Vijay Commr. Co. Op. Bank Ltd., RAJKOT-GUJARAT V. The Asstt. Commr. Income Tax, Circle-2(1), RAJKOT-GUJARAT

ITA 2/RJT/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6657 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN SR DR
• Assessee Lawyers: DM RINDANI
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.02/RJT/2017 ( / ASSESSMENT YEAR : 2010-11) VIJAY COMMERCIAL CO- OPERATIVE BANK LTD. VIJAY BHAVAN KANAK ROAD B/H. ST STAND RAJKOT / VS. THE ACIT CIRCLE-2(1) RAJKOT ./ ./ PAN/GIR NO. ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.M. RINDANI, AR ! / RESPONDENT BY : SHRI LALIT P. JAIN, SR.DR ' #$% ! & / DATE OF HEARING 08/02/2017 '( ! & / DATE OF PRONOUNCEMENT 29 /03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, RAJKOT [CIT(A) IN SHORT] DATED 07/10/2016 FOR THE ASSESSMENT YEAR (AY) 2010-11. ITA NO.02/RJT/2 017/ VIJAY COMMERCIAL CO-OP.BANK LTD. VS.ACIT ASST.YEAR 2010-11 - 2 - 2. THE SOLITARY ISSUE RAISED IN THE PRESENT APPEA L BY THE ASSESSEE IS TOWARDS DISALLOWANCE OF RS.1,52,756/- UNDER S.14A R EAD WITH RULE 8D OF THE INCOME TAX RULES, 1962. 3. BRIEFLY STATED, THE ASSESSEE IS A CO-OPERATIVE B ANK FUNCTIONING UNDER THE LICENCE FROM R.B.I. AND REGISTERED UNDER GUJARAT CO-OPERATIVE SOCIETIES ACT. THE ASSESSEE HAS INTER-ALIA MADE INVESTMENT IN UTI MUTUAL FUND OF RS.20 LAKHS ON WHICH ASSESSEE CLAIME D DIVIDEND INCOME OF RS.53,353/- AS EXEMPT UNDER S.10(38) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). FOR THE IM PUGNED ASSESSMENT YEAR 2010-11, THE AO RESORTED TO DISALLOWANCE UNDER S.14 A OF THE ACT READ WITH RULE 8D OF THE I.T.RULES BY APPLYING FORMULA A S PER RULE-8D OF THE IT RULES IN TERMS OF DIRECTIONS OF ITAT IN ITA NO.1 29/RJT/2014 ORDER DATED 11/04/2014. THE ORDER OF THE ASSESSING OFFIC ER (AO) WAS AGAIN CHALLENGED IN THE FIRST APPEAL BEFORE THE CIT(A) WI THOUT ANY RELIEF. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL IN THE SECOND ROUND OF PROCEEDI NGS. 5. WE HAVE HEARD RIVAL SUBMISSIONS. WITH THE ASSIS TANCE OF THE LD.AR OF THE ASSESSEE, WE NOTICE THAT THE ASSES SEE CLAIMS TO BE HOLDING ITA NO.02/RJT/2 017/ VIJAY COMMERCIAL CO-OP.BANK LTD. VS.ACIT ASST.YEAR 2010-11 - 3 - INTEREST-FREE FUNDS AMOUNTING TO RS.6.06 CRORES A T ITS DISPOSAL AS AGAINST IMPUGNED INVESTMENT IN UTI MUTUAL FUND AT RS.0.20 C RORES. IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZERS AND CHEMICALS LTD. (2013) 358 ITR 323 (GUJ.), THE ASSESSEE CANNOT BE CONSIDERED TO BE INCURRING ANY I NTEREST EXPENDITURE FOR MAKING THE INVESTMENT IN TAX-FREE DIVIDEND YIELDING INSTRUMENT IN VIEW OF SUFFICIENT INTEREST-FREE FUNDS AVAILABLE WITH IT IN EXCESS OF CORRESPONDING INVESTMENT. THE HONBLE GUJARAT HIGH COURT HAS ALSO HELD THAT THE VERY BASIS FOR EMPLOYING SECTION 14A OF THE ACT ON FACTUAL MATRIX IS LACKING WHEN ASSESSEES FUNDS WERE FOUND TO BE HIGHER THAN THE CORRESPONDING INVESTMENTS MADE YIELDING TAX-FREE DI VIDEND INCOME. THE FACT THAT SUFFICIENT INTEREST-FREE FUNDS WERE AVAILABLE WITH ASSESSEE FAR IN EXCESS OF THE CORRESPONDING INVESTMENT HAS N OT BEEN REBUTTED. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS. INDIA GELETINE CHEMICALS LTD. (2015) 376 ITR 553 (G UJ.) HAS ALSO DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN THE SIMI LAR CIRCUMSTANCES. CONSEQUENTLY, FOLLOWING THE RATIONALE OF THE AFORES AID DECISIONS QUOTED, WE FIND MERIT IN THE APPEAL OF THE ASSESSEE. THE D ISALLOWANCE OF RS,1,52,756/- MADE UNDER S.14A OF THE ACT TOWARDS P ROPORTIONATE DISALLOWANCE OF INTEREST EXPENSES IS THEREFORE DELE TED. ITA NO.02/RJT/2 017/ VIJAY COMMERCIAL CO-OP.BANK LTD. VS.ACIT ASST.YEAR 2010-11 - 4 - 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 29 /03/2 017 AT AHMEDABAD. SD/- SD/- ( RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 29/03/2017 ..#, $.,#../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. - & ' .& / CONCERNED CIT 4. ' .& ( ) / THE CIT(A)-2, RAJKOT 5. 2$34 ,&,# , , /DR,ITAT, RAJKOT 6. 4?@ A% / GUARD FILE. / BY ORDER, 2& ,& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT 1. DATE OF DICTATION .. 27.3.17 (DICTATION-PAD 8- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 28.3.17 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 29.3.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.3.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER