Renuka Auto Components India Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 10, Pune

ITA 216/PUN/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8903 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BARVE
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलीय अधधकरण “ए” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI R.S.SYAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 216/PUN/2018 धनधाारण वषा / Assessment Year : 2012-13 Renuka Auto Components India Private Limited Plot No.563, Sector-25, PCNTDA, Nigdi, Pune-411 044 PAN : AADCR5691J .......अपीलाथी / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax, Circle-10, Pune. ......प्रत्यथी / Respondent Assessee by : Shri D.R. Barve Revenue by : Shri S.P Walimbe सुनवाई की तारीख / Date of Hearing : 09.11.2021 घोषणा की तारीख / Date of Pronouncement : 10.11.2021 आदेश / ORDER PER CHANDRA MOHAN GARG JM: This appeal filed by the assessee is directed against the order of the Ld. CIT(Appeals)-6, Pune dated 10.10.2017 for the assessment year 2012-13 as per the following grounds of appeal: “1) The learned CIT(A) erred in confirming the disallowance of Rs.75,500/- related to the provisions of section 14A read with Rule 8D. 2) The learned CIT(A) erred in ignoring the facts that all the investments by the assessee company were from own funds generated during the year. 2 ITA No. 216/PUN/2018 A.Y.2012-13 3) The learned CIT(A) has erred in ignoring the facts that the investment in unlisted group of company is a strategic investment, made out of business exigencies and not for earning dividend income. The investment remained unchanged till the year end and the appellant has not incurred any expenditure for maintaining the portfolio. 4) The learned CIT(A) has erred in ignoring the fact that during the year under consideration, the appellant company has not earned any income which was exempted from tax. 5) The learned CIT(A) has erred in ignoring that only those investments in respect of which dividend or exempt income has been earned can only be considered while computing the disallowance u/s.14A r.w.r.8D. 6) The learned CIT(A) erred in not following the ratio of the High Court/ ITAT decisions in the case of : a) CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 ( Bom.) b) CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom.) c) CIT Vs. Delite Enterprises, ITA No.110/2009 ( Bom.)(HC) 2. The brief facts in this case are that the assessee company is engaged in the business of manufacturing of Auto parts, CED coating, powder coating, stickers, Tapes of different kinds etc. The assessee had filed return of income on 28.09.2012 declaring total income at Rs.3,19,99,693/-. The assessment was completed u/s.143(3) of the Income Tax Act, 1961 ( in short „the Act‟) on 26.03.2015 at a total income of Rs.3,21,75,240/- and consequently, the Assessing Officer made following additions: i. Disallowance misc. expenses Rs.50,000/- ii. Disallowance of traveling, vehicle & telephone expenses Rs.50,000/- iii. Disallowance u/s.14A Rs.75,500/- 3. At the time of hearing, the Ld. Authorized Representative (AR) submitted that all the investments by the assessee company were from own funds generated during the year. He further submitted that the investment remained unchanged till the year end and the assessee has not incurred any expenditure for maintaining the portfolio and during the year under 3 ITA No. 216/PUN/2018 A.Y.2012-13 consideration, the assessee company has not earned any income which was exempted from tax. The Ld. AR also submitted that only those investments in respect of which dividend or exempt income has been earned can only be considered while computing the disallowance u/s.14A r.w.r 8D. In this regard, the Ld. AR has placed strong reliance on the following decisions : a) CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 ( Bom.) b) CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom.) c) CIT Vs. Delite Enterprises, ITA No.110/2009 ( Bom.)(HC) 4. The Ld. CIT-DR has supported the findings recorded by the Sub- ordinate Authorities on this count. 5. On careful consideration of the submissions above, we find that the Ld. CIT(Appeals) vide Para 4.1 observed that during the year, the assessee made an investment of Rs.1,50,00,000/- and thus, the total investment made was of Rs.1,51,10,000/- and there was no dividend received from these investments and the assessee claimed that no expenditure has been incurred towards these investments. Further, we observe that the assessee company has made the strategic investment out of its own funds and the same is evident from the audited financial statements of the company which are placed at Page 6 to 12 of the paper book for the year under consideration. Further, the audited cash flow statement of the assessee company for the year under consideration also proves that the investment made is out of cash generated from operating activities of the assessee company. 6. Further, we observe the Hon‟ble Jurisdictional High Court of Bombay in the case of CIT Vs. HDFC Bank Limited (supra.) following the decision in the case of Commissioner of Income Tax Vs. Reliance Utilities and Power 4 ITA No. 216/PUN/2018 A.Y.2012-13 Ltd. (supra.) has observed that “if the assessee’s capital and reserves were higher than the investment made in securities then it would be presumed that the investment was made out of interest free funds available with the assessee and needs no disallowance u/s.14A of the Act.” Further, the Hon‟ble Jurisdictional High Court in the case of CIT Vs. Delite Enterprises (supra.) has held that “no disallowance u/s.14A of the Act should be made for a year in absence of exempt income.” 7. In view of the above facts and circumstances, we are of the opinion that the intention of Section 14A of the Act is to disallow expenditure incurred in relation to income which does not forming part of total income (i.e. exempt income) and therefore, unless there is exempt income in a particular year, Section 14A should not be triggered for that year. Therefore, respectfully following the judicial precedents referred above, we are of the view that since the assessee company has not received any exempt income, hence, no disallowance u/s.14A of the Act is warranted. Accordingly, grounds raised by the assessee are allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced on 10 th day of November, 2021. Sd/- Sd/- R.S.SYAL CHANDRA MOHAN GARG VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 10 th November, 2021. SB 5 ITA No. 216/PUN/2018 A.Y.2012-13 आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(Appeals)-6, Pune. 4. The Pr. CIT-5, Pune. 5. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “ए” बेंच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गार्ा फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune. 6 ITA No. 216/PUN/2018 A.Y.2012-13 Date 1 Draft dictated on 09.11.2021 Sr.PS/PS 2 Draft placed before author 09.11.2021 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order