Moly Metal Pvt Ltd., Ahmedabad V. The DCIT, Circle-2(1)(2), Ahmedabad

ITA 176/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4682 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-07-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 18-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Principle of natural justice; Earning of tax free income; Revised return; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 176/AHD/2018 (ASSESSMENT YEAR: 2014-15) MOLY METAL PVT. LTD. AMAR ESTATE, OPP. SIVER COTTON MILLS, AMRAIWADI, AHMEDABAD V/S THE DCIT, CIRCLE-2(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACE 6380L APPELLANT BY : SHRI S. N. SOPARKAR, AR RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 18 -07-201 9 DATE OF PRONOUNCEMENT : 29-07-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-2, AHMEDABAD DATED 24.11.2017 PERTAINING TO A.Y. 2014-15 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 176/ AHD/2018 . A.Y. 2014-1 5 2 1.1 THE ORDER PASSED U/S.250 ON 24.11.2017 FOR A.Y.2014-15 BY CLT(A)-2, A'BAD UPHOLDING THE DISALLOWANCE OF RS.L6,70,177/- U/S 14 A-R.W.R. 8D(2) MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS WHILE CONFIRMING THE IMPUGNED DISALLOWANCE. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 16,70,177/- U/S 14A R.W.R. 8D. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF RS. 16,70,177/- U/S 14A R.W.R. 8D. 3.1 WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATI VE, THE IMPUGNED DISALLOWANCE AS WORKED OUT BY AO U/S 14A R.W.R. 8D AND CONFIRMED BY CIT(A) IS HIGHLY EXCESSIVE AND CALLS FOR SUBSTANTIAL REDUCTIO N. IT IS THEREFORE, PRAYED THAT THE DISALLOWANCE OF RS . 16,70,177/- UPHELD BY THE LD. CIT(A) MAY KINDLY BE DELETED. 2. [1] THE ERSTWHILE MOLY METAL PVT. LTD. WAS MERGED INTO ELECTRO FERRO ALLOYS PVT. LTD. VIDE GUJARAT HIGH COURT ORDER DATED 26.08 .2014, THEREAFTER, THE NAME OF ELECTRO FERRO ALLOYS PVT. LTD. WAS CHANGED TO MOLY METAL PVT. LTD. THE FINANCIAL STATEMENTS OF MOLY METAL PVT. LTD. (F ORMERLY KNOWN AS ELECTRO FERRO ALLOYS PVT. LTD.) FOR FY 2013-14 WERE PREPARE D AND PRESENTED INCORPORATING THE INCOME OF THE ERSTWHILE MOLY META L PVT. LTD. AND ELECTRO FERRO ALLOYS PVT. LTD. 3. THE ORIGINAL INCOME TAX RETURN FOR AY 2014-15 WAS E -FILED ON 23.11.2014 IN THE NAME OF MOLY METAL P/T. LTD. (FORMERLY KNOWN AS ELECTRO FERRO ALLOYS PVT. LTD.) DECLARING TOTAL INCOME OF RS. 1,66.39,094/-. THE REVISED RETURN OF ITA NO. 176/ AHD/2018 . A.Y. 2014-1 5 3 INCOME WAS FILED BY THE ASSESSEE COMPANY ON 10.09.2 015 DECLARING TOTAL INCOME OF RS. 1,66,39,094/-. 4. THE ASSESSMENT ORDER WAS MADE BY THE LD. DCIT, CIRC LE-2(L)(2), AHMEDABAD ON 29.11 .2016 U/S. 143(3) OF THE ACT FOR AY 2014-1 5, ASSESSING/ DETERMINING TOTAL INCOME AT RS.2,23,84,840/-AGAINST THE RETURNE D INCOME OF RS..L, 66,39,094/- BY MAKING DISALLOWANCE OF RS.57,45,744/ - U/S. 14A READ WITH RULE 8D OF THE ACT/ RULES. THE DISALLOWANCE U/S. 14A REA D WITH RULE 8D WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASS ESSEE FAILED TO PROVE THE NEXUS BETWEEN THE INVESTMENT MADE TO EARN EXEMPT DI VIDEND INCOME AND ITS IMMEDIATE SOURCE THEREOF. HE FURTHER STATED THAT TH E ASSESSEE ALSO FAILED TO PROVE THAT SUE1 1 INVESTMENT WAS MADE FROM ITS OWN FUNDS OR FROM THE FUNDS ON WHICH NO INTEREST PAYMENT IS MADE BY THE ASSESSE E. AND FINALLY MADE DISALLOWANCE OF RS. 57,45,744/- UNDER SECTION 14 RE AD WITH RULE 8D. 5. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER AND HEARD BOTH THE PARTIES. AT THE OUTSET, LD. A.R. FILED A CHART WHEREIN WORKING OF SECTION 14A READ WITH RULE 8D(2) HAVE BEEN GIVEN WHEREIN IT IS MENTIONED THAT TOTAL EXEMPT INCOME IS RS. 2164258/- . AND ASSESSEE HAS MADE SUO MOTU DISALLOWANCE OF RS. 189293/- AND AVERAGE INVESTMENT OF DIVIDEND FUND IS RS. 27988469/-. AND LD. A.R. FURTHER STATED THAT IT HAS INVESTED MONEY THRO UGH MUTUAL FUNDS. 7. IN VIEW OF THE ABOVE, WE SET ASIDE THIS MATTER TO T HE FILE OF THE A.O. TO RE- DETERMINE THE DISALLOWANCE UNDER RULE 8D(2)(III) HA VING REGARD TO INVESTMENTS WHICH HAVE GENERATED THE EXEMPT INCOME AND AFTER EX CLUSION OF INVESTMENTS ITA NO. 176/ AHD/2018 . A.Y. 2014-1 5 4 NOT GIVING RISE TO ANY EXEMPT INCOME IN THE LIGHT O F DECISION OF SPECIAL BENCH IN VIREET INVESTMENTS LTD. 165 ITD 27 (SB) AS WELL AS EXCLUSION OF INVESTMENTS GIVING RISE TO TAXABLE INCOME. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 29 - 07- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 29 /07/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD