DCIT, Ludhiana V. M/s Rico Auto Industries Limited, Ludhiana

ITA 203/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2082 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K GUPTA
• Assessee Lawyers: G S PHANI KISHORE
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! . .., # $, %& BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ./ ITA NO.203/CHD/2017 / ASSESSMENT YEAR : 2012-13 THE DCIT, CIRCLE-1, LUDHIANA M/S RICO AUTO INDUSTRIES LIMITED, B-26, FOCAL POINT, LUDHIANA ./PAN NO: AAACR8724R / APPELLANT /RESPONDENT C.O.NO. 23/CHD/2017 ( IN ./ ITA NO.203/CHD/2017) / ASSESSMENT YEAR : 2012-13 M/S RICO AUTO INDUSTRIES LIMITED, B-26, FOCAL POINT, LUDHIANA THE DCIT, CIRCLE-1, LUDHIANA ./PAN NO: AAACR8724R / APPELLANT /RESPONDENT ! ' /ASSESSEE BY : SHRI G.S. PHANI KISHORE, CIT # ! ' / REVENUE BY : SH. V.K.GUPTA $ % ! & /DATE OF HEARING : 05.11. 2018 '()* ! & / DATE OF PRONOUNCEMENT : 05.11. 2018 %'/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT IS THE APPEAL BY THE REVENUE AND CORRE SPONDING CROSS OBJECTIONS (C.O.) BY THE ASSESSEE AGAINST ORDER DAT ED 25.11.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. ITA NO. -203/CHD/2017 & C.O. 23/CHD/2017 M/S RICO AUTO INDUSTRIES , LUDHIANA 2 ITA NO. 203/CHD/2017 REVENUES APPEAL 2. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED , THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME-TAX ACT, 19 61 (IN SHORT 'THE ACT') IN RESPECT OF THE DISALLOWANCE OF EXPENDITURE RELAT ABLE TO THE INVESTMENTS MADE BY THE ASSESSEE FOR EARNING OF TAX EXEMPT INC OME AND FURTHER FOR DELETION OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 36(1)(III) OF THE ACT IN RESPECT OF INVESTMENT MADE FOR NON-BUSIN ESS PURPOSES USING BORROWED FUNDS. FURTHER, THE REVENUE IS ALSO AGGRIE VED BY THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE ON FOREI GN TRAVELLING EXPENSES. 3. SO FAR AS THE ISSUES RELATING TO DISALLOWANCE U/ S 14A OF THE ACT AND DISALLOWANCE U/S 36(1)(III) OF THE ACT ARE CONCERN ED, THE LD. CIT(A) AFTER EXAMINING THE ACCOUNT OF THE ASSESSEE HAS CATEGORIC ALLY HELD THAT THE ASSESSEE HAS BEEN POSSESSED SUFFICIENT OWN / INTERE ST FREE FUNDS TO MEET THE AFORESAID INVESTMENTS. THAT THE LOAN TAKEN BY THE ASSESSEE WERE UTILIZED FOR SPECIFIC PURPOSES. FURTHER THAT THE ASSESSEE HA D ALSO EARNED INTEREST INCOME FROM THE ADVANCES MADE. HE, THEREFORE, DIREC TED THE ASSESSING OFFICER TO CALCULATE THE INTEREST DISALLOWANCE UNDE R RULE 8D(2)(II) BY TAKING INTO CONSIDERATION THE NET INTEREST EXPENDIT URE INCURRED. FURTHER, FOR THE PURPOSE OF DISALLOWANCE UNDER RULE 8D(2)(II I), HE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE INVESTMENTS WHICH DID NOT YIELD ANY TAX EXEMPT INCOME. EVEN THE LD. COUNSEL HAS ALSO DEMONS TRATED THAT ASSESSEE WAS POSSESSED OF OWN SUFFICIENT FUNDS TO MEET THE I NVESTMENTS. THE ISSUE IS, THUS, SQUARELY COVERED BY THE DECISIONS OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. KASPSONS ASSOCIATES, 381 ITR 204 (P&H), LAKHANI MARKETING INC. 226 TAXMAN 45 (P&H) AND FURTHER OF THE ITA NO. -203/CHD/2017 & C.O. 23/CHD/2017 M/S RICO AUTO INDUSTRIES , LUDHIANA 3 HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD., 379 ITR 347 (SC). FURTHER, THE LD. COUNSEL FOR THE ASSESSEE HAS BROU GHT OUR ATTENTION TO THE DECISIONS OF THE ITAT IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 1093/CHD/2014 DATED 22.11.2 016 AND ALSO OF ASSESSMENT YEAR 2011-12 (ITA NO. 692/CHD/2016 ALONG WITH C.O.33/CHD/2016) AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISIONS ALSO. 3. IN VIEW OF THIS, WE DONT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE SAME IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 4. THE NEXT ISSUE IS RELATING TO THE DELETION OF DI SALLOWANCE MADE ON FOREIGN TRAVEL EXPENSES. THE PLEA OF THE ASSESSEE H AS BEEN THAT FOREIGN TRAVEL WAS DONE BY THE DIRECTOR OF THE COMPANY FOR BUSINESS PURPOSES. THE ABOVE PLEA OF THE ASSESSEE HAS NOT BEEN CATEGORICAL LY REBUTTED BY THE ASSESSING OFFICER, HOWEVER, HE HAD DISALLOWED 10% O F THE EXPENDITURE OBSERVING THAT THE PERSONAL ELEMENT COULD NOT BE RU LED OUT. HOWEVER, THE LD. CIT(A) AFTER CONSIDERING THE FACTS AND CIRCUMST ANCES OF THE CASE HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER IN THIS RESPECT. 5. AFTER HEARING THE LD. REPRESENTATIVE OF THE PART IES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS IS SUE ALSO. THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. C.O.NO.23/CHD/2017 NOW COMING TO THE CROSS OBJECTIONS OF THE ASSESSEE. ITA NO. -203/CHD/2017 & C.O. 23/CHD/2017 M/S RICO AUTO INDUSTRIES , LUDHIANA 4 6 . GROUND NO.1 : SO FAR AS THE GROUND NO.1 IS CONCERNED, THE ASSE SSEE HAS AGITATED THE ACTION OF THE CIT(A) IN RESTRICTI NG THE DISALLOWANCE U/S 14A OF THE ACT AT RS. 1,10,335/-. THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT HE DOES NOT PRESS THIS GROUND, HENCE, THIS GROUND NO.1 OF THE C .O. IS DISMISSED AS NOT PRESSED. 7. GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY T HE ACTION OF THE CIT(A) IN NOT ALLOWING THE EXPENDITU RE INCURRED ON ABANDONED PROJECT. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED THE RELIABLE EVIDENCES IN THIS RESPECT. HOWEVER, THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE HAS BEEN THAT THE LD. CIT(A) HAS NOT SPECIFICALLY ASKED FOR RELIABLE EVIDENCES ON THIS ISSUE. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH AND GIVE A FINDING ON MERITS IN ACCORDANCE WITH LAW. 8 . GROUND NO.3 : VIDE THIS GROUND OF THE CROSS OBJECTIONS, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTH ORITIES IN REJECTING THE CLAIM OF EXPENDITURE IN RELATION TO ELECTRICITY PE NALTY. THE CLAIM OF THE ASSESSEE IS THAT THE SAME IS PART OF THE BUSINESS E XPENDITURE; HOWEVER, THE LOWER AUTHORITIES HAVE NOT EXAMINED THIS ISSUE. IN VIEW OF THIS, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THIS ISSUE AFRESH AND GIVE FINDING ON MERITS IN ACCORDANCE WITH LAW. ITA NO. -203/CHD/2017 & C.O. 23/CHD/2017 M/S RICO AUTO INDUSTRIES , LUDHIANA 5 9. IN VIEW OF THE ABOVE OBSERVATIONS, APPEAL OF THE REVENUE IS HEREBY DISMISSED WHEREAS THE CROSS OBJECTIONS OF THE ASSES SEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5.11.2018. SD/- SD/- ( . . , # $ / B.R.R. KUMAR) %& / ACCOUNTANT MEMBER ( / SANJAY GARG ) / JUDICIAL MEMBER DATED : 5.11. 2018 .. (, ! -. /. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ 0 / CIT 4. $ 0 ( )/ THE CIT(A) 5. .12 3 , & 3 , 45627 / DR, ITAT, CHANDIGARH 6. 26 8% / GUARD FILE (, $ / BY ORDER, 9 # / ASSISTANT REGISTRAR