Ahmedabad Cement Company, Ahmedabad V. DCIT, Circle-1(1)(2), Ahmedabad

ITA 2180/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7663 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 29-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AHMEDABAD CEMENT COMPANY PVT. LTD. 1, INSIDE ERANDA HALL, KAPASIA BAZAR, AHMEDABAD - 380002 PAN: AADCA7074J (APPELLANT) VS THE D CIT, CIRCLE - 1 (1)(2) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI SOMOGYAN PAL , SR. D . R. ASSESSEE BY: SHRI P.B. PARMAR, A.R. DATE OF HEARING : 02 - 04 - 2 019 DATE OF PRONOUNCEMENT : 04 - 04 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2014 - 15 , ARI SES FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 24 - 07 - 2 017 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 47 , 32 , 670/ - WAS FILED ON 28 TH SEP, 2014. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 18 TH SEP, 2015. REMAINING I T A NO . 2180 / A HD/20 17 A SS ESSMENT YEAR 2014 - 15 I.T.A NO. 2180 /AHD/20 17 A.Y. 2014 - 15 PAGE NO AHMEDABAD CEMENT COMPANY PVT. LTD. VS. D CIT 2 FACTS OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE GROUNDS OF APPEAL FILED BY THE ASSESSEE. GROUND NO. (DISALLOWANCE U/S. 14 A) 3. DURING THE COURSE OF ASSESSMENT , THE ASSESSING OFFICER HAS RECEIVED DIVIDEND OF RS. 39 , 485/ - WHICH WAS CLAIMED AS EXEMPT INCOME FROM TAXES. THE ASSESSING OFFICER HAS ASKED THE ASSES SEE WHY NOT THE PROVISION OF SEC TION 14A OF THE ACT R.W. RULE 8D OF THE IT RULES SHOULD NOT APPLIED IN ITS CASE. THE ASSESSEE HAS RESPONDED THAT NO DISALLOWANCE U/S. 14A SHOULD BE MADE SINCE THE INVESTMENT FROM WHICH EXEMPT INCOME EARNED WAS MADE OUT OF INTE RE ST FREE FUNDS. THE ASSESSI NG OFFICER HAS NOT ACCEPTED HE SUBMISSION OF THE ASSESSEE. HE WAS OF THE VIEW THAT ASSESSEE WAS UNABLE TO SUBSTANTIATE THE QUANTUM OF EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO EARNING EXEMPT INCOME. THEREFORE, THE ASSESSING OFFICER HAS APPLIED P ROVISION OF SECTION 14A R.W. RULE 8D AND COMPUTED AN AMOUNT OF RS. 2 , 51 , 129/ - AS THE EXPENDITURE INCURRED TOWARDS EARNING EXEMPT INCOME AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS STATED THAT ASSESSING OFFICER HAS DISALLOWED RS. 2 , 51 ,129/ - U/S. 14A R.W. RU LE 8D AS AGAINST T H E EXEMPT INCOME OF RS. 88 , 008/ - DURING THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT I NCOME OF R S. 88008/ - EARNED BY THE ASSESSEE. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE HAS RE FE RRED PAGE NO. 26 OF PAPER BOOK CONTAINING I.T.A NO. 2180 /AHD/20 17 A.Y. 2014 - 15 PAGE NO AHMEDABAD CEMENT COMPANY PVT. LTD. VS. D CIT 3 BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31 ST MARCH, 2014. HE H AS SUBMITTED THAT AS PER THE BALANCE SHEET , THE TOTAL INTEREST FREE FUND AVAILABLE WITH ASSESSE E WAS TO THE AMOUNT OF RS . 1,66, 0 7 ,251 / - AND THE ASSESSEE HAS ONLY MADE INVESTMENT TO THE AMOUNT OF RS. 38,46 , 706/ - . HE HAS FURTHER SUBMITTED THAT IN VIEW OF THE AFORESAID INFORMATION, IT IS CLEARLY ESTABLISHED THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE OWN FUND TO COVER THE INVESTM ENT IN THE FORMS OF SHARES . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS PLACED RELIANCE ON THE DECISION OF LD. C IT(A). 6 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY . WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE BALANCE SHEET OF THE ASSESSEE COMPANY AND IT IS NOTICED THAT ASSESSEE WAS HAVING INTEREST FREE FUND IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS TO THE AMOUNT OF RS. 1 , 66 , 07 , 251/ - AND IT HAS MADE TOTAL INVESTMENT TO THE AMOUNT OF RS. 38 , 46 , 706/ - FROM WHICH IT HAS EARNED EXEMPT INCOME I N THE FORM OF DIVIDEND TO THE AMOUNT OF R S. 88 , 008/ - . WE O BSERVED THAT THESE MATERIAL FACTS DEMONSTRATE THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE OWN FUND AS AGAINST THE INVESTMENT MADE IN THE SHARES, THEREFORE, AFTER FOLLOWING THE DECISION OF H ON BLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTIL I TIES AND POWER LTD. 331 ITR 340, W E DO NOT JUSTIFY THE DECISION OF LD. CIT(A). HOWEVER, WE OBSERVE THAT WITHOUT INCURRING ADMINISTRATIVE EXPENDITURE , IT IS NOT POSSIBLE TO EARN EXEMPT INCOME, THEREFORE , WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF ADMI NISTRATIVE EXPENDITURE COMPUTED BY THE ASSESSING OFFICER AS PER COMPUTATION AT PAGE 5 OF THE ASSESSMENT ORDER TO THE AMOUNT OF RS. 20 , 257/ - . ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. I.T.A NO. 2180 /AHD/20 17 A.Y. 2014 - 15 PAGE NO AHMEDABAD CEMENT COMPANY PVT. LTD. VS. D CIT 4 GROUND NO. 2 COMPUTATION OF BOOK PROFIT U /S. 115JB AFTER TAKING INTO DISALLOWANCE U/S . 14A OF THE ACT 7 . DURING THE COURSE OF ASSESSMENT WHILE CALCULATING BOOK PROFIT U/S. 115B OF THE ACT, THE ASSESSING OFFICER HAS ADDED DISALLOWANCE OF RS . 2 , 51 , 129 / - MADE U/S. 14A TO THE BOOK PROFIT. HOWEVER , IT IS NOTICED THAT THE ASSESSEE HAS NOT CONTESTED THIS ISSUE IN ITS APPEAL FILED BEFORE THE LD. CIT(A). WE HAVE ALSO GONE THROUGH THE FORM NO. 35 AND NOTICED TH AT ASSESSEE HAS NOT FILED ANY SUCH GROUND OF APPEAL. IN THE LIGHT OF THE ABOVE FACTS, WE FI ND THAT THIS GROUND OF APPEAL OF THE ASSESSEE IS NOT ARISEN FROM THE ORDER OF THE LD. CIT(A), THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE STANDS DISMISSED . 8 . IN THE RESULT, THE APPEAL OF THE ASSESSE IS PARTLY ALLOWED . ORDER PR ONOUNCE D IN THE OPEN C OURT ON 04 - 04 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 04 /04 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,