M/s. Rajdeep Automation Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 5, Pune

ITA 2374/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4788 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: JYOTI SINGH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI GEORGE MATHAN, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NOS.2374 & 2375/PUN/2017 / ASSESSMENT YEARS : 2012-13 & 2013-14 M/S. RAJDEEP AUTOMATION PVT. LTD., 143, RAJDEEP HEIGHTS, VADGAON DHAYARI SINHGAD ROAD, PUNE 411 047. PAN : AACCR2096N. . / APPELLANT V/S THE DY.COMMISSIONER OF INCOME TAX, CIRCLE 5, PUNE. . / RESPONDENT. ASSESSEE BY : MISS JYOTI SINGH. REVENUE BY : SHRI S.P. WALIMBE. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE EMANATING OUT OF THE SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS), 4 - PUNE DATED 12.06.2017 FOR A.Y.S 2012-13 AND 2013-14. 2. BEFORE US, AT THE OUTSET, BOTH THE PARTIES SUBMITTED T HAT THOUGH THE APPEALS FILED BY THE ASSESSEE ARE FOR TWO DIFFERENT ASSESSM ENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE AMOUNTS INVOLVED AND THEREFO RE THE SUBMISSIONS MADE BY THEM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY A PPLICABLE TO THE OTHER APPEAL ALSO AND THUS BOTH THE APPEALS CAN BE HE ARD TOGETHER. IN / DATE OF HEARING : 21.02.2020 / DATE OF PRONOUNCEMENT: 21.02.2020 2 ITA NOS.2374 & 2375/PUN/2017 VIEW OF THE AFORESAID SUBMISSIONS OF BOTH THE PARTIES, WE, F OR THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER. WE, HOWEVER, PROCEED WITH THE FACTS IN ITA NO.237 4/PUN/2017 FOR A.Y. 2012-13. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF TRADING AND MANUFACTURING OF ELECTRONIC AND ELECTRIC GOODS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 30.09.2012 DECLARING TOTAL INCOME OF RS.2,67,68,722/-. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 19.02.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,73,17,990/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.C IT(A), WHO VIDE ORDER DATED 12.06.2017 (IN APPEAL NO.PN/CIT(A)-4/61/2015- 16) DISMISSED THE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CI T(A), ASSESSEE IS NOW BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5, PUNE HAS ERRED IN MAKING AGGREGATE DISALLOWANCE OF INTEREST UNDER SECTION 14A OF THE ACT OF RS. 5,45,265/- WHEN THE ENTIRE INVESTMENT YIELDING EXEMPT INCOME HAS BEEN MADE OUT OF OWN FUNDS AND THE COMMISSIONER OF INCOME TAX (APPEALS)-4, PUNE HAS ERRED IN CONFIRMING THE SAME. 2. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CI RCLE-5, PUNE HAS ERRED IN COMPUTING DISALLOWANCE UNDER SECTION 14A OF RS.5 ,49,265/- AND THE COMMISSIONER OF INCOME TAX (APPEALS)-4, PUNE HAS ERR ED IN CONFIRMING THE SAME. 3. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CI RCLE-5, PUNE HAS ERRED IN NOT RESTRICTING DISALLOWANCE TO THE AMOUNT OF EX EMPT INCOME AND THE COMMISSIONER OF INCOME TAX (APPEALS)-4, PUNE HAS ERR ED IN CONFIRMING THE SAME. 4. THE DISALLOWANCE UNDER SECTION 14A HAS BEEN MADE WITHOUT FOLLOWING DUE PROCESS OF LAW. 3 ITA NOS.2374 & 2375/PUN/2017 4. SIMILAR DISALLOWANCE U/S 14A OF THE ACT WAS MADE BY AO IN A.Y. 2013-14 & THE SAME WAS UPHELD BY LD.CIT(A). AGGRIEVED BY THE ORDER OF LD.CIT(A) SIMILAR GROUNDS HAVE BEEN RAISED BY THE ASSESSE E IN ITA NO.2375/PUN/2017 FOR A.Y. 2013-14. 5. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICE D THAT ASSESSEE WAS HAVING INVESTMENTS BUT THE AMOUNT OF EXP ENDITURE ATTRIBUTABLE TO THE EXEMPT INCOME WAS NOT DISALLOWED BY T HE ASSESSEE WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. AO THEREFOR E ON THE BASIS OF THE METHODOLOGY PRESCRIBED UNDER RULE 8D OF I.T. RULES WORKED OUT THE DISALLOWANCE U/S 14A OF THE ACT AT RS. 5,49,265/- FOR A.Y . 2012-13 AND RS.6,49,557/- FOR A.Y. 2013-14. AGGRIEVED BY THE ORDERS OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDERS DATED 12.06.2017 FOR A.Y. 2012-13 AND 2013-14 DISMISSED THE APPEALS OF ASSESSEE. AGGRIEVED BY THE ORDERS OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING, ADJOURNMENT APPLICATION WAS FILED BY THE LD.A.R. SEEKING ADJOURNMENT. HOWEVER, CONSIDERING THE FACT THAT THE ISSUE IS COVERED BY THE DECISIONS OF VARIOUS HIGH COURTS, WE RE JECT THE REQUEST FOR ADJOURNMENT AND DECIDE TO TAKE UP THE HEARING. 8. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A) AND SUBMITTED THAT FOR THE REASONS WHICH WERE S UBMITTED BEFORE LOWER AUTHORITIES, NO DISALLOWANCE U/S 14A R.W. RULE 8D IS CA LLED FOR IN THE 4 ITA NOS.2374 & 2375/PUN/2017 PRESENT CASES. SHE THEREFORE SUBMITTED THAT THE ADDITIO N BE DELETED. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF LOWER AUTHORITIES . 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IN BOTH THE YE ARS UNDER APPEALS IS WITH RESPECT TO DISALLOWANCE U/S 14A R.W. RULE 8D OF T HE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD EARNED EXEMPT INCOM E OF RS.62,111/- IN A.Y. 2012-13 AND RS.1,66,283/- IN A.Y. 2013-14 (AS NOTED BY LD.CIT(A) IN PAGE 4 AND 9 OF HIS ORDERS FOR A.YS. 2012-13 AND 2013- 14, RESPECTIVELY). HOWEVER, THE DISALLOWANCE U/S 14A R.W. RULE 8D OF I.T. RU LES HAS BEEN WORKED OUT AT RS.5,49,265/- FOR A.Y. 2012-13 AND RS.6,49,5 57/- FOR A.Y. 2013-14. IT IS THUS SEEN THAT THE DISALLOWANCE U/S 1 4A WORKED OUT BY AO IS MUCH MORE THAN THE EXEMPT INCOME EARNED BY THE ASS ESSEE. WE FIND THAT THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PCIT VS. STATE BANK OF PATIALA (2018) 99 TAXMANN.COM 285 HAS HELD THAT THE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT HAS TO BE RES TRICTED TO THE AMOUNT OF EXEMPT INCOME ONLY AND NOT AT A HIGHER FIGURE. WE FIND THAT AGAINST THE AFORESAID ORDER OF PUNJAB AND HARYANA HIGH COURT, REVENUE FILED S.L.P. BEFORE THE HONBLE APEX COURT AND THE S.L.P. WAS DISMISSED BY THE HONBLE APEX COURT (2018) 99 TAXMANN.COM 286 (SC). W E FURTHER FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS CAR AF BUILDERS & CONSTRUCTION (P) LTD., (2019) 101 TAXMANN.COM 167 (DEL) AFTER CONSIDERING THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF MAXOP P INVESTMENT LTD. VS. CIT (2018) 402 ITR 640, CHEMINVEST VS. CIT (2015) 378 I TR 33 AND OTHER DECISIONS HAS HELD THAT DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME OF THE RELEVANT YEAR. IN THE PRESENT CASE, SINCE ASSESSEE HAS EARNED EXEMPT INCOME OF 62,111/- IN A.Y. 2012-13 AND RS.1,6 6,283/- IN A.Y. 2013-14, WE RELYING ON THE AFORESAID DECISIONS, DIRECT THE 5 ITA NOS.2374 & 2375/PUN/2017 DISALLOWANCE U/S 14A R.W. RULE 8D BE RESTRICTED ONLY TO THE EXEMPT INCOME EARNED BY ASSESSEE. WE THUS DIRECT ACCORDINGLY. THUS, THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED IN BOTH THE APPEALS. 10. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PA RTLY ALLOWED. ORDER PRONOUNCED ON 21 ST DAY OF FEBRUARY, 2020. SD/- SD/- ( GEORGE MATHAN ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 21 ST FEBRUARY, 2020. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-4, PUNE. PR.CIT-3, PUNE. '#$ %%&',) &', / DR, ITAT, PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.