The Assistant Commissioner of Income Tax, Circle-1 (1), Panaji., Panaji V. M/s Alcon Resort Holdings Pvt. Ltd., Panaji

ITA 24/PAN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2109 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 19-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMESH S MUTAGAR
• Keywords: Reasonable cause
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 2 4 /P A N/201 6 (ASST. YEAR : 20 12 - 1 3 ) ACIT, CIRCLE - (1), PANAJI GOA. VS. M/S. ALCON RESORT HOLDINGS LTD., 1 ST FLOOR, VELHO BUILDING, PANAJI - GOA PAN NO. AABCA 6880 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JITENDRA JAIN ADV. DEPARTMENT BY : SHRI RAMESH S. MUTAGAR - D R DATE OF HEARING : 03 / 0 5 /201 6 . DATE OF PRONOUNCEMENT : 03 / 0 5 /201 6 . O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI - 1 , DATED 10 / 11 /201 5 . 2. THE APPEAL FILED B Y THE REVENUE IS BARRED BY LIMITATION BY 06 DAYS. THE ASSESSING OFFICER HAS FILED A CONDONATION PETITION REQUESTING FOR CONDO NA TION OF DELAY AND WE ARE SATIS FIED THAT THE DELAY IN FILING OF THE APPEAL BY 06 DAYS , WAS DUE TO REASONABLE CAUSE, HENCE, WE CONDONE THE DELAY A ND ADMIT THE APPEAL OF THE REV E NUE. 3 . THE GROUND NO.1 OF THE APPEAL OF THE REVENUE IS GENERAL IN NATURE, HENCE, REQUIRES NO ADJUDICATION BY US. 2 ITA NO. 24/PAN/2016 4 . IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SEC. 14A OF THE ACT. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED DIVIDEND ON MUTUAL FUNDS AND SHARES, AMOUNTING TO 28,56,600/ - , WHICH IS EXEMPT ED UNDER SEC. 10 OF THE ACT. THEREFORE, HE, APPLYING SEC. 14A READ WITH RULE 8D OF THE ACT, DISALLOWED 47,06,843/ - ON ACCOUNT OF INTEREST EXPENDITURE AND 3,37,370/ - ON ACCOUNT OF ADMINISTRATIVE EXPENSES AND MADE A TOTAL DISALLOWANCE , AGGREGATING TO 50,44,213/ - BEING EXPENDITURE INCURRED FOR EARNING THE EXEMPT ED INCOME. 6 . ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE INVESTMENT S OF THE ASSESSEE AS ON 31/03/2011 WERE 6 .78 CRORES, WHICH WAS REDUCED TO 6.75 CRORES ON 31/03/2012 , AND THUS, THERE WERE NO NEW INVESTMENTS MADE DURING THE YEAR UNDER CONSIDERATION . HE ALSO OBSERVED THAT THE ASSESSEE HAD SHOWN PROFITS AFTER TAX DURING THE FINANCIAL YEAR 2008 - 09 OF 4.74 CRORES, IN FINANCIAL YEAR 2009 - 10 OF 5.36 CRORES AND IN FINANCIAL YEAR 2010 - 11 OF 3.77 CRORES AND THEREFORE, IT IS THE NORMAL PRESUMPTION THAT THE ASSESSEE MADE INVESTMENTS OUT OF ITS OWN FUNDS AND BORROWED FUNDS WERE NOT UTILIZED FOR THE SAME AND THEREFORE,, THE PROVISIONS OF SEC. 14A CANNOT BE INVOKED FOR MAKING DISALLOWANCE OUT OF INTEREST EXPENDITURE. 7 . FURTHER, COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPENSES, THE ASSESSEE DISALLOWED A SUM OF 700/ - WHICH IS NOT SUFFIC IENT . HE OBSERVED THAT DURING THE APPELLATE PROCEEDINGS , THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE OFFERED 2 LAC AS ADDITIONAL DISALLOWANCE TOWARDS RELATABLE ADMINISTRATIVE EXPENSES UNDER SEC. 14A 3 ITA NO. 24/PAN/2016 AND THEREFORE, HE RESTRI CT ED THE DISALLOWANCE TO 2 LAC UNDER THE HEAD ADMIN I STRATIVE EXPENSES AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8 . BEFORE US, THE DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER. 9. ON THE OTHER HAND, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). HE SUBMITTED THAT THE DISALLOWANCE UNDER THE HEAD ADMINISTRATIVE EXPENSES , SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR 2 LAC , WHICH WAS ADMITTED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) , SHOULD BE SUSTAINED. 10 . AFTER CONSIDERING THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING TO THE EFFECT THAT DURING THE YEAR , NO NEW INVESTMENTS IN MUTUAL FUNDS AND SHARE S, WERE MADE BY THE ASSESSEE AS THE INVESTMENTS AS ON 31/03/2011 WHICH STOOD AT 6.78 CRORES WAS REDUCED TO 6.75 CRORES AS ON 31/03/2012 . HE FURTHER GAVE A FINDING TO THE EFFECT THAT THE ASSESSEE HAD SHOWN PROFITS AFTER TAX IN THE FINANCIAL YEAR S 2008 - 09, 2009 - 10 & 2010 - 11 AT 4.74 CRORES, 5.36 CRORES AND 3.77 CRORES RESPECTIVELY AND THEREFORE, IT IS THE NORMAL PRESUMPTION THAT THE INVESTMENTS WERE MADE BY THE ASSESSEE IN MUTUAL FUNDS AND SHARES , OUT OF ITS OWN FUNDS. THE DEPARTMENT HAS BROUGHT NO MATERIAL BEFORE US TO CONTROVERT THE ABOVE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE AGAINST THE DELETION OF DISALLOWANCE OF INTEREST EXPE NDITURE UNDER SEC. 14A IS DISMISSED. 11 . WITH REGARD TO SUSTENANCE OF DISALLOWANCE UNDER THE HEAD ADMIN I STRATIVE EXPENSES UNDER SEC. 14A OF 2 LAC IN PLACE OF 4 ITA NO. 24/PAN/2016 3,37,370/ - MADE BY THE ASSESSING OFFICER, WE FIND THAT DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE 0.5% OF THE ADMINISTRATIVE EXPENDITURE WORKED OUT UNDER SUB - PAR T (I I I) OF SUB - CLAUSE ( 2 ) OF RULE 8 D ON THE BASIS OF AVERAGE VALUE OF THE INVESTMENT INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS APPE A RING IN THE BALANCE SHEET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOUS YEAR WAS MORE THAN 2 LAC . OUR THIS VIEW FINDS SUPPORT FROM THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S. APEX PACKING PRODUCTS PVT. LTD. VS. ACIT IN ITA NO. 28/PAN/2016, ORDER DATED 27/04/2016 . WE FIND THAT THE ASSESSING OFFICER WHILE CALCULATING THE DISALLOWANCE FOR ADMINISTRATIVE EXPENDITURE HAS TAKEN THE AVERAGE VALUE OF TOTAL INVESTMENTS AS APPEARIN G IN THE BALANCE SHEET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOUS YEAR, HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED . 12 . IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE PROVISIONS OF SEC. 115JB OF THE INCOME TAX ACT, 1961 WHICH STATES THAT BOOK PROFIT MEANS NET PROFIT AS INCREASED BY THE AMO UNT OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECS. 10, 11 OR 12 APPLY WHILE COMPUTING THE BOOK PROFIT. 13 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFIT UNDER SEC. 115JB OF THE ACT, MADE ADDITION OF DISALLOWANCE UNDER SEC. 14A OF THE ACT. ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SAME OBSERVING THAT NO DEFECT IN THE BOOKS OF ACCOUNT WAS POINTED OUT AND, THEREFORE, THE ADDITION CANNOT BE MADE UNDER SEC. 115JB TO THE BOOK PROFIT OF THE ASSESSEE. 5 ITA NO. 24/PAN/2016 14 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN VIEW OF THE SPECIFIC PROVISION IN SEC. 115JB OF THE ACT WHICH STATES THE BOOK PROFITS SHOWN IN THE PROFIT & LOSS ACCOUNT IS TO BE INCREASED BY THE AMOUNT OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECS. 10, 11 OR 12 APPLY, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TO BE REV ERSED AND THE GROUND OF APPEAL OF THE REVENUE HAS TO BE ALLOWED. ACCORDINGLY , WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND ALLOW THIS GROUND OF APPEAL OF THE REVENUE . 15 IN THE RESULT, APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 3 RD DAY OF MAY , 201 6 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03 RD MAY , 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI