DCIT, Ludhiana V. M/s Loil Health Foods Ltd., Chandigarh

ITA 185/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5023 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 185/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, VS. M/S LOIL HEALTH FOODS LTD., CENTRAL CIRCLE III, CHANDIGARH LUDHIANA PAN NO. AAACL8432C (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MITTAL RESPONDENT BY : SH. SUDHIR SEHGAL DATE OF HEARING : 29.06.2017 DATE OF PRONOUNCEMENT : 13.07.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 26.09.2016 OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-2, [HEREINAFTER REFERRED TO AS CIT(A)], GURGAON. 2. THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CI T(A) IN DELETING THE DISALLOWANCE OF RS. 35,70,262/- MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') READ WITH RULE 8-D OF THE INCOME TAX RULE, 1962 (IN SHORT INCOME TAX RULES). 2 3. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT T HE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOTED THAT ASSESSEE H AD MADE INVESTMENT OF RS. 70,58,30,000/- AND HAD SHOWN RECEIPT OF TAX EXE MPT DIVIDEND OF RS. 11,21,000/- HOWEVER, NO DISALLOWANCE OF EXPENDITURE HAS BEEN OFFERED IN RELATION TO THE EARNING OF THE ABOVE EXEMPT INCOME. THE ASSESSING OFFICER APPLIED RULE 8-D OF THE INCOME TAX RULES AND MADE A DISALLOWANCE OF RS. 35,70,262/- U/S 14A OF THE INCOME-TAX ACT.. 4. BEING AGGRIEVED BY THE ABOVE DISALLOWANCE, THE A SSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 5. THE LD. CIT(A) RELYING UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 DELETE D THE ADDITIONS SO MADE BY THE ASSESSING OFFICER OBSERVING THAT NO BORROWE D FUNDS WERE USED BY THE ASSESSEE FOR MAKING THE INVESTMENTS AND THAT NO NEW INVESTMENTS WERE MADE DURING THE YEAR. BEING AGGRIEVED BY THE ABOVE ACTION OF THE CIT(A), IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE REV ENUE HAS COME IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. AR OF THE AS SESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) WHEREAS THE LD. DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. WE FIND THAT THE ASSESSEE DURING THE YEAR HAS EARNED SUBSTANTIAL DIVIDEND INCOME. THE ASSESSEE HA S RETURNED ITS INCOME AT NIL WHILE THE TOTAL EXPENSES DEBITED TO PROFIT A ND LOSS ACCOUNT ARE 3 RS. 25,005/- OUT OF WHICH RS. 57/- HAS BEEN DEBITED TOWARDS FINANCIAL COSTS AND RS. 24,948.32 TOWARDS OTHER EXPENSES. NO BUSINE SS OPERATION HAS BEEN CARRIED OUT BY THE ASSESSEE DURING THE YEAR. ALL TH E EXPENSES CLAIMED BY THE ASSESSEE THUS ARE RELATABLE TO THE EARNING OF T HE DIVIDEND INCOME IN QUESTION. IT IS SETTLED PROPOSITION OF LAW THAT THE DISALLOWANCE OF EXPENSES CANNOT BE MORE THAN THE ACTUAL EXPENSES CLAIMED BY THE ASSESSEE. IN VIEW OF THIS, THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER U/S 14A OF THE ACT IS RESTRICTED TO THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE IN PROFIT AND LOSS ACCOUNT. 7. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.07.2017 SD/- SD/- (DR. B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13.07.2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR