The Dy. Commissioner of Income Tax, Circle-1(1)(2), Ahmedabad V. Durgesh Impex Pvt. Ltd., Ahmedabad

ITA 2266/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8403 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital receipt
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 2266/AHD/2016 & C.O. NO. 165/AHD/16 (ASSESSMENT YEAR: 2013-14) DCIT, CIRCLE-1(1)(2), AHMEDABAD M/S. DURGESH IMPEX PVT. LTD. B/1, 2 ND & 3 RD FLOOR, SAFAL PROFITAIRE, CORPORATE ROAD, NR. PRAHLADNAGAR, AHMEDABAD V/S V/S M/S. DURGESH IMPEX PVT. LTD. B/1, 2 ND & 3 RD FLOOR, SAFAL PROFITAIRE, CORPORATE ROAD, NR. PRAHLADNAGAR, AHMEDABAD DCIT, CIRCLE-1(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACCD 1075D APPELLANT BY : SHRI MUDIT NAGPAL, SR. D. R. RESPONDENT BY : SHRI RUPESH MEHTA, A.R. ( )/ ORDER DATE OF HEARING : 12 -04-201 8 DATE OF PRONOUNCEMENT : 16-04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, AHM EDABAD DATED 29.06.2016 ITA NO. 2266 & C.O. 165/AHD/2016 . A.Y. 2013-14 2 PERTAINING TO A.Y. 2013-14. THE APPEAL AND THE CROS S OBJECTION WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE FIRST GRIEVANCE OF THE REVENUE RELATES TO THE D ELETION OF THE ADDITION OF RS. 1,30,319/- MADE ON ACCOUNT OF DISALLOWANCE U/S. 14A READ WITH RULE 8D. 3. THE ASSESSEE IS IN THE BUSINESS OF WHOLE SALE TRADI NG & MANUFACTURING OF COTTON, COTTON BASE, OIL/ CAKE, GAUR GUM AND IS ALS O A COMMISSION AGENT AND TRADING IN DERIVATIVES. 4. ON VERIFICATION OF THE BALANCE SHEET, THE A.O. FOUN D THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES THE INCOME FROM WHICH IS EXEMP T FROM TAX. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST PAYM ENT TO THE LOANS AND HAS INCURRED OTHER EXPENSES. THE A.O. FOUND THAT THE AS SESSEE HAS NOT MADE ANY DISALLOWANCE U/S. 14A R.W. RULE 8D. THE ASSESSEE WA S SHOW CAUSED TO EXPLAIN WHY DISALLOWANCE SHOULD NOT BE MADE AS PER THE RELE VANT PROVISIONS OF THE LAW. 5. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O. PROCEEDED BY COMPUTING THE DISALLOWANCE U/S. 14A R.W. RULE 8D AND THE DISALLOW ANCE WAS COMPUTED AT RS. 2,48,709/-. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CONTENDED THAT IT HAS NOT INCURRED ANY EXPENDITURE AND THEREFORE T HERE IS NO NEED FOR ANY DISALLOWANCE U/S. 14A R.W. RULE 8D. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE OUTFLOW OF INTEREST WAS AT RS. 2.60 CRORES WHEREAS THE INTEREST EARNED BY THE ASSESSEE IS RS. 4.22 CRORES AND SINCE THERE WAS A POSITIVE INTEREST ITA NO. 2266 & C.O. 165/AHD/2016 . A.Y. 2013-14 3 INCOME, THE INTEREST EXPENDITURE CANNOT BE CONSIDER ED FOR THE DISALLOWANCE U/S. 14A OF THE ACT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 1,18,390/-. 7. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. AND RELIED UPON THE VERY SAME JUDGMENTS WHICH HAVE BEEN REFERRED TO BY THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. FACTS ON RECORD SHOW THAT THERE IS NO DISPUTE INSOFAR AS THE EARNING OF INTEREST VIS--VIS INCURRING OF INTEREST EXPENDITURE ARE CONCERNED, TH E INTEREST EARNED IS AT RS. 4.22 CRORES WHEREAS INTEREST EXPENDITURE ARE AT RS. 2.60 CRORES. THIS MEANS THAT THE INTEREST EARNED BY THE ASSESSEE IS IN EXCESS OF THE INTEREST INCURRED BY IT. ON THESE FACTS, IN OUR CONSIDERED OPINION, DISALLOWANC E ON ACCOUNT OF INTEREST IS UNCALLED FOR. HOWEVER, AT THE SAME TIME, WE FIND TH AT SOME DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE HAS TO BE MAD E. