M/s. Refoil Earth Pvt.Ltd., Baroda V. The ACIT., Circle-4, Baroda

ITA 2211/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94576 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL H TALATI
• Assessee Lawyers: A K
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER REFOIL EARTH PVT. LTD, 23, AMARDEEP APARTMENT, PASHABHAI PARK, GOTRI ROAD, BARODA - 390007 PAN: AAACR9881K (APPELLANT) VS ACIT, CIR - 4, BARODA (RESPONDENT) THE ACIT, CIR - 4, BARODA (APPELLANT) VS REFOIL EARTH PVT. LTD, 23, AMARDEEP APARTMENT, PASHABHAI PARK, GOTRI ROAD, BARODA - 390007 PAN: AAACR9881K (RESPONDENT) REVENUE BY : S H RI SUNIL H. TALATI , SR. D . R. ASSESSEE BY: S H RI A.K. PANDEY , A.R. DATE OF HEARING : 26 - 08 - 2 015 DATE OF PRONOUNCEMENT : 21 - 10 - 2 015 I T A NO . 2211 / A HD/20 11 A SSESSMENT YEAR 200 8 - 09 ITA NO. 2503 /AHD/20 11 ASSESSMENT YEAR 200 8 - 09 I.T.A NO S . 2211 & 2503 /AHD/20 11 A.Y. 2008 - 09 PAGE NO REFOIL EARTH PVT. LTD V S. ACIT 2 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THESE CROSS APPEALS FILED BY ASSESSEE AND REVENUE FOR A.Y. 200 8 - 09, ARISE FROM ORDER OF THE CIT(A) - III, BARODA DATED 06 - 07 - 2011 IN APPEAL NO . CAB/III - 147/ 10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. FIRST WE COME TO ASSESSEE S APPEAL ITA 2211/AHD/2011 CHALLENGING DISALLOWANCE OF RS. 2,91,313/ - U/S. 14A R.W. RULE 8D MADE BY BOTH THE LOWER AUTHORITIES. THIS ASSESSEE COMPANY MANUFACTURES FULLER S EARTH AND OXYCLO. IT FILED ITS ON 27 - 09 - 2008 ADMITTING INCOME OF RS. 48,33,615/ - . THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED ASSESSEE S DIVIDEND INCOME OF RS. 39,06,489/ - AS EXEMPT. IT HAD PAID INTEREST ON BORROWED FUNDS OF RS. 13,81,666/ - IN PROFIT AND LOSS ACCOUNT WITHOUT ALLOCATING ANY EXPENDITURE TOWARDS THE EXEMPT INCOME HEREINABOVE. THE ASSESSING OFFICER WAS OF THE VIEW IN ASSESSMENT ORDER DATED 13 - 12 - 2010 THAT THERE WAS NO EVIDENCE OF NON - DIVERSION OF INTEREST BE ARING FUNDS AND SOME OVER HEAD EXP ENDITURE OF TELEPHONE AND MANPOWER ETC IS EMBEDDED THEREIN. HE ACCORDINGLY COMPUTED SECTION 14A DISALLOWANCE UNDER RULE 8D(2)(II) OF RS. 2,29,741/ - AND THAT OF ADMINISTRATIVE EXPENDITURE @ 0.5% OF AVERAGE VALUE OF INVESTMENT UNDER RULE 8D(2)(III) COMING T O RS. 61,572/ - AS ADMINISTRATIVE EXPENDITURE. I.T.A NO S . 2211 & 2503 /AHD/20 11 A.Y. 2008 - 09 PAGE NO REFOIL EARTH PVT. LTD V S. ACIT 3 3. THE CIT(A) UPHOLDS THE ASSESSING OFFICER S ACTION. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE ASSESSEE FILES A PAPER BOOK. ITS PAGE 7 DEMONSTRATES SHARE CAPITAL, RESERVE AN D SURPLUS, PROFIT AND LOSSES AND TOTAL OWN FUNDS ALONG WITH THE SPECIFIED AMOUNTS IN QUESTIONS INVESTED IN THE RELEVANT SHARES ETC. THE RELEVANT FINANCIAL YEAR 2007 - 08 DEPICTS SHARE CAPITAL OF RS. 12,03,000/ - , RESERVE AND SURPLUS OF RS. 4,01,50,221/ - , PRO FITS OF RS. 94,29,531/ - , TOTAL OWN FUNDS OF RS. 4,13,53,221/ - AND INVESTMENTS OF RS. 1, 02,74,027/ - ; RESPECTIVELY . THE REVENUE FAILS TO REBUT THIS FACTUAL POSITION. WE ACCORDINGLY ARE OF THE VIEW THAT ASSESSEE S OWN FUNDS WITHOUT HAVING INTEREST OUTAGE AR E MUCH MORE THAN THOSE INVESTED IN TAX FREE INVESTMENT INSTRUMENTS. WE ARE OF THE OPINION AS PER CASE LAW OF 313 ITR 340 CIT VS. RELIANCE POWER AND UTILITIES LTD. (BOM) THAT A PRESUMPTION CAN SAFELY BE DRAWN OF DEPLOYMENT OF NON - INTEREST BEARING OWN FUNDS IN THE IMPUGNED INVESTMENTS. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. THE ASSESSEE S ARGUMENTS CHALLENGING DISALLOWANCE OF RS. 2,29,741/ - COMPUTED U/S. 14A R.W. RULE 8D(2)(II) ACCORDINGLY SUCCEEDS. COMING TO ADMINISTRATIVE EXPENDITU RE ISSUE O F RS. 61,572/ - (SUPRA) COMPUTED UNDER RULE 8D(2)(III), THE ASSESSEE FAILS TO REBUT APPLICATION OF THE RELEVANT STATUTORY PROVISION IN THE IMPUGNED ASSESSMENT YEAR. ITS CORRESPONDING ARGUMENTS ACCORDINGLY FAIL. THE ASSESSEE S APPEAL 2211/AHD/20 11 IS PARTLY ALLOWED. I.T.A NO S . 2211 & 2503 /AHD/20 11 A.Y. 2008 - 09 PAGE NO REFOIL EARTH PVT. LTD V S. ACIT 4 5. NOW WE COME TO REVENUE S APPEAL CHALLENGING THE LOWER APPELLATE ORDER DELETING ADDITION OF RS. 92,09,628/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RE - COMPUTATION OF GROSS PROFITS AFTER REJECTING ASSESSEE S BOOKS. THE ASSESSI NG OFFICER APPEARS TO HAVE FOLLOWED THE VERY COURSE AS ADOPTED IN THE PRECEDING ASSES SMENT YEAR 2007 - 08 REJECTING AS SESSEE S BOOKS THEREBY RE - COMPUTING ITS GROSS PROFITS @ 24.9% TO 34.2% RESULTING IN DIFFERENCE @ 9.29% LEADING TO THE IMPUGNED ADDITION OF R S. 92,09,628/ - . 6. THE CIT(A) FOLLOWS HIS PREDECESSOR S ORDER DELETING AN IDENTICAL ADDITION OF GROSS PROFITS IN THE PRECEDI NG ASSESSMENT YEAR FOR ALLOWING THE ASSESSEE S CORRESPONDING GROUND . THE REVENUE S CASE ACCORDINGLY SEEKS TO RESTORE THE ASSESS ING OFFICER S ACTION IN REJECTING ASSESSEE S BOOKS THEREBY RE - ESTIMATING ASSESSEE S GROSS PROFITS. THE ASSESSEE FILES BEFORE US COPY OF THE TRIBUNAL S ORDER IN REVENUE S APPEAL ITA 1281/AHD/2011 DECIDED 20 - 03 - 2015 UPHOLDING THE CIT(A) S ORDER DATED 04 - 11 - 2010 ON THE VERY ISSUE. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. ITS FIRST SUBSTANTIVE GROUND ACCORDINGLY FAILS. 7. THIS LEAVES US WITH REVENUE S SECOND SUBSTANTIVE GROUND SEEKING TO RESTORE SECTION 40(A)(IA) DISALLOWANCE OF RS . 10,95,297/ - ON ACCOUNT OF ASSESSEE S FAILURE IN DEDUCTING TDS ON FREIGHT PAYMENTS MADE TO M/S. TULSI LOGISTICS PVT. LTD. THE ASSESSEE FAIRLY STATES AT THE BAR THAT THE CIT(A) HAS DISMISSED ITS RELEVANT GROUND. THE REVENUE IS UNABLE TO REBUT THE SAME. WE ACCORDINGLY HOLD THAT I.T.A NO S . 2211 & 2503 /AHD/20 11 A.Y. 2008 - 09 PAGE NO REFOIL EARTH PVT. LTD V S. ACIT 5 THIS SECOND GROUND HAS BEEN RENDERED INFRUCTUOUS. THE REVENUE S APPEAL ITA 2503/AHD/2011 IS DISMISSED. 8 . THE ASSESSEE S APPEAL ITA 2211 /AHD/2011 IS PARTLY ALLOWED. THE REVENUE S APPEAL ITA 2503/AHD/2011 IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 10 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 21 /10 /2015 AK / COPY OF ORDER FORWARD ED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,