VISA Energy Ventures Limited, West Bengal V. DCIT, Circle-1(2), Bhubaneswar

ITA 234/CTK/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1983 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 16-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule 8D
• Section: 14A; 264

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.234/CTK/2019 (नििाारण वषा / Asses s m ent Year :2015-2016) M/s VISA Energy Ventures Limited, 11, VISA House, Ekamra Kanan, Nayapalli, Bhubaneswar-751015 P AN No. AADCV 9890 K ... ......... ..... A ssessee Versus DCIT, Circle-1(2), Bhubaneswar ... ......... ...... R evenue Shri Dillip Kumar Mohanty/Pradyumna Kumar Sahu/Sunima Panda, ARs for the assessee. Shri M.K.Gautam, CIT-DR for the Revenue Date of Hearing : 29/06/2022 Date of Pronouncement : 29/06/2022 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A)-1, Bhubaneswar, dated 14.05.2019 passed in I.T.Appeal No.0644/16-17 for the assessment year 2015-2016, confirming the disallowance u/s.14A of the I.T.Act, 1961 r.w.rule 8D of I.T.Rules, 1962 as made by the AO. 2. It was submitted by the ld. AR that the assessee had invested Rs.396.14 crores in the equity shares of Visa Power Ltd., Visa Resources India Ltd. and others. The assessee had borrowed funds for the purpose ITA No.234/CTK/2019 2 of this investment and had claimed interest outgo of Rs.8.95 crores. It was the submission that the AO on the ground that the investments made by the assessee could earn dividend income, made the disallowance u/s.14A r.w.r.8D. It was the submission that the assessee has not earned any exempt income and consequently no disallowance u/s.14A r.w.r.8D is called for. He placed reliance on the decision of Hon’ble Supreme Court in the case of Chettinad Logistcs (P.) Ltd., reported in [2018] 257 Taxman 2 (SC) as also the decision of the Hon’ble Supreme Court in the case of GVK Project and Technical Services Ltd. reported in [2019] 264 Taxman 76 (SC). 3. In reply, the ld. CIT-DR submitted that the assessee having borrowed funds for the purpose of making the investments in the sister concern. The disallowance u/s.14A of the Act if not confirmed, a disallowance u/s.36(1)(iii) of the Act should be considered by the Tribunal. It was the submission that the assessee had only about Rs.203 crores in the form of capital and reserves as per the balance sheet as on 31 st March, 2015, the investment in the sister concern was Rs.396.14 crores and as per the audit report the assessee has traded in cotton yarn. It was the submission that as an interest payments on the borrowed funds being the long term borrowings and short term borrowings were not used for the business of the assessee being trading in yarn, the interest in relation to the investment made by the assessee in its sister concern were liable to be considered for the disallowance of proportionate interest which has been paid by the assessee. For this purpose, he relied upon the decision ITA No.234/CTK/2019 3 of Hon’ble Kerala High Court in the case of Smt. Leena Ramachandran reported in [2011] 10 taxmann.com 109 (Kerala) and the decision of the Karnataka High Court in the case of Kingfisher Finvest India Ltd. [2020] 121 taxmann.com 233 (Karnataka). It was also submitted that admittedly the main disallowance under Section 14A of the Act r.w.r.8D of I.T.Rules, 1962 were connected with the investment which has earned the exempt income, however, the disallowance computed under rule 8D(2)(ii) did not have any relationship to the exempt income but related to the average value of the opening and closing balance of the business. It was the submission that the disallowance to this extent is liable to be confirmed. 4. We have considered rival submissions. 5. Admittedly, as per the balance sheet of the assessee during the relevant assessment year the assessee has traded in cotton yarn only. It has made a profit of Rs.7 lakhs from trading. It has also derived substantial income in the form of interest. The assessee has set off the interest expenditure from both these business income from trading of yarn and the business income being the income received by the assessee from interest. Coming to the argument of ld. CIT-DR that the disallowance u/s.36(1)(iii) of the Act is liable to be made, we are unable to agree with this argument of ld. CIT-DR as this is not an issue that has been raised by the AO or the CIT(A) and it is not open to an appellate authority, being the Tribunal, to make a disallowance under the provision which has not been invoked by the AO. It is also to be mentioned here that in an appeal the revenue is fully entitled to defend the order of the AO before the Tribunal. ITA No.234/CTK/2019 4 It cannot seek to bring to tax any income or take refuge of any of the other provisions of the Act for the purpose of making a fresh addition or disallowance. The assessee admittedly has not received any exempt income. The assessee’s investment in its sister concern are claimed by the assessee to be in the business interest of the assessee insofar as the assessee has started its activity in coal also. But the assessee has not been able to point out in the audit report or the balance sheet where it has dealt with in coal. A perusal of the decision of the Hon’ble Supreme Court in the case of Chettinad Logistics Pvt. Ltd. (supra) as also the decision in the case of GVK Project and Technical Services Ltd. (supra), shows that no disallowance u/s.14A can be made if no exempt income has been received. However, under the provisions of rule 8D(2)(ii), admittedly, a disallowance is to be made and to such extent the disallowance has been made by the AO and confirmed by the CIT(A). Therefore, the addition representing Rs.1,49,06,500/- stands confirmed. The balance of the disallowance as made by the AO and confirmed by the CIT(A) by invoking the provisions of Section 14A r.w.r.8D, stands deleted. 6. In the result, appeal filed by the assessee is partly allowed. Order dictated and pronounced in the open court on 29/06/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 29/06/2022 Prakash Kumar Mishra, Sr.P.S. ITA No.234/CTK/2019 5 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- M/s VISA Energy Ventures Limited, 11, VISA House, Ekamra Kanan, Nayapalli, Bhubaneswar-751015 2. प्रत्यथी / The Respondent- DCIT, Circle-1(2), Bhubaneswar 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//