M/s. Vipor Chemicals Pvt.Ltd., Baroda V. The A.CIT.,Circle-4, Baroda

ITA 2391/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76647 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: M K PATEL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R.MEENA, ACCOUNTANT MEMB ER VIPOR CHEMICAL PVT. LTD IVORY TERRACE, R.C. DUTT ROAD, ALKAPURI, DIST: VADODARA PAN: AAACV61692 (APPELLANT) VS ASST. COMMISSIONER OF INCOME TAX CIRCLE-4, INCOME TAX DEPARTMENT, AAYAKAR BHAVAN, RACE COURSE CIRCLE, VADODARA-7 (RESPONDENT) REVENUE BY: SRI K.C. MATHEWS, SR.D.R. ASSESSEE BY: SRI M.K. PATEL, A.R. DATE OF HEARING : 02-04-2014 DATE OF PRONOUNCEMENT : 04-04-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-III, BARODA DATED 12-06-2012. ITA NO. 2391/AHD/2012 ASSESSMENT YEAR 2008-09 I.T.A NO.2391/AHD/2012 A.Y. 2008-09 PAGE NO VIPOR CHEMICALS PVT. LTD VS. ACIT 2 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEA L:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. ACIT, CIRCLE-4, BARODA ERRED IN DISALLOWING AND THE LD. CIT(A)-III, BARODA ERRED IN CONFIRMING THE DISALLOWANCE OF AMOU NT OF RS. 3,72,828/- U/S. 14A OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAD SHOWN DIVIDEND INCOME EX EMPT AT RS. 20,68,965/- AND HAD DEBITED INTEREST OF RS. 8,74,61 4/- IN ITS PROFIT AND LOSS ACCOUNT. HOWEVER, THE ASSESSEE HAD NOT DISALLOWED ANY EXPENDITURE ATTRIBUTABLE TO EARNING OF THIS INCOME. THEREFORE, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENDITURE INCURRED FOR EARNI NG EXEMPT INCOME SHOULD NOT BE DISALLOWED. IN REPLY, THE ASSESSEE SUBMITTE D BEFORE THE AO THAT THE UNSECURED LOANS ARE THE CONTRIBUTION RECEIVED FROM THE FAMILY MEMBERS AT THE TIME OF STARTING THE UNIT LONG BACK AND THEREFO RE, THIS MONEY CANNOT BE TERMED AS BORROWINGS BUT ARE A PART OF CAPITAL CONT RIBUTION AND THE MONEY INVESTED IN THE MUTUAL FUNDS IS OUT OF SURPLUS FUND S. HENCE, THERE WAS NO NEXUS BETWEEN OLD UNSECURED LOANS FROM FAMILY MEMBE RS AND CURRENT INVESTMENT. THEREFORE, THERE WAS NO QUESTION OF DI SALLOWANCE U/S. 14A. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE AO NOTED THAT THE UNSECURED LOANS AND THE INVESTMENT IN MUTUAL FUNDS HAD INCREASED DURING THE YEAR UNDER CONSIDERATION. HENCE, IT CANNOT BE HELD THAT ASSESSEE HAD NOT DIVERTED INTEREST BEARING FUNDS FOR INVESTMENT IN M UTUAL FUNDS. THEREFORE, I.T.A NO.2391/AHD/2012 A.Y. 2008-09 PAGE NO VIPOR CHEMICALS PVT. LTD VS. ACIT 3 HE WORKED OUT THE DISALLOWANCE U/S. 14A AS PER RULE 8D AT RS. 3,72,828/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL, THIS ACTION OF ASSESSING OFFICER HAS BEEN CONFIRMED BY LD. CIT(A). 5. AGGRIEVED BY THIS ORDER OF LD. CIT(A), NOW THE A SSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING LEARNED COUNSEL OF THE AS SESSEE AT THE OUTSET SUBMITTED THAT THE SUBMISSION OF THE ASSESSEE THOUG H HAS BEEN REPRODUCED BY LD. CIT(A) IN PARA 4.1 OF HIS ORDER BUT THE SAME HA S NOT BEEN CONSIDERED AT ALL BY HIM. THEREFORE, THE MATTER MAY KINDLY BE RE STORED BACK TO THE FILE OF EITHER AO OR CIT(A) TO DECIDE THE ISSUE AFRESH AFTE R TAKING INTO CONSIDERATION PARAS 8-13 OF HIS SUBMISSION BEFORE L D. CIT(A). LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF LOWER AUTHOR ITIES. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND FORCE IN THE CONTENTION OF LEARNED COUNSEL OF THE ASSESSE E THAT SUBMISSIONS MADE BY ASSESSEE IN PARA 8-13 HAVE NOT DULY BEEN CONSIDE RED BY THE LD. CIT(A) WHILE DISMISSING THE APPEAL OF THE ASSESSEE. SINCE THE SUBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN IGNORED BY THE LD. CIT(A) ARE SUCH THAT THEY REQUIRE VERIFICATION, WE DEEM IT PROPER THAT THE MA TTER BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER MAKING NECE SSARY VERIFICATION OF THE SUBMISSION OF THE ASSESSEE. I.T.A NO.2391/AHD/2012 A.Y. 2008-09 PAGE NO VIPOR CHEMICALS PVT. LTD VS. ACIT 4 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 04/04/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,