Sarabhai Holdings Pvt. Ltd., Ahmedabad V. The ACIT.,(OSD) Circle-8, Ahmedabad

ITA 2328/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76636 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ I.T.A. NO.2328/AHD/2012 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2009-10) SARABHAI HOLDING PVT.LTD. OPP. JANSATTA PRESS MIRZAPUR ROAD AHMEDABAD-380 001 / VS. THE ACIT (OSD) CIRCLE-8 AHMEDABAD ( !./)* !./ PAN/GIR NO. : AAECS 6919 B ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI MEHUL K.PATEL, AR ,-(+ / . / RESPONDENT BY : SHRI J.P.JHANGID, SR.D.R. ' 0 / $1 / / / / DATE OF HEARING : 03/04/2014 23' / $1 / DATE OF PRONOUNCEMENT : 11/04/2014 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDAB AD (CIT(A) FOR SHORT) DATED 13/08/2012 PERTAINING TO ASSESSME NT YEAR (AY) 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- (1) THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS GR IEVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.14,16,57 2/- MADE U/S.14A OF THE ACT. (2) THAT ON CORRECT APPRECIATION OF FACTS AND LAW, IT O UGHT TO HAVE BEEN HELD THAT NO DISALLOWANCE IS WARRANTED U/S.14A OF THE ACT. ITA NO.2328/AHD /2012 SARABHAI HOLDING PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 2 - (3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY GROUND OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE 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 13/10//2011, THEREBY THE ASSESSING OFFICER(AO) MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R.8D OF THE IT RULES, 1962 AND AMOUNTING TO RS.14,16,572/-. AG AINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPE AL, THEREBY THE GROUNDS TAKEN AGAINST DISALLOWANCE U/S.14A WAS DISM ISSED. 3. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. TH E LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IS MADE WHILE INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE INCOME TA X RULES, 1962 AMOUNTING TO RS.14,16,572/-. HE SUBMITTED THAT THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME AMOUNTING TO RS.11,67,949/-. HE FURTHER SUBMITTED THAT THE AUTHORITIES BELOW HAVE WRONGLY INVOKED THE PROVISIONS OF RULE 8 D. HE SUBMITTED THAT NO BORROWED CAPITAL HAS BEEN UTILIZED FOR THE PURPOSE OF INVESTMENT. HE SUBMITTED THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST-FREE FUNDS TO MAKE INVESTMENT. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON THE BALANCE-SHEET AS ON 31/3/2009 OF THE ASSESSEE. AS PER BALANCE-SHEET, IT IS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE THAT SHARE CAPITAL RS. (IN 000) 113,220, RESERVE AND SURPLUS RS.(IN 000)15 3,251, WHEREAS SECURED AND UNSECURED LOAN IS RS.(IN 000)1,468. HE SUBMITTED THAT THE ITA NO.2328/AHD /2012 SARABHAI HOLDING PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 3 - LAW IS WELL-SETTLED, IF THE ASSESSEE IS HAVING SUF FICIENT INTEREST-FREE FUNDS, THE PRESUMPTION IS THAT THE ASSESSEE HAS INVESTED O UT OF OWN FUNDS. HE FURTHER SUBMITTED THAT EVEN THE ADDITION TOWARDS AD MINISTRATIVE EXPENSES IS VERY HIGH AS AGAINST THE DIVIDEND INCOME OF RS.1 1,67,949/- THE ADMINISTRATIVE EXPENSES IS DISALLOWED AMOUNTING TO RS.12,79,512/- EVEN HIGHER THAN THE INCOME EARNED. HE PLACED RELIANCE ON THE DECISION OF HONBLE COORDINATE BENCH (ITAT C BENCH AHMEDABAD) RENDERED IN ASSESSEES OWN CASE IN ITA NO.3341/AHD/2010 & CO NO .08/AHD/2011 (BY ASSESSEE) FOR AY 2007-08 DATED 21/02/2014. 4. ON THE CONTRARY, LD.SR.DR OPPOSED THE SUBMISSION S OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSMENT YEAR INVOLVED IN 2009-10, THEREFORE RULE 8D IS RIGHTLY APPLIED BY THE AO. HE SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW. 4.1. IN REJOINDER, LD.COUNSEL FOR THE ASSESSEE SUBM ITTED THAT AS PER RULE 8D(2)(III), ONLY THOSE INVESTMENTS WHERE FROM THE A SSESSEE HAS EARNED EXEMPT INCOME % OF SUCH VALUE IS TO BE TAKEN FOR T HE PURPOSE OF DISALLOWANCE IN RESPECT OF THE ADMINISTRATIVE EXPEN SES. HE SUBMITTED THAT THE AO AS WELL AS THE LD.CIT(A) HAS TAKEN % O F THE ENTIRE INVESTMENT, WHICH IS EX-FACIE ILLEGAL AND UNJUSTIFIED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD.COUNSEL F OR THE ASSESSEE THAT THE INTEREST HAS BEEN WRONGLY TAKEN AS THE ASSESSEE HAS SUFFICIENT INTEREST-FREE ITA NO.2328/AHD /2012 SARABHAI HOLDING PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 4 - FUNDS AVAILABLE, HENCE THE ADDITION MADE ON ACCOUN T OF INTEREST AMOUNTING TO RS.1,37,060/- IS HEREBY DIRECTED TO BE DELETED. IN RESPECT OF THE DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENSES, S INCE BOTH THE AUTHORITIES BELOW HAVE NOT GIVEN FINDING AS TO WHET HER THE % OF AVERAGE INVESTMENT IS OF THOSE INVESTMENTS WHEREFROM THE AS SESSEE HAS EARNED EXEMPT INCOME. AS PER THE PROVISION OF RULE 8D, I T IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH THE INCOM E HAS BEEN EARNED WHICH IS NOT FALLING WITHIN THE PART OF TOTAL INCOM E THAT IS TO BE CONSIDERED. THUS, IT IS NOT THE TOTAL INVESTMENT A T THE BEGINNING OF THE YEAR AND AT THE END OF YEAR WHICH IS TO BE CONSIDER ED BUT IT IS THE AVERAGE OF THE VALUE OF THE INVESTMENT WHICH HAS GIVEN RISE TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME IS TO BE CONSIDE RED. HENCE, THE ISSUE IS RESTORED BACK TO THE FILE OF AO TO VERIFY AS TO HOW MUCH INVESTMENT WAS MADE DURING THE YEAR ON WHICH THE ASSESSEE HAS EARNED EXEMPT INCOME AND, ACCORDINGLY, RE-COMPUTE THE DISALLOWAN CE UNDER RULE 8D OF THE INCOME TAX RULES, 1962. AS A RESULT, THIS GROU ND OF ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NOS.2 & 3 ARE GENERAL IN NATURE REQUIRE N O INDEPENDENT ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/04/2014 71.., .../ T.C. NAIR, SR. PS ITA NO.2328/AHD /2012 SARABHAI HOLDING PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 5 - 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-XIV, AHMEDABAD 5. 8 #; ,$ , , / DR, ITAT, AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER, -8$ ,$ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 7.4.14 (DICTATION-PAD 8-PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 7.4.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.11.4.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.4.14 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