HAS RAISED THIS GROUND FOR TECHNICAL REASO NS THAT THE MATTER SHOULD BE EXAMINED BY THE A.O. AFRESH AND LD . CIT(A) MAY NOT HAVE POWER TO REMIT THE ISSUE TO A.O. 5.1. SINCE, REVENUE HAS NOT COME IN APPEAL ON THE DIRECTION OF LD. CIT(A), WE DO NOT FIND ANY REASON TO ADJUDICATE ON ASSESSEES GROUND. HOWEVER, WE REITERATE THAT TH E A.O. SHOULD EXAMINE THE ALLOWABILITY OF THIS AMOUNT KEEP ING IN VIEW THE PROVISIONS OF THE ACT AS DIRECTED BY LD. CIT(A) . GROUND NO.2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . 6. GROUND NO.3 PERTAIN TO AN AMOUNT OF RS.6,17,471 DISALLOWED BY A.O. OUT OF THE CLAIM OF PRIOR PERIOD EXPENSES. A.O. VIDE PARA 5 HAS DISCUSSED THE PRIOR PERIOD INC OME AND EXPENDITURE AND DISALLOWED AN AMOUNT OF RS.17,67,12 3 CLAIMED TOWARDS WRITE-OFF ADVANCE AND AN AMOUNT OF RS.11,32,934 DEBITED TOWARDS SERVICE CHARGES ON THE ADVISE OF STATE GOVERNMENT. ON THE ISSUE OF SERVICE CHARGES, A.O. 3 ITA.NO.1708/HYD/2013 M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., HYDERABAD. DISALLOWED THAT ASSESSEE HAS NOT FURNISHED ANY EVID ENCE TO DECIDE CRYSTALLIZATION OF LIABILITY. WITH REFERENC E TO WRITE OFF OF RS.17,67,123 HE WAS OF THE OPINION THAT THE ADVANCE S WRITTEN OFF HAVE NOT BEEN OFFERED TO TAX IN EARLIER YEARS, THEREFORE, THE CONDITIONS LAID DOWN UNDER SECTION 36(I)(VII) ARE N OT FULFILLED. THUS, DISALLOWING THE TWO AMOUNTS OUT OF TOTAL PRIO R PERIOD EXPENDITURE OF RS.99,11,891, HE ARRIVED AT THE ALLO WABILITY OF PRIOR PERIOD EXPENDITURE AT RS.70,11,834. SINCE, AS SESSEE HAD PRIOR PERIOD INCOME OF RS.76,29,305 THE DIFFERENCE OF RS.6,17,471 WAS BROUGHT TO TAX, AS THIS ADJUSTMENT HAVE BEEN MADE IN THE APPROPRIATION AMOUNT AND ASSESSEE HAS N OT OFFERED INCOME. LD. CIT(A) IN THE BRIEF ORDER CONFI RMED THE ADDITION MADE BY A.O. BY STATING AS UNDER : 11.3. THE SUBMISSIONS MADE BY THE APPELLANT DO NOT CONVEY ANY MEANING. ON THE OTHER HAND, THE A.O. HAS CORRECTLY REDUCED PRIOR PERIOD EXPENSES OF RS.11,32 ,934/- ON THE GROUND THAT THIS LIABILITY IS NOT CRYSTALLIZ ED DURING THE RELEVANT PREVIOUS YEAR AND HE ALSO REDUCED AN AMOUNT OF RS.17,67,123/- AS ADVANCES WRITTEN OFF DU RING THE YEAR AS THE CORRESPONDING INCOME WAS NOT OFFERE D EITHER IN THE CURRENT YEAR OR IN THE EARLIER YEARS. THEREFORE, THIS AMOUNT WAS DISALLOWED U/S.36(1)(VII). SINCE TH E ACTION OF THE A.O. IS IN ACCORDANCE WITH THE LAW, T HE DISALLOWANCE MADE BY THE A.O. IS CONFIRMED. 7. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THIS ISSUE REQUIRES RE-EXAMINATION BY A.O. OUT OF THE TOTAL CLAIM OF PRIOR PERIOD EXPENDITURE OF RS.99,11,891, A.O. DISALLOWED TWO AMOUNTS, ONE WAS WRITTEN OFF AND OTHER WAS SERVICE CHARGES DEBITED ON THE AD VISE OF THE STATE GOVERNMENT. WHY THESE AMOUNTS CANNOT BE ALLOW ED HAS NOT BEEN DISCUSSED FULLY. IF THE AMOUNTS WERE WRITT EN OFF IN THE BOOKS OF ACCOUNTS, THE SAME ARE ALLOWABLE FOLLOWING THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN TH E CASE OF 4 ITA.NO.1708/HYD/2013 M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., HYDERABAD. TRF LIMITED VS. CIT 323 ITR 397 AND SO THE AMOUNT O F RS.17,67,123 IS AN ALLOWABLE BAD DEBT. IF IN CASE, THE AMOUNT OF RS.11,32,934 WAS DIRECTED TO BE PROVIDED BY THE STATE GOVERNMENT, THEN, THE AMOUNT MIGHT HAVE CRYSTALLIZE D DURING THE YEAR. SINCE THE A.O. AND LD. CIT(A) HAVE NOT CO NSIDERED THE FACTS OF THE CASE PROPERLY, WE ARE OF THE OPINION T HAT THIS REQUIRE RE-EXAMINATION BY A.O. ASSESSEE SHOULD BE G IVEN AN OPPORTUNITY TO EXPLAIN. ACCORDINGLY, THE ISSUE PERT AIN TO THIS ADDITION IS RESTORED TO THE FILE OF A.O. FOR RE-EXA MINATION ON FACTS AND LAW. GROUND NO.3 IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.4 PERTAIN TO THE ISSUE OF DISALLOWANC E OF AN AMOUNT OF RS.7,19,973 UNDER 14A OF THE INCOME TAX ACT. ASSESSING OFFICER NOTICED THAT ASSESSEE RECEIVED DI VIDEND INCOME OF RS.13,77,032 WHICH IS EXEMPT. ASSESSEE HA S INVESTED AN AMOUNT OF RS. 1 CRORE IN ANOTHER PUBLIC SECTOR UNDERTAKING BY NAME M/S. A.P. OIL SEEDS CORPORATION LTD. EVEN THOUGH ASSESSEE CLAIMED THAT NO OTHER ADMINIST RATIVE EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOM E, A.O. INVOKED PROVISIONS OF SECTION 14A AND RULE 8D TO DI SALLOW AMOUNT OF RS.71,973 AT 0.5% OF AVERAGE INVESTMENT M ADE IN THE INVESTMENTS. THUS, AO WORKED OUT DISALLOWANCE A T RS.71,973. LD. CIT(A) CONFIRMED THE DISALLOWANCE BY STATING AS UNDER VIDE PARA 11.4. : 11.4. THE OTHER ISSUE CONTESTED BY THE APPELLANT R EFERS TO DISALLOWANCE OF AN AMOUNT OF RS.71,973/- U/S.14A. T HE APPELLANT HAD INVESTED AN AMOUNT OF RS. 1 CRORE LON G BACK IN M/S. A.P. OIL SEEDS CORPORATION WHICH IS AGAIN A STATE GOVERNMENT UNDERTAKING, AND THE APPELLANT RECEIVED DIVIDEND OF RS.13,7,032/- ON INVESTMENTS MADE. SINC E THE DIVIDEND IS AN EXEMPTED INCOME, THE CORRESPONDING EXPENSES HAVE TO BE DISALLOWED U/S.14A. THE APPELLA NT 5 ITA.NO.1708/HYD/2013 M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., HYDERABAD. PLEADED THAT THE INVESTMENT WAS MADE LONG BACK OUT OF ITS OWN FUNDS AND NO EXPENSES WERE INCURRED. IT IS PERTINENT TO MENTION THAT THE A.O. DISALLOWED 0.5% OF AVERAGE INVESTMENTS UNDER RULE 8D(III). SINCE THE PROVISIONS OF RULE 8D, MORE PARTICULARLY THE THIRD LIMB OF RULE 8D IS MANDATORY IRRESPECTIVE OF ANY EXPENDITUR E IS ACTUALLY INCURRED OR NOT IN EARNING THE EXEMPT INCO ME, THE DISALLOWANCE MADE BY THE A.O. OF RS.71,973/- IS CONFIRMED. 9. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A). CONSIDERING THAT ASSESSEE HAS EARNED EXEMPT INCOME AND IN EARNING THAT INCOME, THERE COULD BE SOME ADMINISTRA TIVE EXPENDITURE. SINCE ASSESSEE HAS NOT FURNISHED ANY D ETAILS OF ACTUAL EXPENDITURE INCURRED, A.O. INVOKED THE RULES MADE THERE UNDER THE ACT AND DISALLOWED ONLY 0.5% OF THE AVERAGE INVESTMENTS AS PROVIDED UNDER RULE 8D(III). IN VIEW OF THE ABOVE FACTS, WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE GROUND. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02.01.2015. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 02 ND JANUARY, 2015. VBP/- COPY TO 1. M/S. A.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPN. LTD., 504, HERMITAGE OFFICE COMPLEX, HILL FORT ROAD, HYDE RABAD. 2. DCIT, CIRCLE 1(1), HYDERABAD. 3. CIT(A)-II, HYDERABAD. 4. CIT-I, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD.