Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 4922 (ITAT-RAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2012-2013
Appeal Filed On
11-07-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER . / ITA NO. 173 /RPR/20 16 / ASSESSMENT YEAR : 2012 - 13 M/S. S B MULTIMEDIA PVT. LTD. FIRST FLOOR, AARSON MOTORS, LUDHIPARA CHOWK, R A IPUR (C.G.) - 492 001 PAN : AAJCS9860N ....... / APPELLANT / V/S. THE DEP UTY COMMISSIONER OF INCOME TAX - 1(2), RAIPUR (C.G.) / RESPONDENT A SSESSEE BY : SHRI ABHISHEK MALU REVENUE BY : SHRI SANJAY KUMAR / DATE OF HEARING : 1 6 .05 .2019 / DATE OF PRONOUNCEMENT : 17 .05 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 1, RAIPUR (C.G.) DATED 01.03.2016 FOR THE ASSESSMENT YEAR 2012 - 13 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO. 173 / RPR /20 16 A.Y. 2012 - 13 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS DISALLOWANCE OF RS.39,09,246/ - ON ACCOUNT OF INADMISSIBLE EXPENSES U/S.14A R.W.R.8D OF THE INCOME TAX RULES, 1962. 3. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR AND THEREFORE , NO DISALLOWANCE U/S.14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) IS PERMISSIBLE. THE LD. AR FURTHER SUBMITTED THAT WHATEVER INVESTMENT HAS BEEN MADE, HAS BEEN MADE THROUGH ITS OWN INTEREST FR EE FUNDS. THE LD. AR INVITES OUR ATTENTION TO THE BALANCE SHEET OF THE ASSESSEE - COMPANY WHEREIN THE TOTAL NO N - CURRENT INVESTMENTS MADE IS RS.136,051,474/ - SHOWN IN THE ASSETS. THAT THE ASSESSEE S SHARE CAPITAL IS OF RS.35,700,000/ - AND RESERVE AND SURPLUS IS RS.51,704,671/ - ALONG WITH LONG TERM BORROWINGS OF RS.167,971,8 14/ - . THE LD. AR OF THE ASSESSEE THEREFORE STATED THAT INVESTMENTS HAVE BEEN MADE FROM HIS OWN INTEREST FREE FUNDS. 3.1 THE LD. AR OF THE ASSESSEE H AS PLACED RELIANCE ON THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL, RAIPUR IN THE CASE OF SHREE NAKODA INDUSTRIES LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX IN ITA NO.81/RPR/2016 FOR THE ASSESSMENT YEAR 2012 - 13 WHEREIN THE ISSUE WAS AS UNDER : 3 ITA NO. 173 / RPR /20 16 A.Y. 2012 - 13 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON P ERUSI N G THE BALANCE SHEET THE ASSESSING OFFICE R NOTED THAT THE ASSESSEE HAD INV ESTED RS.4.41 CRORES IN THE SHARES OF THREE COMPANIES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PROVISIONS OF SECTION 14A SHOULD NOT BE INVOKED SINCE, THE INCOME FROM SHARES IS EXEMPT FROM TAX. APART FROM MAKING OTHER SUBMISSIONS ALSO SUBMITTED THAT ASS ESSEE HAS NOT ANY EXEMPT INCOME AND THEREFORE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. THE SUBMISSIONS OF ASSESSEE WERE NOT FOUND ACCEPTABLE TO ASSESSING OFFICER. ASSESSING OFFICER THEREAFTER WORKED OUT THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDIT URE AT RS.40,17,237/ - AND DISALLOWED THE SAME U/S. 14A R.W. RULE 8D OF THE ACT. THE CO - ORDINATE BENCH OR THE TRIBUNAL, RAIPUR REGARDING THAT ISSUE HAS HELD AND OBSERVED AS UNDE R : 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIA L ON REC ORD. THE ISSUE IN PRESENT GROUND WITH RESPECT TO DISALLOWANCE U/S. 14A OF THE ACT. IT IS AN UNDISPUTE D FACT THAT ON THE INVESTMENT MADE BY THE ASSESSEE, NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR. WE FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORTECH ENERGY P. LTD. (2015) 372 ITR 97 (GUJARAT) HAS HELD THAT WHEN THERE IS NO CLAIM FOR EXEMPT INCOME, SECTION 14A WOULD HAVE NO APPLICATION. WE ALSO FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA P. LTD. (2014) 90 CCH 81 (DELHI) HAS HELD THAT WHERE NO DIVIDEND IN COME WAS EARNE D BY A SSESSEE, DISALLOWANCE U/S. 14A IS NO T WARRANTED. FURTHER THE BALANCE SHEET OF ASSESSEE REVEALS THAT THE AVAILABILITY OF INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS IS MUCH MORE THAN THE INVESTMENT HELD BY THE ASSESSEE. ON THE ISSUE OF AVAILABILITY OF FREE FUNDS BEING MORE THAN INVESTMENT, WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC VS. DCIT REPORTED IN (2016) 383 ITR 529 (BOM) HAS OBSERVED AS UNDER : 1 5. IT IS CLEAR THAT FOR THE FIRST TIME IN THE CASE OF HDFC BANK LTD. (SUPRA) THAT THIS COURT TOOK A VIEW THAT THE PRESUMPTION WHICH HAS BEEN LAID DOWN IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) WITH REGARD TO INVESTMENT IN TAX FREE SECURITIES COMING OUT OF ASSESSEES OWN FUND S IN CASE THE SAME ARE IN EXCESS OF THE INVESTMENTS MADE IN THE SECURITIES (NOTWITHSTANDING THE FACT THAT THE ASSESSEE CONCERNED MAY ALSO HAVE TAKEN SOME FUNDS ON INTEREST) APPLIES, WHEN APPLYING 4 ITA NO. 173 / RPR /20 16 A.Y. 2012 - 13 SECTION 14A OF THE ACT. THUS, THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA) FOR THE FIRST TIME ON 23RD JULY, 2014 HAS SETTLED THE ISSUE BY HOLDING THAT THE TEST OF PRESUMPTION AS HELD BY THIS COURT IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) WHILE CONSIDERING SECTION 36(L)(III) OF THE ACT WOULD APPLY WHILE CONSIDERING THE APPLICATION OF SECTION 14A OF THE ACT. THE AFORESAID DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA) ON THE ABOVE ISSUE HAS ALSO BEEN ACCEPTED BY THE REVENUE INASMUCH AS EVEN THOUGH THEY HAVE FILED AN APPEAL TO THE SUPREME COURT AGAINST TH AT ORDER ON THE OTHER ISSUE THEREIN, VIZ., BROKEN PERIOD INTEREST, NO APPEAL HAS BEEN PREFERRED BY THE REVENUE ON THE ISSUE OF INVOKING THE PRINCIPLES LAID DOWN IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) IN ITS APPLICATION TO SECTION 14A OF THE ACT. THER EFORE, THE ISSUE WHICH AROSE FOR CONSIDERATION BEFORE THE TRIBUNAL HAD NOT BEEN DECIDED BY THIS COURT IN GODREJ AND BOYCE MANUFACTURING CO. LTD. (SUPRA). IT AROSE AND WAS SO DECIDED FOR THE FIRST TIME BY THIS COURT IN HDFC BANK LTD. (SUPRA). THUS, THERE IS NO CONFLICT AS SOUGHT TO BE MADE OUT BY THE IMPUGNED ORDER. THUS, IMPUGNED ORDER HAS PROCEEDED ON A FUNDAMENTALLY ERRONEOUS BASIS AS THE RATIO DECIDENDI OF THE ORDER IN GODREJ AND BOYCE MANUFACTURING CO. LTD. (SUPRA) HAD NOTHING TO DO WITH THE REST OF PRE SUMPTION CANVASSED BY THE PETITIONER BEFORE THE TRIBUNAL ON THE BASIS OF THE RATIO OF THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA). 16. AT THE HEARING MR. SURESH KUMAR, LEARNED COUNSEL FOR THE REVENUE URGED THAT ON THE FACTS OF THIS CASE NO FAULT C AN BE FOUND WITH THE ORDER OF THE TRIBUNAL. IT IS SUBMITTED THAT, THE PETITIONER WAS NOT ABLE TO ESTABLISH BEFORE THE ASSESSING OFFICER AND THE CIT(A) THAT THE AMOUNTS INVESTED IN THE INTEREST FREE SECURITIES CAME OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE PETITIONER. IN THAT VIEW OF THE MATTER, IT IS SUBMITTED BY HIM THAT THE ORDER OF THIS COURT IN HDFC BANK LTD. (SUPRA) WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. WE ARE UNABLE TO UNDERSTAND THE ABOVE SUBMISSION. THE ASSESSING OFFICER PASSED THE A SSESSMENT ORDER ON 22ND DECEMBER, 2010 UNDER SECTION 143(3) OF THE ACT. THE CIT(A) PASSED AN ORDER ON 21ST NOVEMBER, 2011 DISMISSING THE PETITIONERS APPEAL. ON BOTH THE DATES, WHEN THE ORDERS WERE PASSED BY THE ASSESSING OFFICER AND CIT(A), THE AUTHORITIE S DID NOT HAVE THE BENEFIT OF THE ORDER OF THIS COURT IN HDFC BANK LTD. (SUPRA) RENDERED ON 23RD JULY, 2014.'ONCE THE ISSUE IS SETTLED BY THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA), THERE IS NOW NO NEED FOR THE ASSESSEE TO ESTABLISH WITH EVIDENCE THAT THE AMOUNTS WHICH HAS BEEN INVESTED IN THE TAX FREE SECURITIES HAVE COME OUT OF INTEREST FREE FUNDS AVAILABLE WITH IT. THIS IS BECAUSE ONCE THE ASSESSEE IS POSSESSED OF INTEREST FREE FUNDS SUFFICIENT TO MAKE THE INVESTMENT IN TAX FREE SECURITIES, IT IS PRESUMED THAT IT HAS BEEN PAID FOR OUT OF THE INTEREST FREE FUNDS. CONSEQUENTLY, WE DO NOT FIND ANY MERIT IN THE ABOVE SUBMISSION MADE AT THE HEARING ON BEHALF OF THE REVENUE. 5 ITA NO. 173 / RPR /20 16 A.Y. 2012 - 13 7. BEFORE US REVENUE HAS NOT POINTED ANY CONTRARY BINDING DECISION NOR HAS DEMONSTRATED THAT THE AFORESAID DECISION HAS BEEN SET ASIDE OR OVERRULED BY HIGHER JUDICIAL AUTHORITY. CONSIDERING THE TOTALITY OF AFORESAID FACTS, WE ARE OF VIEW THAT IN THE PRESENT CASE NO DISALLOWANCE U/S. 14A US C AKED FOR. THUS, THE GROUNDS OF APPEAL OF ASSESSEE IS ALLOWED . 3.2 FURTHER, THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TASX VS. OIL INDUSTRIES DEVELOPMENT BOARD IN ITA NO.197/2018 WHER EIN DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE DISALLOWANCE U/S.14A OF THE ACT BY TAKING INTO ACCOUNT ONLY ASSESSEE S INVESTMENT PATTERNS. THE LD. CIT(A) CONFIRMED SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE INCOME TAX APPELLATE TRIBUNAL DELETED SUCH ADDITION BY HOLDING THAT IN ABSENCE OF EXEMPT INCOME, DISALLOWANCE U/S.14A OF THE ACT OF ANY AMOUNT WAS NOT PERMISSIBLE. AGAINST THE ORD ER OF THE INCOME TAX APPELLATE TRIBUNAL, THE REVENUE HAS TAKEN UP THE MATTER BEFORE THE HON BLE DELHI HIGH COURT AND THE SAME WAS DISMISSED STATING THAT NO SUBSTANTIAL QUESTION OF LAW HAS ARISEN FOR CONSIDERATION. THEREAFTER, THE REVENUE WENT BEFORE THE HON BLE SUPREME COURT OF INDIA ON THE ISSUE AND S PECIAL LEAVE PETITION NO.2755/2019 FILED BY THE REVENUE WAS DISMISSED . 4. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. THE LD. AR OF THE ASSESSEE HAS DEMONSTRATED THAT THE ASSESSEE HAS 6 ITA NO. 173 / RPR /20 16 A.Y. 2012 - 13 SUBSTANTIALLY USED INTEREST FREE FUNDS FOR MAKING I NVESTMENT AND THAT THERE WAS NO EXEMPT INCOME AND THEREFORE, DISALLOWANCE U/S.14A OF THE ACT IS NOT PERMISSIBLE. R ESPECTFULLY, FOLLOWING THE AFORESAID BINDING DECISIONS, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND ALLOW THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRO NOUNCED ON 17 TH DAY OF MAY , 201 9 . SD/ - SD/ - MITHA LAL MEENA PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / RAIPUR ; / DATED : 17 TH MAY, 2019. SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 1, RAIPUR (C.G.) 4. THE PR. CIT - 1, RAIPUR (C. G.) 5. , , , / DR, ITAT, RAIPUR BENCH, RAIPUR. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, RAIPUR.
