Aavas Infrastructure & Gruh Finance Ltd., Ahmedabad V. The DCIT, Circle-1(1), Ahmedabad

ITA 1732/AHD/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7887 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 31-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD (through web-based video conferencing platform) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT ITA No. 1732/Ahd/2018 Assessment Year : 2013-14 Aavas Infrastructure & Gruh Finance Ltd., 202, 2 nd Floor, City Pride Complex, Nr. Nalanda Hotel, Mithakhali Six Roads, Navrangpura, Ahmedabad-380009 PAN : AABCA 6373 J Vs. The Deputy Commissioner of Income-Tax, Circle -1 (1), Ahmedabad अपीलाथ牸 अपीलाथ牸अपीलाथ牸 अपीलाथ牸/ (Appellant) 灹瀄 य 灹瀄 य灹瀄 य 灹瀄 यथ牸 थ牸थ牸 थ牸/ (Respondent) Assessee by : Shri M.K. Patel, Advocate Revenue by : Shri R.R. Makwana, Sr DR सुनवाई क琉 तारीख सुनवाई क琉 तारीखसुनवाई क琉 तारीख सुनवाई क琉 तारीख/Date of Hearing : 24/11/2021 घोषणा क琉 तारीख /Date of Pronouncement: 24/11/2021 आदेश आदेशआदेश आदेश/O R D E R The assessee is in appeal before the Tribunal against the order of learned Commissioner of Income-Tax (Appeals)-11, Ahmedabad dated 07.05.2018 passed for Assessment Year 2013-14. 2. The solitary grievance of the assessee is that the leaned CIT(A) has erred in confirming the addition of Rs.1,08,724/- out of total addition of Rs.1,16,990/- made by the Assessing Officer with the aid of Section 14A of the Income-Tax Act, 1961 (“the Act” in short). 3. The Registry has pointed out that the appeal is time barred by one day. After due consideration of the explanation given by the learned Counsel for the assessee, I condone the delay of one day in filing the appeal. 4. The brief facts of the case are that the assessee has filed its return of income electronically on 28.09.2013 declaring total income at Rs.8,77,000/-. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee SMC-ITA No. 1732/Ahd/2018 Aavas Infrastructure & Gruh Finance Ltd Vs. DCIT For AY: 2013-14 2 has made an investment of Rs.2,33,98,098/- and shown dividend income of Rs.1,08,724/- which has been claimed as exempt from taxation. The learned Assessing Officer has worked out the disallowance of Rs.1,16,990/- with the help of Rule 8D. Basically, he has worked out this disallowance at 0.5% of the investment under the head “administrative expenses”. 5. On appeal, learned CIT(A) has restricted this disallowance equivalent to the exempt income. 6. At the time of hearing, learned Counsel for the assessee drew my attention to page No. 16 of the paper-book. He pointed out that all investments were made in the year 2008, except 2 investments, i.e. investment in the shares of Samay Builders Private Limited of Rs.39,50,000/- and in the shares of Samay Micro Tech Private Limited of Rs.10,03,000/-. Both these investments have been made during this year, but these investments are not resulted in any dividend income. The dividend income earned by the assessee is from the investments made in the year 2008 only. The assessee has not incurred any administrative expenditure for earning this exempt income; because the dividend income has directly been credited into its bank account. No manpower was ever allocated by the assessee to keep a track on these investments. Therefore, learned Counsel for the assessee submitted that, according to sub-section (2) of Section 14A of the Act, the Assessing Officer is required to record a specific finding as to why the accounts of the assessee are not acceptable demonstrating the Nil expenditure incurred by the assessee for earning tax free income. He submitted that the Assessing Officer has nowhere recorded such finding; rather straightway applied Rule 8D. 7. On the other hand, learned Departmental Representative relied upon the orders of the Revenue Authorities. SMC-ITA No. 1732/Ahd/2018 Aavas Infrastructure & Gruh Finance Ltd Vs. DCIT For AY: 2013-14 3 8. I have duly considered the rival contentions and gone through the record carefully. A perusal of page No.16 of the paper-book would demonstrate the details of investments and expenditure, if any, incurred by the assessee for earning tax free income. According to the assessee, it has neither incurred any expenditure nor debited anything in the P&L account. The Assessing Officer has to first demonstrate that this claim is not sustainable from the surrounding details. The Assessing Officer did not carry out this exercise. I could appreciate the case of the Assessing Officer if he has pointed out that, overall perusal of the P&F accounts, it is discernable that some expenses are allocable to earning of tax free income which has not been shown by the assessee in its accounts. The leaned CIT(A) has disallowed the total tax free income claimed by the assessee. It is not permissible for earning an income of Rs.1,08,724/-. How the equivalent expenses can be allocated? Therefore, looking into the circumstances of the case, I am of the view that even if one is required to estimate the expenditure required for earning such type of exempt income is concerned, that has to be worked out on the basis of the details available in the record. To my mind, hardly one or two persons would have been called upon to devote some energy to keep a track on the bank details and to collect the details. Therefore, the ends of justice would meet if I restrict the disallowance to the extent of Rs.15,000/- out of total disallowance confirmed by the learned CIT(A). Accordingly, the appeal of the assessee is partly allowed. 9. In the result, the appeal of the assessee is partly allowed. Order pronounced in the Court on 24 th November, 2021 at Ahmedabad. Sd/- (RAJPAL YADAV) VICE PRESIDENT Ahmedabad; Dated 24/11/2021 SMC-ITA No. 1732/Ahd/2018 Aavas Infrastructure & Gruh Finance Ltd Vs. DCIT For AY: 2013-14 4 *Bt आदेश क琉 灹ितिलिप अ灡ेिषत आदेश क琉 灹ितिलिप अ灡ेिषतआदेश क琉 灹ितिलिप अ灡ेिषत आदेश क琉 灹ितिलिप अ灡ेिषत/Copy of the Order forwarded to : 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴(अपील) / The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड榁 फाईल / Guard file. आ आआ आदेशानुसार देशानुसारदेशानुसार देशानुसार/BY ORDER, TRUE COPY उप उपउप उप/सहायक पंजीकार सहायक पंजीकारसहायक पंजीकार सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- .....24.11.2021.......... 2. Date on which the typed draft is placed before the Dictating Member ....24.11.2021..... Other member ......24.11.2021............. 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...24.11.2021........ 4. Date on which the fair order is placed before the Dictating Member for Pronouncement 24.11.2021... 5. Date on which the file goes to the Bench Clerk......24.11.2021............... 6. Date on which the file goes to the Head Clerk.......24.11.2021............................... 7. The date on which the file goes to the Assistant Registrar for signature on the order............ 8. Date of Despatch of the Order..................