Andhra Pradesh Gas Power Corporation Limited, Hyderabad V. Dy. Commissioner of Income Tax, Circle-1(1), Hyderabad

ITA 1765/Hyd/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7467 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 03-01-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 26-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITHARAM
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO 1765 OF 2017 AP GAS POWER CORPORATION LTD HY DERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1765/HYD/2017 (ASSESSMENT YEAR: 2013-14) ANDHRA PRADESH GAS POWER CORPORATION LTD HYDERABAD PAN: AABCA9105C VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. SIVA KUMAR FOR REVENUE : SHRI M. SITHA RAM, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)-1, HYDERABAD, DATED 13.07. 2017. IN THIS ORDER, THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATIO N OF THE DISALLOWANCE MADE U/S 14A R.W.RULE 8D(2) AND ALSO A GAINST THE ADDITION OF THE PROVISION FOR GRATUITY WHILE COMPUT ING THE BOOK PROFIT U/S 115JB OF THE ACT AND THE ASSESSEE HAS RA ISED THE GROUNDS ACCORDINGLY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF GAS BASED POWER GENERATI ON, FILED ITS RETURN OF INCOME FOR THE A.Y 2013-14 ON 25.09.2013 DECLARING AN DATE OF HEARING : 03.01.2019 DATE OF PRONOUNCEMENT: 11.01.2019 ITA NO 1765 OF 2017 AP GAS POWER CORPORATION LTD HY DERABAD. PAGE 2 OF 4 INCOME OF RS.5,30,02,703 AFTER SET OFF OF BROUGHT F ORWARD LOSSES OF RS.19,98,91,729 UNDER THE NORMAL PROVISIONS AND RS.28,69,14,869 U/S 115JB OF THE ACT. DURING THE AS SESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME BUT HAS NOT MAD E ANY DISALLOWANCE U/S 14A(2) R.W.S RULE 8D OF THE ACT. H E CONSIDERED THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.2,68,150 TOWARDS INTERESTS. THEREFORE, INVOKING RULE 8D2(II), HE MAD E THE DISALLOWANCE OF RS.2,68,150. 3. FURTHER, HE ALSO MADE A DISALLOWANCE OF RS.3,62, 694 UNDER RULE 8D2(III) OF THE ACT. FURTHER, THE AO OBS ERVED THAT THE ASSESSEE HAS MADE A PROVISION FOR GRATUITY. TREATIN G IT AS A CONTINGENT PROVISION, HE ADDED A SUM OF RS.24,61,86 7 TO THE BOOK PROFIT U/S 115JB OF THE ACT. AGGRIEVED BY THESE DIS ALLOWANCES AND THE ADDITION, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE ASSESSEE HAS SUBMITTED A DETAILED WRITTEN SUBMISSIONS BEFORE US, WHILE THE LEARNED DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS EARNED DIV IDEND INCOME OF RS.66,67,095 FROM MUTUAL FUNDS BUT DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. ACCORDING TO THE L EARNED COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAD EXCESS FUNDS/RES ERVES FROM ITA NO 1765 OF 2017 AP GAS POWER CORPORATION LTD HY DERABAD. PAGE 3 OF 4 WHICH THE INVESTMENTS WERE MADE AND NO BORROWED FUN DS WERE USED FOR MAKING THE INVESTMENT AND THEREFORE, NO DI SALLOWANCE OF INTEREST CAN BE MADE. HE HAS GIVEN THE DETAILS OF T HE INTEREST WHICH HAS BEEN DISALLOWED BY THE AO AND THE FOLLOWI NG IS THE BREAK-UP OF THE SAME. I) INTEREST ON WORKING CAPITAL LOAN RS.2,20,361 II) INTEREST FOR LATE PAYMENT OF GAS - RS. 45,715 BILLS TO GAIL III) INTEREST FOR BELATED PAYMENT TO - RS. 2, 074 I.T. DEPTT. --------------------------------- TOTAL - RS.2,68,150 ======================= 6. WE FIND THAT THE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) IS ONLY OF INTEREST EXPENDITURE WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. I N THE CASE BEFORE US, THE INTEREST EXPENDITURE IS FAIRLY ATTRIBUTABLE TO INCOMES WHICH ARE NOT EXEMPT FROM TAX. THEREFORE, THE DISALLOWANC E UNDER RULE 8D(2)(II) IS NOT SUSTAINABLE. 7. AS REGARDS THE DISALLOWANCE UNDER RULE 8D(2)(III ), WE FIND THAT IT HAS BEEN HELD IN VARIOUS CASES BY THE COORDINATE BENCH OF THIS TRIBUNAL (TO WHICH BOTH OF US ARE SIG NATORIES) THAT THE AVERAGE VALUE OF THE INVESTMENTS WHICH HAVE YIE LDED THE EXEMPT INCOME ONLY SHOULD BE TAKEN FOR CALCULATING THE PERCENTAGE OF DISALLOWANCE. WE DIRECT THE AO ACCORD INGLY. THUS, GROUND OF APPEAL NO.2 IS PARTLY ALLOWED. 8. AS REGARDS GROUND NO.3, THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE H ON'BLE GUJARAT ITA NO 1765 OF 2017 AP GAS POWER CORPORATION LTD HY DERABAD. PAGE 4 OF 4 HIGH COURT IN THE CASE OF DY. CIT VS. INOX LEISURE LTD REPORTED IN 351 ITR 314 (GUJ.) WHEREIN BY FOLLOWING THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARATH EARTH MOVERS LTD V. CIT (2000) 245 ITR 428 (S.C). THE HON'BLE HIGH C OURT HAS HELD THAT THE PROVISION FOR GRATUITY IS NOT A CONTINGENT LIABILITY BECAUSE SUCH A PROVISION IS MADE ON ACTUARIAL QUANTIFICATIO N. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO DELETE THE ADDITION MADE TO THE BOOK PROFIT U/S 115JB OF THE ACT. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH JANUARY, 2019. VINODAN/SPS COPY TO: 1 ANDHRA PRADESH GAS POWER CORPN. LTD, NO.201, 2 ND FLOOR, MY HOME SAROVAR PLAZA, SECRETARIAT ROAD, HYDERABAD 500 063 2 DY.CIT, CIRCLE 1(1) HYDERABAD 3 CIT (A)-1 HYDERABAD 4 PR. CIT 1 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER