Nirma Chemical Works Pvt. Ltd, Ahmedabad V. DCIT, Circle-3(1)(1), Ahmedabad

ITA 1857/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4758 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-04-2020
• Assessment Year: 2004-2005
• Appeal Filed On: 30-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: HEMANSHU C SHAH
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER NIRMA CHEMICAL WORKS PVT. LTD. NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD PAN: AAACN5353L (APPELLANT) VS THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1)(1), AHMEDABAD (RESPONDENT) REVENUE BY: SHRI L.P. JAIN, SR. D.R. ASSESSEE BY: SHRI HEMANSHU C. SHAH, A.R. DATE OF HEARING : 09-09-2020 DATE OF PRONOUNCEMENT : 07-10-2020 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2004-05, ARISES FRO M ORDER OF THE CIT(A)-9, AHMEDABAD DATED 03-07-2018, IN PROCEEDINGS UNDER SE CTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE AG AINST THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS 14,982, 931/- U/S. 14A R.W.R. 8D OF I.T. RULES. 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECL ARING INCOME OF RS. 4,53,83,570/- WAS FILED ON 1 ST NOV, 2004. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 30 TH NOV, ITA NO. 1857/AHD/2018 ASSESSMENT YEAR 2004-05 I.T.A NO. 1857/AHD/2018 A.Y. 2004-05 PAGE NO NIRMA CHEMICAL WORKS PVT. LTD. VS. DY. CIT 2 2006 AND DISALLOWANCE OF RS. 2,86,937/- U/S. 14A OF THE ACT OUT OF INTEREST EXPENSES AND RS. 37,37,962/- OUT OF ADMINISTRATIVE EXPENDITURE WAS MADE U/S. 14A OF THE ACT. THE LD. CIT(A) HAS CONFIRMED THIS ADDITION. HOWEVER, THE CO- ORDINATE BENCH OF THE ITAT VIDE ITA NO. 2281/AHD/20 08 HAS SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE I SSUE AFRESH AFTER VERIFICATION OF DETAILS AND REVISED WORKING OF INTEREST EXPENSES FU RNISHED BY THE ASSESSEE. THE ASSESSING OFFICER HAS PASSED ORDER U/S. 143(3) R.W. S. 254 OF THE ACT ON 15 TH DECEMBER, 2007 AND COMPUTED DISALLOWANCE U/S. 14A R .W. RULE 8D OF THE I.T. RULES TO THE AMOUNT OF RS. 14,82,931/-. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CITA HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS FILED PAPER BOOK COMPRISING COPIES OF BALANCE SHEET , PROFIT AND LOSS ACCOUNT AND ORDER OF THE ITAT PERTAINING TO THE ASSESSMENT YEAR 2012-13. THE LD. COUNSEL HAS CONTENDED THAT VIDE ITA NO. 750/AHD/2016, THE CO-OR DINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF ON SIMILAR ISSUE AN D IDENTICAL FACTS HAS HELD THAT ASSESSEE WAS HAVING SUBSTANTIAL INTEREST FREE FUND, SO, THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE U/S. 14A OUT OF INTEREST EXPEND ITURE AND JUSTIFIED THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENDITURE TO T HE EXPENDITURE OF RS. 6 LACS AFTER CONSIDERING THE NATURE OF EXPENDITURE AS ASSE SSEE HAS NOT SPECIFICALLY CLAIMED ANY EXPENDITURE FOR TAKING CARE OF INVESTMENT I.E. SALARY OF PARTICULAR EMPLOYEE ETC. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRE SENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE OF RS. 14,82,931/- FOR I.T.A NO. 1857/AHD/2018 A.Y. 2004-05 PAGE NO NIRMA CHEMICAL WORKS PVT. LTD. VS. DY. CIT 3 ADMINISTRATIVE EXPENSES U/S. 14A R.W. RULE 8D OF TH E I.T. RULES. DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT IT HAD SHARE CAPITAL AND RESERVES OF RS. 532.12 CRORES AS ON 31 ST MARCH, 2014 AS AGAINST INVESTMENT OF RS. 14.60 CRORES. THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE OUT OF INTEREST EXPENDITURE INC URRED ON EARNING EXEMPT INCOME. HOWEVER, IN RESPECT OF DISALLOWANCE OF ADM INISTRATIVE EXPENDITURE, WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINATE BENC H OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2012-13 WHEREIN THE DISALLOWANCE IN RESPECT OF ADMINISTRATIVE EXPENDITURE WAS RESTRICTE D TO RS. 6 LACS AFTER TAKING INTO CONSIDERATION THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE OF RS. 63,35,308/-. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH ON THE SIMILAR FACTS AND IDENTICAL ISSUE, WE RESTRICT THE DISALLOWANCE O UT OF ADMINISTRATIVE EXPENSES TO RS. 7 LACS AS ASSSESSE HAS EARNED DIVIDEND INCOME O F RS. 77,60,108/- AS AGAINST DIVIDEND INCOME OF RS. 63,35,308/- EARNED IN A.Y. 2 012-13. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 07-10-2020 SD/- SD/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 07/10/2020 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO. 1857/AHD/2018 A.Y. 2004-05 PAGE NO NIRMA CHEMICAL WORKS PVT. LTD. VS. DY. CIT 4 BY ORDER/ , / ,