The DCIT, Circle-1, Ahmedabad V. Adani Mundra Port & Special Economic Zone Ltgd., Ahmedabad

ITA 2038/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9587 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER DCIT, CIR. 1, AHMEDABAD (APPELLANT) VS ADANI MUNDRA PORT & SPECIAL ECONOMIC ZONE LTD (FORMERLY KNOWN AS MUNDRA PORT & SPECIAL ECONOMIC ZONE LTD), 1 ST FLOOR, ADANI HOUSE, NR. MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD - 380009 PAN: AAACG7917K (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : S H RI N. R. SINGH , SR. D . R. ASSESSEE BY: S H RI S.N. SOPARKAR , A.R. DATE OF HEARING : 21 - 01 - 2 016 DATE OF PRONOUNCEMENT : 10 - 02 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL AND ASSESS EE S CROSS OBJECTION ARISE FROM ORDER OF THE CIT(A) - VIII, AHMEDABAD DATED 26 - 06 - 2012 IN I T A NO . 2038 & CO NO. 212 / A HD/20 12 A SSESSMENT YEAR 200 7 - 08 I .T.A NO.2038 /AHD/20 12 & CO NO. 212/AHD/2012 A.Y. 2007 - 08 PAGE NO DCIT VS. ADANI MUNDRA PORT & SPECIAL ECONOMIC ZONE LTD 2 APPEAL NO. CIT(A) - VIII/ACIT R.4/392/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) R.W .S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. BOTH PARTIES STATE AT THE OUTSET THAT THE INSTANT APPEAL AS WELL AS CROSS OBJECTION RAISE SOLE SUBSTANTIVE ISSUE OF CORRECTNESS OF SECTION 14A R.W. RULE 8D DISALLOWANCE MADE BY THE ASSESSING OFF ICER BY COMPUTING PROPORTIONATE INTEREST DISALLOWANCE OF RS. 2,57,84,951/ - ALONG WITH ADMINISTRATIVE EXPENDITU RE COMPUTED OF RS. 50,45,150/ - . THE Y STATE THAT THE CIT(A) HAS RESTRICTED THE SAME TO THE TUNE OF RS. 8 LACS UNDER THE LATTER HEAD OF ADMINISTRAT IVE EXPENDITURE ONLY. THIS LEAVES BOTH THE PARTIES AGGRIEVED. 3. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSING OFFICER COMPLETED A RE - ASSESSMENT IN ASSESSEE S CASE COMPUTING THE ABOVE STATED DISALLOWANCE IN RESPECT OF ASSESSEE S NIL EXEMPT INCOME FROM DIVIDEND AND IN VIEW OF THE FACT THAT IT HAD CLAIMED INTEREST EXPENSES OF RS. 67,92,10,000/ - . THIS MADE THE ASSESSING OFFICER TO INVOKE RULE 8D. HE OBSERVED IN HIS ORDER DATED 27 - 12 - 2011 THAT TRIBUNAL S SPECIAL BENCH DECISION IN CIT VS. M/S. CHEM INVEST LTD HAS ALREADY HELD THAT THE IMPUGNED DISALLOWANCE C OULD BE MADE EVEN IN CASE NO EXEMPT INCOME IS EARNED OR RECEIVED. HE WENT ON TO DISALLOW PROPORTIONATE AND ADMINISTRATIVE EXPENDITURE (SUPRA). I .T.A NO.2038 /AHD/20 12 & CO NO. 212/AHD/2012 A.Y. 2007 - 08 PAGE NO DCIT VS. ADANI MUNDRA PORT & SPECIAL ECONOMIC ZONE LTD 3 4. THE ASSESSEE PREFERRED APPEAL. THE CIT( A) HOLDS IN PRINCIPLE THAT RULE 8D APPLIES ONLY FROM AY 2008 - 09 AS HELD IN CASE LAW GODREJ AND BOYCE MFG COM PANY LTD VS. DCIT 234 CTR 01 (BO M). HE THEREAFTER PROCEED ED TO COMPUTE ADMINISTRATIVE EXPENDITURE ON ADHOC BASIS OF RS. 8 LACS ONLY THEREBY DELETIN G REST OF THE DISALLOWANCE AMOUNTS. 5. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO RIVAL CONTENTIONS. THERE CAN HAR D LY BE ANY DISP UTE THAT RULE 8D APPLIES FROM AY 2008 - 09 AND NOT IN THE IMPUGNED ASSESSMENT YEAR 2007 - 08. WE FIND NO FORCE IN REVENUE S COR RESPONDING ARGUMENT. THE ASSESSEE AT THIS STAGE INVITES OUR ATTENTION TO HON BLE JURISDICTIONAL HIGH COURT DECISION (2015) 372 ITR 97 CIT VS. CORRTECH ENERGY PVT . L TD HOLDING THAT SECTION 14A R.W. RULE 8D DISALLOWANCE IS NOT SUSTAINABLE IN CASE AN A SSESSE E DOES NOT CLAIM ANY EXEMP T INCOME. WE REITERATE THAT THERE IS NO EXEMPT INCOME DECLARED IN THE INSTANT CASE. THE REVENUE IS UNABLE TO REBUT THIS FACTUAL POSITION. WE FOLLOW TH IS JUDICIAL PRECEDENT AND HOLD THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN INVOKING THE IMPUGNED SECTION 14A DISALLOWANCE IN THE INSTANT CASE . THE REVENUE S APPEAL IS DISMISSED. ASSESSEE S CROSS OBJECTION CHALLENGING ADMINISTRATIVE EXPENDITURE DISALLOWANCE OF RS. 8 LACS AND CORRESPONDING PLEADING SUCCEED. REST OF THE SUBSTANTIV E GROUNDS THEREIN HAVE BEEN RENDERED INF R U CTUOUS. I .T.A NO.2038 /AHD/20 12 & CO NO. 212/AHD/2012 A.Y. 2007 - 08 PAGE NO DCIT VS. ADANI MUNDRA PORT & SPECIAL ECONOMIC ZONE LTD 4 6. REVENUE S APPEAL ITA 2038/AHD/2012 IS DISMISSED. ASSESSEE S CROSS OBJECTION 212/AHD/2012 IS PARTLY ALLOWED TO THE EXTENT INDICATED HEREINABOVE. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 02 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 10 /02 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CI T 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,