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS EARNED DIVIDEND OF RS. 1,18,3 90/- AND CONSIDERING THE QUANTUM OF DIVIDEND, IT IS FAIR ENOUGH TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF THE DIVIDEND INCOME. THEREFORE, THE LD. CIT(A) H AS RIGHTLY RESTRICTED THE DISALLOWANCE TO RS. 1,18,390/- AND THEREFORE NO INT ERFERENCE IS CALLED FOR. GROUND NO. 1 OF REVENUES APPEAL AND GROUND NO. 1 O F THE CROSS OBJECTION ARE DISMISSED. 9. THE SECOND GRIEVANCE OF THE REVENUE RELATES TO THE DELETION OF THE ADDITION OF RS. 35,29,200/- MADE ON ACCOUNT OF SUBSIDY RECEIVED FROM GOVERNMENT. ITA NO. 2266 & C.O. 165/AHD/2016 . A.Y. 2013-14 4 10. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS RECEIVED PROMOTIONAL SUBSIDY OF RS. 35,29,200/- WHICH WAS NOT CREDITED IN THE PROFIT AND LOSS ACCOUNT. TH E ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. IN ITS REPLY, THE ASSESSEE STRON GLY CONTENDED THAT THE SUBSIDY RECEIVED IS ON ACCOUNT OF CAPITAL ASSETS AND IS THE REFORE A CAPITAL RECEIPT AND HENCE NOT TAXABLE. THE A.O. DISMISSED THE CONTENTIO N OF THE ASSESSEE AND MADE ADDITION OF RS. 35,29,200/-. 11. ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED THAT THE SUBSIDY IS A CAPITAL RECEIPT. STRONG RELIANCE WAS P LACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. 306 ITR 392 AND SAHNEY STEEL & PRESS WORKS LTD. 228 ITR 253 . 12. AFTER CONSIDERING THE FACETS AND THE SUBMISSIONS AN D DRAWING SUPPORT FROM THE VARIOUS JUDICIAL JUDGMENTS INCLUDING THOSE OF THE H ONBLE SUPREME COURT, THE LD. CIT WAS CONVINCED WITH THE CLAIM THAT THE SUBSI DY IS A CAPITAL RECEIPT AND ACCORDINGLY DELETED THE ADDITION MADE BY THE A.O. 13. BEFORE US, THE LD. D.R. SUPPORTED THE FINDINGS OF T HE A.O. AND THE LD. COUNSEL SUPPORTED THE FINDINGS OF THE LD. CIT(A). 14. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS RECEIVED CASH SUBSIDY OF RS. 35.29 LACS FROM THE GOVERNMENT OF MAHARASHTRA ON A CERTAIN PER CENTAGE OF CAPITAL EMPLOYED. IT IS ALSO NOT IN DISPUTE THAT THE SUBSID Y HAS BEEN GIVEN AS AN INCENTIVE FOR ESTABLISHING/EXPANSION OF A UNIT AND NOT GIVEN FOR MEET ANY PART OF EXPENDITURE. THE HONBLE SUPREME COURT IN THE C ASE OF PONNI SUGARS & ITA NO. 2266 & C.O. 165/AHD/2016 . A.Y. 2013-14 5 CHEMICALS LTD. (SUPRA) HAS HELD THAT IF THE OBJECT OF THE SUBSIDY WAS TO SET UP A NEW UNIT IN A BACKWARD AREA TO GENERATE EMPLOYMENT THEREIN, THE SUBSIDY WAS TO BE TREATED ON CAPITAL ACCOUNT. A SIMILAR VIEW TA KEN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF BOUGAINVILLEA MULTIPL EX ENTERTAINMENT VIDE ORDER DATED 02.02.2015. THE HONBLE HIGH COURT IN THE CAS E OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) HAS RULED THAT PURPOSE FOR WHICH SUBSIDY IS GIVEN IS THE DECIDING FACTOR. 15. CONSIDERING THE JUDICIAL DECISIONS REFERRED TO HERE INABOVE AND VARIOUS OTHERS DISCUSSED BY THE LD. CIT(A) IN HIS ORDER, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). THE SECOND GRIEV ANCE OF THE REVENUE IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 17. COMING TO THE SECOND GRIEVANCE IN THE CROSS OBJECTI ON WHICH RELATES TO THE ADDITION OF RS. 56,160/- ON ACCOUNT OF DEPOSIT OF E PF/ESIC. WE FIND THAT THE SAME HAS BEEN DEPOSITED BEYOND THE GRACE PERIOD. WE FIND THAT THIS ISSUE IS NOW SETTLED IN FAVOUR OF THE REVENUE AND AGAINST TH E ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF GSRTC 366 ITR 170. 18. RESPECTFULLY FOLLOWING THE SAME, GROUND NO. 2 OF CR OSS OBJECTION IS DISMISSED. ITA NO. 2266 & C.O. 165/AHD/2016 . A.Y. 2013-14 6 19. GROUND NOS. 3 & 4 ARE IN SUPPORT OF THE ORDER OF TH E LD. CIT(A) AND NEEDS NO SEPARATE ADJUDICATION. ORDER PRONOUNCED IN OPEN COURT ON 16 - 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 16 /04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD