Autoline Industries Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 2306/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7748 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK BABU
• Keywords: Earning of tax free income; Question of law
• Section: 14A; 115JB

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT. AND SHRI VIKAS AWASTHY, JM ITA NO.2306/PUN/2016 ASSESSMENT YEAR : 2010-11 AUTOLINE INDUSTRIES LIMITED, S.NO.313 & 314, NANEKARWADI, CHAKAN, TALUKA KHED, PUNE 410501. PAN : AABCA4534D. ..APP ELLANT. V/S THE DY. COMMISSIONER OF INCOME TAX , CIRCLE 1(1), PUNE. .. RESPONDENT . ASSESSEE BY : SHRI SHARAD SHAH. REVENUE BY : SHRI ASHOK BABU, JCIT. / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS), PUNE 1, DATED 13.07 .2016 FOR THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS ASSAILED THE ORDER OF CIT(A) BY RAIS ING FOLLOWING GROUNDS OF APPEAL : 1. THE LD.AO ERRED IN INCREASING (& LD.CIT(A) ERRE D IN CONFIRMING) ERRED IN DISALLOWING RS.15,28,522/- U/S 14A R.W. RU LE 8D. / DATE OF HEARING : 14.01.2019 / DATE OF PRONOUNCEMENT: 15.01.2019. 2 ITA NO.2306/PUN/2016 2. THE APPELLANT CRAVES ITS RIGHT TO ADD OR ALTER T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF HEARING OF THE CASE. SUBSEQUENTLY, THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIO NAL GROUND : THE LD.AO BE DIRECTED TO DELETE THE ADDITION OF RS .27,56,582/- (ON ACCOUNT OF DISALLOWANCE U/S 14A R.W. RULE 8D) MADE TO BOOK PROFIT CALCULATED U/S 115JB. 3. SHRI SHARAD SHAH APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED, AT THE OUTSET, THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.3,40,211/- U/S 10(38) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT). THE ASSESSEE MADE SUO-MOTO DISALLOWAN CE OF EXPENDITURE RS.12,28,060/- IN RESPECT OF EXEMPT INCOME EA RNED. THE AO MADE FURTHER DISALLOWANCE OF RS.15,28,522/- U/S 14A R.W. RULE 8D. THE LD.A.R. SUBMITTED THAT THE ASSESSEE IS HAVIN G OWN INTEREST FREE FUNDS TO THE TUNE OF RS.186.3 CRORES AS AG AINST INVESTMENT OF RS.87.49 CRORES. THE LD.A.R. TO SUBSTANTIATE HIS CONTENTIONS REFERRED TO THE BALANCE-SHEET OF ASSESSEE AS ON 31.03.2010. THE LD.A.R. CONTENDED THAT IN VIEW OF THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., REPORTED AS 313 ITR 340, NO DISALLOWAN CE IN RESPECT OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) OF THE INCOME TA X RULES IS WARRANTED. 4. IN RESPECT OF ADDITIONAL GROUND, LD.A.R. SUBMITTED THAT T HE A.O. WHILE COMPUTING BOOK PROFITS UNDER SEC.115JB OF THE ACT, MA DE ADDITION OF RS.27,56,582/- I.E., THE DISALLOWANCE MADE U/S 14A R .W. RULE 8D OF I.T. RULES. NO SUCH ADDITION IS TO BE MADE WHILE 3 ITA NO.2306/PUN/2016 COMPUTING BOOK PROFITS UNDER MAT PROVISIONS. IN SUPPORT OF HIS CONTENTIONS, THE LD.A.R. PLACED RELIANCE ON THE DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. BENGAL FINAN CE AND INVESTMENTS PVT. LTD., IN INCOME TAX APPEAL NO.337 OF 2013 DECIDED ON 10.02.2015. 5. ON THE OTHER HAND, SHRI ASHOK BABU REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS OF REPRESENTATIVES OF R IVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE S OLITARY ISSUE RAISED IN APPEAL IS WITH RESPECT TO ADDITIONAL DISALLOWANCE M ADE U/S 14A R.W. RULE 8D OF I.T. RULES AND ADDITION OF SAID DISALLOWAN CE WHILE COMPUTING BOOK PROFITS UNDER MAT PROVISIONS. IT IS AN UND ISPUTED FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.3 ,40,211/- AND THAT THE ASSESSEE HAS MADE SUO-MOTO DISALLOWANCE U /S 14A TO THE EXTENT OF RS.12,28,060/-. DURING ASSESSMENT PROCEED INGS, THE AO INVOKED THE PROVISIONS OF RULE 8D AND MADE DISALLOWANCE AS UNDER : RULE 8D COMPUTATION : (I)EXPENDITURE DIRECTLY ATTRIBUTABLE TO EXEMPT INCO ME RS. NIL. (II) INTEREST EXPENDITURE RS.14,34,000/- (III) 0.5% OF AVERAGE VALUE OF INVESTMENTS RS.13,22 ,582/- TOTAL DISALLOWANCE RS.27,56,582/- 4 ITA NO.2306/PUN/2016 THUS, AO HAS MADE ADDITIONAL DISALLOWANCE OF RS.15,28,522/-. THE LD.A.R. HAS DRAWN OUR ATTENTION TO THE BALANCE-SHEET AS ON 31.03.2010. A PERUSAL OF THE BALANCE-SHEET SHOWS THAT O WN FUNDS OF THE ASSESSEE COMPRISING OF SHARE CAPITAL AND RESERVES A ND SURPLUS ARE TO THE TUNE OF RS.186.33 CRORES AS AGAINST THE INVE STMENTS OF RS.87.49 CRORES. SINCE OWN FUNDS OF THE ASSESSEE ARE SUFFIC IENT TO COVER THE INVESTMENTS, NO DISALLOWANCE IN RESPECT OF INTER EST EXPENDITURE IS WARRANTED IN VIEW OF THE DECISION RENDERED BY HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. RELIANCE UTILITIES (S UPRA) AND HDFC BANK LTD., VS. DCIT REPORTED AS 366 ITR 505 (BOM). 7. IN THE ADDITIONAL GROUND OF APPEAL, THE ASSESSEE HAS A SSAILED THAT WHILE COMPUTING BOOK PROFITS U/S 115JB OF THE ACT, NO ADDITION IN RESPECT OF DISALLOWANCE U/S 14A OF THE ACT IS TO BE MAD E. WE FIND THAT THIS ISSUE HAS ALREADY BEEN ADDRESSED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. BENGAL FINANCE AND INVESTMENTS (SUPRA). FOR THE SAKE OF COMPLETENESS, THE RELEVANT QUESTION OF LAW RAISED BEFORE THE HON'BLE HIGH COURT IS R EPRODUCED HEREIN BELOW : 2. THE REVENUE PRESS THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION : (A) X X X X (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, AND IN LAW, THE ITAT IS JUSTIFIED IN DELETING THE ADDITION OF RS.78,84,387/- UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB RELYING UPON THE DECISION IN THE CASE OF GOET ZE (INDIA) LTD. V/S. CIT (2009) 32 SOT 101 (DEL.), WHICH HAS BEEN FOLLOWED BY ITAT, MUMBAI IN THE CASES REFERRED TO I N PARA 5 OF THE IMPUGNED ORDER WITHOUT APPRECIATING THAT THE AB OVE 5 ITA NO.2306/PUN/2016 DECISION IN THE CASE OF GOETZE (INDIA) LTD. WAS REN DERED BY THE ITAT, DELHI BENCH ON COMPLETELY DISTINGUISHABLE SET OF FACTS, PECULIAR TO THE SAID CASE ? THE HONBLE HIGH COURT ANSWERED THE ABOVE QUESTION BY OBSERVING AS UNDER : 4. SO FAR AS QUESTION (B) IS CONCERNED, THE IMPUGN ED ORDER OF THE TRIBUNAL FOLLOWED ITS DECISION IN M/S. ESS AR TELEHOLDINGS LTD. V/S. DCIT IN ITA NO.3850/MUM/20 10 TO HELD THAT AN AMOUN T DISALLOWED UNDER SECTION 14-A OF THE ACT CANNOT BE ADDED TO AR RIVE AT BOOK PROFIT FOR PURPOSES OF SECTION 115JB OF THE ACT. THE REVEN UE'S APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN M/S. ESSAR TELEHOLDING S (SUPRA) WAS DISMISSED BY THIS COURT IN INCOME TAX APPEAL NO . 438 OF 2012 RENDERED ON 7 T H AUGUST , 2014 . IN VIEW OF THE ABOVE, QUESTION (B) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. THUS, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT, THE ADDITIONAL GROUND RAISED IN THE APPEAL IS ALLOWED. 8. IN VIEW OF THE FACT THAT THE ASSESSEE HAS MADE SUO- MOTO DISALLOWANCE WHICH IS MUCH MORE THAN THE EXEMPT INCOME EA RNED, NO FURTHER DISALLOWANCE IS WARRANTED U/S 14A R.W. RULE 8D OF I NCOME TAX RULES. THE IMPUGNED ORDER IS SET ASIDE AND THE APPE AL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 15 TH DAY OF JANUARY, 2019. SD/- SD/- SD/- SD/- (R.S. SYAL) (VIKA S AWASTHY ) VICE PRESIDENT JUDICIAL MEMB ER PUNE; DATED : 15 TH JANUARY, 2019. YAMINI 6 ITA NO.2306/PUN/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, PUNE. PR. CIT-1, PUNE. '#$!% %&',)! !&' , / DR, ITAT, A PUNE; $,-./ GUARD FILE. / BY ORDER // TRUE COPY // / 01%2&3 / SR. PRIVATE SECRETARY )! !&' , / ITAT, PUNE.