Anand Metallics power Private Limited, Hyderabad V. Income Tax Officer, Ward-1(2), Hyderabad

ITA 206/Hyd/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6478 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 29-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Earning of tax free income
• Section: 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE S MT P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 206 /HYD/201 8 ASSESSMENT YEAR: 20 1 4 - 1 5 ANAND METALLICS AND POWER PVT. LTD., HYD ERABAD. PAN AAECA 6095 J VS. INCOME - TAX OFFICER, WARD 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI LAXMI NIWAS SHARMA REVENUE BY : SHRI RAJEEV BENJWAL DATE OF HEARING 2 5 / 0 7 /2018 DATE OF PRONOUNCEMENT 2 7 / 0 7 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1 5 / 11 / 201 7 OF CIT(A) 1 , HYDERABAD FOR AY 20 1 4 - 15. 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE COMPANY FILES ITS E - RETURN FOR THE AY 2014 - 15 ON 29/11/2014 ADMITTING TOTAL INCOME OF RS. 58,96,416/ - . AS THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS, STATUTORY NOTICES U/S 143(2) & 142(1) WERE ISSUED AND IN RESPONSE , THE ASSESSEE FURNISHED THE INFORMATION. THE AO COMPLETED THE ASSESSMENT U/S 143(3) DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 68,01,935/ - BY MAKING THE FOLLOWING DISALLOWANCES: 1. DISALLOWANCE OF PF & ESI FOR LATE REMITTANCE - RS. 1,37,622 2. DISALLOWANCE OF EXPENDITURE IN RELATION TO EXEMPT INCOME U/S 14A OF THE ACT. - RS.68,01,935 2 ITA NO. 206 /HYD/1 8 ANAND METALLICS AND POWER PVT. LTD., HYD. . 3. ON APPEAL BEFO RE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE ON ACCOUNT PF & ESI AND UPHELD THE DISALLOWANCE MADE U/S 14A OF THE ACT. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE AO NOTICED THAT THERE WERE HUGE BORROWINGS ON PART OF THE ASSESSEE DURING THE YEAR. FURTHER, THE COMPANY HAD PAID INTEREST DURING THE YEAR AMOUNTING TO RS. 2,01,26,068/ - . DURING THE YEAR, ASSESSEE CLAIMED AN AMOUNT OF RS. 2,42,60,249/ - AS FINANCE CHARGES WHICH INCLUDES INTEREST EXPENDITURE. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THEY HAD MADE INVESTMENT TOTALLING T O RS. 1,16,00,000/ - FROM ITS OWN FUNDS AND IT HAS NOT INVESTED OUT OF BORROWED FUNDS OR THE FUNDS ON WHICH INTEREST IS PAID FOR HOLDING THESE INVESTMENTS. FURTHER, IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT INCURRED ANY ADDITIONAL EXPENDITURE, HENCE, 14A I S NOT APPLICABLE. REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE AO MADE DISALLOWANCE OF EXPENDITURE U/S 14A AS PER RULE 8D AMOUNTING TO RS. 7,67,897/ - . ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. 6. LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE IS HAVING OWN FUNDS AMOUNTING TO RS. 4,44,48,585 IN THE FORM OF SHARE CAPITAL OF RS. 3,25,00,000/ - AND RESERVES AND SURPLUS OF RS. 1,19,48,585/ - AS ON 31/03/2010. THE COMPANY HAD INVESTED RS. 1,16,00,000/ - IN SHARES IN THE FY 2010 - 11, OUT OF ITS OWN FU NDS ONLY. HE SUBMITTED THAT NO FRESH INVESTMENTS MADE IN THE CURRENT AY. FURTHER, HE SUBMITTED THAT ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME DURING THIS YEAR. AS THERE IS NO EXEMPT INCOME, PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. 7. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A). 3 ITA NO. 206 /HYD/1 8 ANAND METALLICS AND POWER PVT. LTD., HYD. . 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A SETTLED POSITION OF LAW THAT THE PROVISIONS OF SECTION 14A CAN BE APPLIED TO QUANTIFY THE EXPENSES IN RELATION TO EX EMPT INCOME. SINCE THE EXEMPT INCOME IS NIL, SECTION 14A WILL NOT APPLY. THE RULE 8D CAN BE APPLIED ONLY WHEN THERE IS DIFFICULTY IN FINDING THE EXPENDITURE RELATING TO EXEMPT INCOME. THE PROVISIONS OF SECTION 14A AND RULE 8D WILL NOT APPLY TO THE PRESENT CASE. IT IS THE CONSISTENT VIEW OF THE HYDERABAD BENCHES. IN THE CASE OF ACIT VS. M/S MISHRA DHATU NIGAM LTD., (SUPRA), THE COORDINATE BENCH OF ITAT, HYDERABAD HAS HELD AS UNDER: 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIA LS ON RECORD. THOUGH, LD. DR RELYING UPON THE DECISION OF ITAT DELHI SPECIAL BENCH IN CASE OF CHEMINVEST LTD. VS. ITO (SUPRA), ATTEMPTED TO JUSTIFY THE DISALLOWANCE MADE U/S 14A, HOWEVER, ON CAREFUL ANALYSIS OF THE DECISIONS CITED BY ASSESSEE INCLUDING THE DECISION OF THE HONBLE P&H HIGH COURT IN CASE OF CIT VS. M/S LAKHANI MARKETING INC. IN ITA NO. 970 OF 2008 DATED 02/04/2014, WE FIND THAT THE PRINCIPLE LAID DOWN BY DIFFERENT HIGH COURTS ARE TO THE EFFECT THAT UNLESS ASSESSEE HAS EARNED EXEMPT INCOME IN A PARTICULAR FY, PROVISIONS OF SECTION 14A WILL NOT APPLY. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE DEPARTMENT. ACCORDINGLY, WE DISMISS THE SAME BY UPHOLDING THE ORDER OF LD. CIT(A) ON THIS ISSUE. IN VIEW OF THE ABOV E, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE DISALLOWANCE MADE U/S 14A. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH JULY , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 27 TH J ULY , 2018 KV 4 ITA NO. 206 /HYD/1 8 ANAND METALLICS AND POWER PVT. LTD., HYD. . C OPY TO: - 1) ANAND METALLICS AND POWER PVT. LTD., 5 - 9 - 208, ANAND COMPLEX, CHIRAGALI LANE, ABIDS, HYDERAB AD 500 001 ` 2) ITO, WARD 1(2), HYDERABAD. 3) CIT(A) 1 , HYDERABAD. 4) PR. CIT - 1 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE