M/s. Gujarat State Petronet Ltd., Gandhinagar V. The Jt.CIT.,GNR Circle, Gandhinagar

ITA 2279/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9192 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K
• Keywords: Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. ./ I.T.A. NO.2279/AHD/2012 2. ./ I.T.A. NO.2338/AHD/2012 ( / ASSESSMENT YEAR: 2009-10 CROSS-APPEALS) 1. GUJARAT STATE PETRONET LTD. 5 TH FLOOR GSPC BHAVAN SECTOR-11, GANDHINAGAR 382 010 2. ACIT GANDHINAGAR CIR GANDHINAGAR / VS. 1. JT.CIT GANDHINAGAR RANGE GANDHINAGAR 2. GUJARAT STATE PETRONET LTD. GANDHINAGAR ./ ./ PAN/GIR NO. : AABCG 1812 E ( ' / APPELLANTS ) .. ( #' / RESPONDENTS ) ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI SANJAY R.SHAH, ARS REVENUE BY : SHRI A.K. PANDEY, SR.DR $%& ' ( / DATE OF HEARING 24/02/2016 )*+ ' ( / DATE OF PRONOUNCEMENT 11/03/2016 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME -TAX (APPEALS)- ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 2 - GANDHINAGAR DATED 23/07/2012 PASSED FOR ASSESSMENT YEAR (AY) 2009-10. THESE APPEALS WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE. 2. FIRSTLY, WE SHALL TAKE UP FOR ADJUDICATION OF RE VENUES APPEAL IN ITA NO.2338/AHD/2012 FOR AY 2009-10:- THE ONLY EFFECTIVE GROUND RAISED IN REVENUES APP EAL READS AS UNDER:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN RESTRICTING THE ADDITION MADE BY THE AO TOWARDS THE ESTIMATE OF 5% INSTEAD OF 10% OF EXPENSES INCURRED FOR CAPITAL WORK-IN- PROGRESS AMOUNTING TO RS.1,65,37,529/-. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 27/12/2011. WHILE FRAMING THE ASSESSMENT O RDER, THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.1,65,37,5 29/- @ 10% OF RS.16,53,75,290/- ON ESTIMATION BASIS IN RESPECT OF EXPENDITURE TAKEN INTO P&L ACCOUNT IN RESPECT OF REVENUE EARNING ACTIVITIE S AND VARIOUS PROJECTS UNDER PROGRESS. THE AO ALSO MADE ADDITION OF RS.1,22,12,831/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE AC T. HENCE, TOTAL ADDITION OF RS.2,87,50,360/- WAS MADE BY THE AO. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER, PREFERRED AN APP EAL BEFORE THE ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 3 - LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE WHEREBY RESTRIC TED THE DISALLOWANCE IN RESPECT OF THE EXPENDITURE AS TAKEN @ 10% BY DIREC TING THE AO TO WORK OUT THE DISALLOWANCE @ 5% OF THE EXPENDITURE. HOWE VER, IN RESPECT OF THE DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, THE LD.CIT(A) CONFIRMED THE DISALLOWANCE. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BE FORE US. 3. THE LD.SR.DR SHRI A.K. PANDEY SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DOING THE RATE @ 5% INSTEAD OF @ 1 0% AS ADOTED BY THE AO. 3.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF THE COORDINATE BENCH (ITAT B BENCH AHMEDABAD) IN ITA NO. 2286/AH D/2011 (ASSESSEES OWN APPEAL) & ITA 2359/AHD/2011 (REVENU ES APPEAL) FOR AY 2008-09 DATED 07/12/2015. THE LD.COUNSEL FOR TH E ASSESSEE SUBMITTED THAT, IN THE SAID DECISION, THE TRIBUNAL AT PAGE NO.19 IN PARA- 25, THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE COO RDINATE BENCH. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 4 - WE FIND THAT UNDER THE IDENTICAL FACTS, THE COORDIN ATE BENCH IN ITA NO.2286/AHD/2011 AND ITA NO.2359/AHD/2011(SUPRA) H AS HELD AS UNDER:- 25. FROM ABOVE DISCUSSION, WE CAN INFER THAT NO SP ECIFIC DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BO OKS OF ACCOUNTS OF ASSESSEE MAINTAINED AS WELL AS DETAILS OF CAPITAL E XPENDITURE INCURRED FOR THE CAPITAL WORK IN PROGRESS INCURRED TO PROJEC TS NOT COMPLETED UPTO THE END OF THE YEAR AND ALSO DID NOT CONTROVERT TO THE SUO MOTO ALLOCATION BY THE ASSESSEE OF CERTAIN REVENUE EXPEN DITURE WHICH RELATES TO THE PROJECT UNDER PROCESS. HOWEVER, LOOKING TO T HE SIZE OF BUSINESS OF THE ASSESSEE AS WELL AS IMPOSSIBILITY OF BIFURCATIO N OF EACH AND EVERY EXPENDITURE FALLING UNDER VARIOUS HEADS AND ALSO LO OKING TO THE FIGURE OF CAPITAL WORK IN PROGRESS FOR THE YEAR UNDER APPE AL AT RS.588.97 CRORES VIS-A-VIS TOTAL REVENUE OF THE ASSESSEE AT R S.447.27 CRORES, IN ORDER TO MEET THE ENDS OF JUSTICE WE DEEM IT PROPER TO SUSTAIN DISALLOWANCE @ 1% OF TOTAL EMPLOYEE COST OF THE COM PANY AT RS.7,63,31,420/- AND 1% OF ADMINISTRATIVE AND OTHER EXPENSES OF RS.4,71,50,100/- AND ACCORDINGLY THE SUSTAINED DISA LLOWANCE WILL ARRIVE AT RS.12,35,815/-. THUS IN VIEW OF THE ABOVE, GROUN D OF APPEAL RAISED BY REVENUE IS REJECTED AND THAT OF ASSESSEE IS PARTLY ALLOWED. 4.1. SINCE THERE IS NO CHANGE INTO THE FACTS IN THE PRESENT CASE AND THE REVENUE HAS NOT BROUGHT ANY CONTRARY-MATERIAL ON RE CORD, WE HAVE NO OTHER DIFFERENT VIEW THAN TAKEN BY THE COORDINATE B ENCH IN ASSESSEES OWN CASE FOR AY 2008-09. THEREFORE, WE DIRECT THE AO TO ADOPT THE DISALLOWANCE TOWARDS EMPLOYEE COST @ 1% AND THE AD MINISTRATIVE AND OTHER EXPENSES @ 1% AS ADOPTED IN AY 2008-09 AND CO MPUTE THE DISALLOWANCE IN THE LIGHT OF THE ABOVE DECISION OF THE COORDINATE BENCH. ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 5 - THUS, GROUND RAISED IN THE REVENUES APPEAL IS REJE CTED. AS A RESULT, REVENUES APPEAL IN ITA NO.2338/AHD/2012 FOR AY 200 9-10 IS DISMISSED. 5. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 2279/AHD/2012 FOR AY 2009-10. 5.1. GROUND NO.1 IS GENERAL IN NATURE NEEDS NO SEPA RATE ADJUDICATION. 6. GROUND NO.2 IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF EXPENDITURE TO THE EXTENT OF 5%. THE LD.SR.COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COORDINATE BENCH IN ASS ESSEES OWN CASE IN ITA NO.2286/AHD/2011,WHEREIN THE TRIBUNAL HAS SUSTA INED THE DISALLOWANCE TO THE EXTENT OF 1%. ON THE CONTRAR Y, LD.SR.DR SUPPORTED THE ASSESSMENT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE COORDINATE BENCH IN ITA NOS.2286 & 2359/AHD/201 1 FOR AY 2008- 09 HAS DECIDED THE ISSUE IN AY 2008-09, BY OBSERVIN G AS UNDER:- 25. FROM ABOVE DISCUSSION, WE CAN INFER THAT NO SP ECIFIC DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN TH E BOOKS OF ACCOUNTS OF ASSESSEE MAINTAINED AS WELL AS DETAILS OF CAPITAL EXPENDITURE INCURRED FOR THE CAPITAL WORK IN PROGRE SS INCURRED TO PROJECTS NOT COMPLETED UPTO THE END OF THE YEAR AND ALSO DID NOT CONTROVERT TO THE SUO MOTO ALLOCATION BY THE ASSESS EE OF CERTAIN ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 6 - REVENUE EXPENDITURE WHICH RELATES TO THE PROJECT UN DER PROCESS. HOWEVER, LOOKING TO THE SIZE OF BUSINESS OF THE ASS ESSEE AS WELL AS IMPOSSIBILITY OF BIFURCATION OF EACH AND EVERY EXPE NDITURE FALLING UNDER VARIOUS HEADS AND ALSO LOOKING TO THE FIGURE OF CAPITAL WORK IN PROGRESS FOR THE YEAR UNDER APPEAL AT RS.588.97 CRORES VIS-A-VIS TOTAL REVENUE OF THE ASSESSEE AT RS.447.27 CRORES, IN ORDER TO MEET THE ENDS OF JUSTICE WE DEEM IT PROPER TO SUSTAIN DI SALLOWANCE @ 1% OF TOTAL EMPLOYEE COST OF THE COMPANY AT RS.7,63 ,31,420/- AND 1% OF ADMINISTRATIVE AND OTHER EXPENSES OF RS.4,71, 50,100/- AND ACCORDINGLY THE SUSTAINED DISALLOWANCE WILL ARRIVE AT RS.12,35,815/-. THUS IN VIEW OF THE ABOVE, GROUND O F APPEAL RAISED BY REVENUE IS REJECTED AND THAT OF ASSESSEE IS PART LY ALLOWED. 8. NO CHANGE INTO THE FACTS AND CIRCUMSTANCE S IS POINTED OUT BY THE SR.DR. THEREFORE, TAKING A CONSISTENT VIEW, WE HER EBY NULLIFY THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO RESTRICT LUMP SUM DISALLOWANCE TO THE EXTENT OF 1% EMPLOYEE COST, ADMINISTRATIVE EXPE NSES AND OTHER EXPENSES. THUS, GROUND NO.2 OF THE ASSESSEES APP EAL IS PARTLY ALLOWED. 9. GROUND NO.3 IS DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. THE LD.SR.COUNSEL ON BEHAL F OF THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) ERRED IN CONFIRMING TH E DISALLOWANCE U/S.14A OF THE ACT, TO THE EXTENT OF RS.1,22,12,831 /- IGNORING VOLUNTARY DISALLOWANCE MADE BY THE APPELLANT-ASSESSEE OF RS.3 ,81,716/-. HE SUBMITTED THAT THE LD.CIT(A) FAILED TO APPRECIATE, THE FACT THAT THE ASSESSEE HAS HUGE OWN FUNDS TO THE TUNE OF RS.1867- CRORES AS AGAINST INVESTMENT OF RS.35-CRORES. HE SUBMITTED THAT INTE REST, IF ANY, ALLOWED BE ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 7 - RESTRICTED ON LOANS WHICH WERE TAKEN FOR THE PERIOD OF INVESTMENT AND NOT OTHERWISE. HE SUBMITTED THAT EVEN OTHERWISE ALSO, THE DISALLOWANCE SHOULD NOT EXCEED THE EXEMPT INCOME OF RS.8,01,370/ -. IN SUPPORT OF THIS CONTENTION, LD.COUNSEL RELIED UPON THE JUDGEMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF JOINT INVESTMENT (P) LTD. VS. CIT REPORTED AT 372 ITR 694 (DELHI). THE LD.COUNSEL FOR THE ASS ESSEE ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE GUJARAT HIGH C OURT RENDERED IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. IN DIA GELATINE AND CHEMICALS LTD. REPORTED AT [2015] 376 ITR 553 (GUJA RAT) IN SUPPORT OF SUBMISSION THAT THE ASSESSEE HAD SUFFICIENT INTERES T-FREE FUNDS OUT OF WHICH CONCERNED INVESTMENT HAD BEEN DISALLOWANCE U/ S.14A OF THE ACT WAS NOT JUSTIFIED. 9.1. ON THE CONTRARY, LD.DEPARTMENTAL REPRESENTATIV E SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT ASSESSMENT YEAR UNDER APPEAL IS 2009-10, THEREFORE THE AO HAS RIGHTLY COM PUTED DISALLOWANCE BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE UNCONTROVERTED FACTS ARE THAT THE AO PROCEEDED ON T HE BASIS THAT THE SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE IS NOT IN ACCORD ANCE WITH RULE 8D OF INCOME TAX RULES, 1962. THE AO, THEREFORE, C OMPUTED ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 8 - DISALLOWANCE U/S.14A AT RS.1,22,12,831/- AS AGAINST DISALLOWANCE OF RS.3,81,716 AS MADE BY THE ASSESSEE, WHILE DOING SO , THE AO APPLIED RULE 8D OF THE INCOME TAX RULES, 1962. THE LD.CIT( A) CONFIRMED THE DISALLOWANCE BY FOLLOWING HIS ORDER IN AY 2008-09. THE COORDINATE BENCH IN ITA NO.228/AHD/2011, IN ASSESSEES OWN CAS E FOR AY 2008-09 RESTRICTED THE DISALLOWANCE AS WERE MADE BY THE ASS ESSEE. IN THE PRESENT CASE, FACTS ARE IDENTICAL, AS THE AO HAS NOT RECORD ED AS TO HOW THE EXPENDITURE AS CLAIMED BY THE ASSESSEE IS NOT SATIS FACTORY, WHICH IS A CONDITION PRECEDENT BEFORE APPLYING THE RULE 8D OF THE INCOME TAX RULES, 1962. UNDER THESE FACTS, WE HEREBY DELETE T HE DISALLOWANCE AS WERE MADE BY THE AO. THUS, THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED. 11. GROUND NO.4 IS AGAINST CHARGING OF INTEREST U/S .234-B OF THE ACT. THIS ISSUE BEING CONSEQUENTIAL IN NATURE NEEDS NO I NDEPENDENT ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 11 TH DAY OF MARCH, 2016 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( PRAMOD KUMAR ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/ 03 /2016 /(..$ , %.$../ T.C. NAIR, SR. PS ITA NO.2279/AHD/2012 (BY ASSESSEE) AND ITA NO.2338/AHD/2012 (BY REVENUE) GUJARAT STATE PETRONET LTD. VS. JCIT ASST.YEAR 2009-10 - 9 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012 3 / CONCERNED CIT 4. 3 ( ) / THE CIT(A)-GANDHINAGAR 5. 4%5 $12 , ( 12 + , 0 / DR, ITAT, AHMEDABAD 6. 578 9& / GUARD FILE. / BY ORDER, #4 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 24.2.16 (DICTATION-PAD 7+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..2.3.16/10.3.16 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.11.3.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.3.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER