Mahavir Steel Industries Ltd, Pune V. Assistant Commissioner of Income-tax, Circle - 9, Pune

ITA 2370/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8628 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 11-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY DHOKE
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 2370 /PUN/201 7 / ASSESSMENT YEAR : 20 1 2 - 1 3 MAHAVIR STEEL INDUSTRIES LTD., KHANDELWAL JAIN & ASSOCIATES, ALANKAR CINEMA BUILDING, FIRST FLOOR, ABOVE UNITED BANK, PUNE 411001 PAN : A A BCM1744K ....... / APPELLANT / V/S. THE ASST . COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE / RESPONDENT ASSESSEE BY : SHRI SARVESH KHANDELWAL REVENUE BY : SHRI AJAY DHOKE, ADDL.CIT / DATE OF HEARING : 1 7 - 0 7 - 20 20 / DATE OF PRONOUNCEMENT : 17 - 0 7 - 2020 / ORDER PER S.S. VISWANETHRA RAVI , JM : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 02.0 8 .2017 PASSED BY THE COMMISSIONER OF INCOME - TAX ( APPEALS ) - 6 , PUNE FOR ASSESSMENT YEAR 201 2 - 1 3 . 2. THE ONLY ISSUE TO BE DECIDED IS AS TO WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY IVOKING RULE 8D(2)(II) & (III) OF THE INCOME - TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.2370/PUN/2017 MAHAVIR STEEL INDUSTRIES LTD. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF ROLLED STRUCTURAL STEEL PRODUCTS AND MACHINERY. THE ASSESSEE FILED RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.17,59,79,870/ - AND UNDER SCRUTINY, THE ASSESSING OFFICER DETERMINED THE SAME AT RS.1 7,68,15,790/ - , INTER - ALIA, MAKING DISALLOWANCE FOR THE PURPOSE OF SECTION 14A OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY INVOKING RULE 8D(2) OF THE RULES TO AN EXTENT OF RS.6,12,379/ - VIDE HIS ORDER DATED 12.03.2015. THE CIT(A) CONFIRMED THE SAME. 4. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD . THE CONTENTION OF LD. AR SHRI SARVESH KHANDELWAL IS THAT THE ASSESSEE HAS SUFFICIENT RESERVES FUNDS TO AN EXTENT OF RS.92,84,26,657/ - AS ON 31.03.2012 AND THE INV ESTMENTS MADE ONLY AT RS.2,76,79,111/ - AND ARGUED THAT THE INVESTMENTS MADE THEREON ARE LESS THAN THE RESERVE FUNDS AND THE DISALLOWANCE MADE UNDER RULE 8D(2)(II) OF THE RULES IS TO BE DELETED . THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. HDFC BANK LTD. REPORTED AS 366 ITR 505 (BOM) AND REFERRED TO THE ORDER OF THIS TRIBUNAL DATED 22.07.2016 IN ITA NO.1437/PUN/2014 FOR A.Y. 2009 - 10 IN ASSESS EES OWN CASE. WE FIND THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE APPEAL IN A.Y. 2009 - 10, WHEREIN THIS TRIBUNAL BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA) HELD THAT IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS, THEN PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST FREE FUNDS. AS DISCUSSED ABOVE, THE BALANCE SHEET AS ON 31.03.2012 CLEARLY SHOWS SHARE CAPITAL AND RESERVES & SURPLU SES FUND OF RS.92,84,26,657/ - 3 ITA NO.2370/PUN/2017 MAHAVIR STEEL INDUSTRIES LTD. AND INVESTMENTS ARE ONLY AT RS.2,76,79,111/ - . THEREFORE, IT IS CLEARLY ESTABLISHED THE INVESTMENTS ARE FAR BELOW THE RESERVES & SURPLUSES AND THUS, A PRESUMPTION CAN SAFELY BE DRAWN THAT THE ASSESSEE MADE INVESTMENTS OUT OF R ESERVES & SURPLUSES IN TERMS OF DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA). THUS, THE DISALLOWANCE MADE UNDER RULE 8D(2) OF THE RULES IS DELETED. 5. REGARDING RULE 8D(2)(III) OF THE RULES, THERE WAS NOTHING ON RECORD THAT THE ASSESSEE MADE DISALLOWANCE ON ITS OWN IN EARNING THE EXEMPT INCOME. THEREFORE, IN OUR OPINION, THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT(A) IS TO BE SUSTAINED. THE LD. DR SHRI AJAY DHOKE, ADDL.CIT SUB MITTED THAT THE ASSESSEE ITSELF STATED THAT NO EXPENDITURE HAS INCURRED TOWARDS MAKING THE INVESTMENTS AND THE ADDITION MADE UNDER RULE 8D(2) (III) OF THE RULES IS TO BE UPHELD AND SUPPORTED THE ORDER OF CIT(A). AS DISCUSSED ABOVE AND IN VIEW OF THE SUBMIS SIONS OF LD. DR, WE HOLD THAT THE DISALLOWANCE MADE UNDER RULE 8D(2)(III) OF THE RULES TO AN EXTENT OF RS.1,17,760/ - IS SUSTAINED. THUS, SOLE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 6 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 1 7 T H JU LY , 20 20 . SD/ - SD/ - R.S. SYAL S.S. VISWANETHRA RAVI VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 1 7 T H JU LY , 20 20 GCVSR 4 ITA NO.2370/PUN/2017 MAHAVIR STEEL INDUSTRIES LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT 3. THE CIT (APPEALS) - 6 , PUNE. 4. THE PR. CIT - 5 , PUNE. 5. DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / SR. PRIVATE SECRETARY , / ITAT, PUNE