Echolac Finvest Pvt. Ltd., Ahmedabad V. The ITO, Ward-2(1)(1), Ahmedabad

ITA 2398/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0981 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 02-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AOITYA SHUKLA SR DR
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO.2398/AHD/2017 / ASSTT. YEAR: 2013-14 ECHOLAC FININVEST P.LTD. 44/D, SHARNAM 12, PRAHALADNAGAR VEJALPUR AHMEDABAD PAN : AAACE 3446 R VS. ITO, WARD-2(1)(1) AHMEDABAD. ( APPLICANT ) (RESPONDENT) ASSESSEE BY : SHRI PARIN SHAH, AR REVENUE BY : SHRI AOITYA SHUKLA, SR.DR ! '#$ % &' / DATE OF HEARING : 08/03/2019 ()* % &' / DATE OF PRONOUNCEMENT: 25/03/2019 +, / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-2, AHMEDABAD DATED 4.10.2017 PASSED FOR T HE ASSTT.YEAR 2013-14. 2. ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, BUT I TS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THE LD.CIT(A) H AS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,31,084/- WHICH WAS MADE BY THE AO WITH AID OF SECTION 14A OF THE INCOME TAX AC T R.W. RULE 8D OF THE INCOME TAX RULES, 1962. ITA NO.2398/AHD/2017 2 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ELECTRO NICALLY ON 19.8.2013 DECLARING TOTAL INCOME AT RS.6,02,812/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE DISALL OWANCE UNDER SECTION 14A IS REQUIRED TO BE MADE IN RESPECT OF EX PENDITURE ATTRIBUTABLE TO EARNING OF TAX FREE INCOME. HE CON FRONTED THE ASSESSEE TO SHOW WORKING OF EXPENDITURE RELATABLE T O EARNING OF TAX FREE INCOME. ACCORDING TO THE AO, ASSESSEE FAI LED TO DEMONSTRATE ANY SUCH WORKING, HENCE, WITH HELP OF R ULE 8, HE PROCEEDED TO WORK OUT THE EXPENDITURE REQUIRED TO B E DISALLOWED. THE LD.AO HAS WORKED OUT THE EXPENDITURE AT RS.1,31 ,084/- WHICH IS HALF-PERCENT OF THE AVERAGE INVESTMENT AMOUNTING TO RS.2,62,16,717/-. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF SPECIAL BENCH OF THE IT AT IN THE CASE OF ACIT VS. VIREET INVESTMENTS P.LTD., 165 ITD 27 ( SB). HE CONTENDED THAT THE TRIBUNAL HAS HELD THAT WHILE WOR KING OUT DISALLOWANCE UNDER RULE 8D, THE AO WAS REQUIRED TO TAKE INTO CONSIDERATION AVERAGE VALUE OF THE INVESTMENT, WHIC H YIELDED EXEMPT INCOME DURING THE YEAR. HE POINTED OUT THAT BEFORE THE AO A SPECIFIC PLEA WAS TAKEN BY THE ASSESSEE THAT O UT OF THE TOTAL INVESTMENT, DIVIDEND ON THE INVESTMENT WORTH OF RS. 1,36,67,429/- HAS NOT BEEN RECEIVED. IN THE OTHER WORDS, THIS IN VESTMENT DID NOT YIELD ANY EXEMPT INCOME. ACCORDING TO THE LD.C OUNSEL FOR THE ASSESSEE, A DISALLOWANCE AT HALF PERCENT OF THE INV ESTMENT OUGHT TO BE WORKED OUT, WHICH IS EQUIVALENT TO RS.62,365/ -. HE HAS ITA NO.2398/AHD/2017 3 PLACED ON RECORD WORKING SHOWING TOTAL INVESTMENTS AS ON 31.3.2013 AT RS.2,62,16,717/- OUT OF WHICH INVESTME NT EARNED EXEMPT INCOME IS OF RS.1,24,73,178/-; HALF % OF THI S AMOUNT WOULD COME TO RS.62,365/-. THE LD.DR WAS UNABLE TO CONTROVERT THIS CONTENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE . 5. ON DUE CONSIDERATION OF THE ABOVE FACTS, AND RES PECTFULLY FOLLOWING ORDER OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF VIREET INVESTMENT P.LTD. (SUPRA), WE RESTRICT THE D ISALLOWANCE TO RS.62,365/- WHICH IS EQUIVALENT TO HALF-PERCENT OF THE AVERAGE INVESTMENT WHICH YIELDED EXEMPT INCOME DURING THE Y EAR. IN VIEW OF THE ABOVE, APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25 TH MARCH, 2019. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER