ASSISTANT COMMISSIONER OF INCOME TAX, KOTA V. M/S N R SWITCH - -RADIO, KOTA

ITA 185/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6305 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA
• Assessee Lawyers: SANJIV MATHUR CA DHK
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 185/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2013-14 THE ACIT CIRCLE 1 KOTA CUKE VS. M/S. N.R. SWITCH-N-RADIO SERVICE (P) LTD. E-17, RIICO ELECTRONICS COMPLEX I.P.I.A., KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCN 1300 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY:SMT. SEEMA MEENA, JCIT - DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI SANJIV MATHUR, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/07/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09/07/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE APPEAL FILED BY THE REVENUE EMANATES FROM TH E ORDER OF THE LD. CIT(A), KOTA DATED 16-11-2017 FOR THE ASSESSME NT YEAR 2013-14 RAISING THEREIN SOLITARY GROUND OF APPEAL AS UNDER . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 20,409/- MADE BY TREATING INTEREST INCOME AS INCOME FROM OTHER SOURCES. ITA NO.185/JP/2018 ACIT , CIRCLE 1, KOTA VS M/S. N.R. SWITCH-N-RADI O SERVICE (P) LTD. KOTA 2 2.1 BRIEF FACTS OF THE CASE ARE THAT THE AO ON PERU SAL OF THE BALANCE SHEET OF THE ASSESSEE DURING ASSESSMENT PROCEEDING NOTED THAT THE ASSESSEE IS HAVING INVESTMENT OF RS. 7,33,352/- ON SHARES. THE INCOME OF THIS INVESTMENT IS NOT INCLUDIBLE WHILE COMPUTING T HE TOTAL INCOME. THE AO NOTED THAT THE ASSESSEE HAS NOT DISALLOWED ANYT HING U/S 14A OF THE ACT. THE AO VIDE QUERY LETTER DATED 30-11-2015 ASKE D THE ASSESSEE TO FURNISH WORKING OF DISALLOWANCE AS PER PROVISIONS O F SECTION 14A R.W.R. 8D. THE ASSESSEE WAS FURTHER ASKED VIDE ORDER SHEET ENTRY DATED 10-03- 2016 TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S 14A R EAD WITH RULE 8D SHOULD NOT BE MADE. THE AO DURING ASSESSMENT PROC EEDING NOTED THAT THE ASSESSEE HAD NOT SUBMITTED ANYTHING IN THIS REG ARD. THE AO HAS GIVEN THE REFERENCE OF CBDT CIRCULAR NO. 5/2014 AND ALSO THE RELEVANT PROVISION OF SECTION 14A OF THE ACT IN THE ASSESSME NT ORDER. THE AO DISALLOWED AN AMOUNT OF RS. 20,409/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY OBSERVING AS UNDER:- 7.3 IN VIEW OF THE PROVISIONS OF SECTION 14A AND IN THE LIGHT OF BOARDS CIRCULAR NO. 5/2014 AND HAVING REGARD TO THE INCOME OF THE ASSESSEE, I AM NOT SATISFIED W ITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF ITS INCOME WHICH DOES NOT PART OF THE TOTAL INCOME UNDE R THIS ACT. THEREFORE, THE DISALLOWANCE U/S 14A IS CALCULA TED AS ITA NO.185/JP/2018 ACIT , CIRCLE 1, KOTA VS M/S. N.R. SWITCH-N-RADI O SERVICE (P) LTD. KOTA 3 PRESCRIBED UNDER RULE 8D (DETAILS MENTIONED AT PAG E 5) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2.2 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- BASED ON THE ABOVE LEGAL PRECEDENTS RELEVANT TO THE FACTS OF THIS CASE WHERE NO EXEMPT INCOME HAS B EEN EARNED BY THE APPELLANT TO WARRANT DISALLOWANCE AS PER THE PROVISIONS LAID DOWN U/S 14A R.W.R. 8D AND FURTHER SINCE THE AO HAD NOT BROUGHT OUT ANY NEXUS BETWEEN INTEREST B EARING FUNDS HAVING BEEN DIVERTED TOWARDS SUCH INVESTMENT OF RS. 7,33,352/-, THE ADDITION OF RS. 20,409/- IS ACCORDI NGLY DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS TR EATED AS ALLOWED. 2.3 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO AND ALSO MENTIONED THAT THE ISSUE OF DISALLOWANC E U/S 14A R.W.RULE 8D FALLS UNDER EXCEPTION AS MENTIONED IN PARA 8(B) OF THE BOARDS CIRCULAR NO. 21/2015. 2.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A) AND ALSO RELIED ON THE DECISION OF H ON'BLE ALLAHABD HIGH COURT IN THE CASE OF ADDL. CIT VS DHAMPUR SUGAR MIL LS PVT. LTD. 111 ITA NO.185/JP/2018 ACIT , CIRCLE 1, KOTA VS M/S. N.R. SWITCH-N-RADI O SERVICE (P) LTD. KOTA 4 DTR (2014) 350 (ALL.). THE HON'BLE COURT HELD THAT WHERE THE ENTIRE INTEREST EXPENDITURE WAS ATTRIBUTABLE TO BUSINESS I NCOME IN WHICH RESULTANT INCOME WAS ASSESSABLE TO TAX, DISALLOWANC E U/S 14A IS NOT WARRANTED IN FAVOUR OF ASSESSEE. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THIS GROUND IS TH AT THE AO DISALLOWED THE SUM OF RS. 20,409/- U/S 14A OF THE ACT READ WITH RU LE 8D HOLDING THAT THE INVESTMENT MADE BY THE ASSESSEE COMPANY IS NOT CORR ECT AS THE COMPANY HAS NOT EARNED ANY INCOME. IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE AO AMOUNTING TO RS. 20,409/- H OLDING THAT THE AO HAD NOT BROUGHT OUT ANY NEXUS BETWEEN INTEREST BEAR ING FUNDS HAVING BEEN DIVERTED TOWARDS SUCH INVESTMENT OF RS. 7,33,3 52/-. IT IS NOTED THAT THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE VAR IOUS CASE LAWS IN HIS ORDER WHICH FINDS SUPPORT IN FAVOUR OF THE ASSESSEE . THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF ADDL. CIT VS DHAMPUR SUGAR MILLS (P) LTD. FINDS SUPPORT IN FAVOUR OF THE ASSESSEE ON THE ISSUE IN QUESTION. IN VIEW OF THE FACTS, CIRCUMSTANCES OF TH E CASE AND THE CASE LAWS (SUPRA), WE CONCUR WITH FINDINGS OF THE LD. CIT(A) . THUS THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.185/JP/2018 ACIT , CIRCLE 1, KOTA VS M/S. N.R. SWITCH-N-RADI O SERVICE (P) LTD. KOTA 5 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 -07-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 /07/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE 1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S. N R SWITCH-N-RADIO SERVICE (P) LTD. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.185 /JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR