Lok Prakashan Ltd., Ahmedabad V. The DCIT.,Central .Circle-1(3), Ahmedabad

ITA 2476/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0108 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Proportionate interest; Capital expenditure
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO.2476/AHD/2013 / A.Y. 2010-11 LOK PRAKASHAN LTD., GUJRAT SAMACHAR BHAVAN, KHANPUR, AHMEDABAD-1 PAN : AAACL 2742 F VS DCIT, CENTRAL CIRCLE 1(3), AHMEDABAD ./ ITA NO.2863/AHD/2013 / A.Y. 2010-11 ACIT, CENTRAL CIRCLE 1(3), AHMEDABAD VS L OK PRAKASHAN LTD., GUJRAT SAMACHAR BHAVAN, KHANPUR, AHMEDABAD-1 PAN : AAACL 2742 F / (APPELLANT) / (RESPONDENT) B Y ASSESSEE : SHRI P.M. MEHTA, AR B Y REVENUE : SHRI VILAS V. SHINDE, SR DR / DATE OF HEARING : 17/08/2016 /DATE OF PRONOUNCEMENT: 10/11/2016 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THE ASSESSEE AND REVENUE HAVE INSTITUTED THE INSTAN T CROSS-APPEALS FOR ASSESSMENT YEAR 2010-11, AGAINST CIT(A)-I, AHME DABAD ORDER 17.09.2013 PASSED IN CASE NO. CIT(A)-I/CC.1(3)/003/ 2013-14, IN PROCEEDINGS U/S 143(3) OF THE I.T. ACT, 1963, IN SH ORT THE ACT. 2. WE ADVERT TO RIVAL PLEADINGS. THE ASSESSEES SOL E SUBSTANTIVE GROUND IN ITS APPEAL ITA NO.2476/AHD/2013 CHALLENGES THE C IT(A) ORDER CONFIRMING SECTION 14A R.W. RULE 8D DISALLOWANCE OF RS.61,74,046/- ITA NOS. 2476 & 2863/AHD/2013 ASSESSEE : LOK PRAKASHAN LTD A.Y. 2010-11 - 2 - COMPRISING OF INTEREST AMOUNT OF RS.75,864/- AND AD MINISTRATIVE EXPENDITURE OF RS.60,98,182/-, RESPECTIVELY. THE R EVENUES APPEAL ITA NO.2863/AHD/2013 ON THE OTHER HAND SEEKS TO REVIVE DISALLOWANCE/ADDITION OF BUSINESS DEVELOPMENT EXPEN DITURE AND THAT OF OUTSTANDING CREDITORS LIABILITY U/S 41(1) OF THE AC T AMOUNTING TO RS.3,21,91,284/- AND RS.2,53,48,895/-; RESPECTIVELY . 3. WE COME TO ASSESSEES APPEAL FIRST. IT PRINTS/P UBLISHES NEWSPAPERS AND MAGAZINES. THE ASSESSEE INVESTED SUMS OF RS.3, 37,95,19,606/- AND RS.84,39,32,138/- IN MUTUAL FUNDS AND SHARES RESPEC TIVELY. THESE INVESTMENTS TOTALLED TO RS.4,22,34,51,744/-. THE S AME GAVE RISE TO IMPUGNED DIVIDEND INCOME OF RS.5,49,52,412/- TREATE D AS EXEMPT UNDER THE PROVISIONS OF THE ACT. THIS FURTHER FOLLOWED T AX FREE INTEREST OF RS.1,74,38,356/-. THE ASSESSEE SUO MOTO DISALLOWED A SUM OF RS.10,81,020 /- . THE ASSESSING OFFICER SOUGHT TO INVOKE SECTION 14A R.W. RULE 8D FOR THE PURPOSE OF COMPUTING DISALLOWANCE OF EXPENDITURE IN RELATION TO THE ABOVE EXEMPT INCOME. THE ASSESSEE FILED REPLY INTER ALIA STATING THAT IT HAD HUGE INTEREST FREE FUNDS, THE IMPUGNED TAX FREE INV ESTMENTS HAD BEEN MADE FROM NON-INTEREST BEARING FUNDS IN ORDER TO AC QUIRE STRATEGIC INTEREST AND THAT ITS SOU MOTO DISALLOWANCE FIGURE HEREINABOVE COVERED ALL FACETS OF RULE 8D OF THE INCOME-TAX RULES. THE ASSESSING OFF ICER IN ASSESSMENT ORDER DATED 05.03.2013 REJECTED ALL THESE PLEAS. HE NOTICED THAT THE ASSESSEE HAD DEBITED INTEREST AMOUNT OF RS.4,88,440/- IN P&L ACCOUNT. ITS ASSESSMENT ORDER FOR AY 2006-07 DULY STATED THAT TH E ABOVE INTEREST HAD BEEN PAID ON ACCOUNT OF APPLICATION MONEY IN IPOS O F VARIOUS COMPANIES. THE ASSESSING OFFICER FURTHER OBSERVED THAT SUCH KI ND OF INVESTMENTS WOULD CREATE NEED FOR BORROWED FUNDS. HE ACCORDING LY PROCEEDED TO COMPUTE THE IMPUGNED DISALLOWANCE AND REDUCED THE S AME FROM ASSESSEES SUO MOTO FIGURE (SUPRA). ITA NOS. 2476 & 2863/AHD/2013 ASSESSEE : LOK PRAKASHAN LTD A.Y. 2010-11 - 3 - 4. THE ASSESSEE PREFERRED APPEAL. THE CASE FILE IN DICATES THAT THE CIT(A) FOLLOWS HIS ORDER FOR AY 2009-10 IN ASSESSEE S OWN CASE HOLDING THAT IT HAD FAILED TO PROVE NEXUS BETWEEN ITS NON-I NTEREST BEARING FUNDS VIS-A-VIS THE IMPUGNED TAX FREE INVESTMENTS. HE F URTHER CONCLUDES THAT INTEREST EXPENSES OF RS.19,69,881/- HAD ALREADY BEE N DEBITED THEREIN. THE CIT(A) ACCORDINGLY CONFIRMS ASSESSING OFFICERS FIN DINGS RELATING TO THE IMPUGNED DISALLOWANCE. THIS LEAVES THE ASSESSEE AG GRIEVED. 5. WE HAVE HEARD BOTH THE PARTIES QUA THE IMPUGNED ISSUE OF CORRECTNESS OF SECTION 14A R.W. RULE 8D DISALLOWANC E OF RS.61,74,046/- IN QUESTION. THERE IS NO DISPUTE ABOUT THE RELEVANT F ACTS AND FIGURES NARRATED HEREINABOVE PERTAINING TO ASSESSEES TAX FREE INVES TMENTS AND EXEMPT INCOME FORMING SUBJECT MATTER OF THE INSTANT APPEAL . SHRI MEHTA TAKES US TO PAPER-BOOK PAGE NO.104 CONTAINING THIS TRIBUNAL S ORDER IN ITA NO.1510 & 1659/AHD/2012 DECIDED ON 12.02.2016 IN ASSESSEES OWN CASE FOR AY 2009-10 UPHOLDING IDENTICAL SECTION 14A DISALLOWANC E PERTAINING TO PROPORTIONATE INTEREST AND ADMINISTRATIVE EXPENDITU RE. HE STATES VERY FAIRLY THAT THE SAID CO-ORDINATE BENCH HAS CONFIRME D SIMILAR DISALLOWANCE ON IDENTICAL FACTS. HIS ONLY CONTENTION IS THAT ANO THER CO-ORDINATE BENCH OF THIS TRIBUNAL IN MORGAN STANLEY INDIA SECURITIES PV T LTD VS. ACIT- ITA NO.5072/MUM/2005 DECIDED ON 13.04.2011 FOLLOWED IN DCIT VS. TRADE APARTMENT LTD ITA NO.1277/KOL/2011 DECIDED ON 30.03 .2012 HOLD THAT SUCH AN INTEREST DISALLOWANCE IS TO BE COMPUTED ON NET INTEREST FIGURE INSTEAD OF THE GROSS ONE. THE REVENUE DOES NOT DIS PUTE THIS LEGAL POSITION. WE THUS FIND FORCE IN ASSESSEES CONTENTION ON THIS LIMITED ASPECT OF INTEREST DISALLOWANCE AND DIRECT THE ASSESSING OFFI CER TO PROCEED ON NET INTEREST BASIS ONLY. WE AGREE WITH LD. CIT(A)S FI NDINGS IN PRINCIPLE AND REMIT THE ISSUE BACK TO THE ASSESSING AUTHORITY TO RE-COMPUTE THE ITA NOS. 2476 & 2863/AHD/2013 ASSESSEE : LOK PRAKASHAN LTD A.Y. 2010-11 - 4 - IMPUGNED INTEREST DISALLOWANCE AFRESH AFTER AFFORDI NG ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESS EES ONLY SUBSTANTIVE GROUND AS WELL AS ITS APPEAL ITA NO.2476/AHD/2013 P ARTLY SUCCEEDS FOR STATISTICAL PURPOSES. 6. WE NOW COME TO REVENUES APPEAL ITA NO.2863/AHD/ 2013. ITS FIRST SUBSTANTIVE GROUND CHALLENGES THE CIT(A)S ORDER DE LETING BUSINESS DEVELOPMENT EXPENDITURE DISALLOWANCE OF RS.3,21,91, 284/- AS MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER BY TREATING T HE SAME TO BE CAPITAL EXPENDITURE. BOTH THE LD. REPRESENTATIVES ARE AD IDEM THAT THIS TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AYS 2005-06 TO 20 09-10 (SUPRA) FOLLOWS YET ANOTHER DECISION IN ITS CASE PERTAINING TO AY 2 001-02 HOLDING IDENTICAL BUSINESS DEVELOPMENT EXPENDITURE TO BE REVENUE IN N ATURE. LD. DEPARTMENTAL REPRESENTATIVE FAILS TO POINT OUT ANY DISTINCTION ON THE RELEVANT FACTS INVOLVED. WE THUS FIND NO REASON TO INTERFERE IN THE CIT(A)S CONCLUSION UNDER CHALLENGE. THE REVENUE FAILS IN I TS FIRST SUBSTANTIVE GROUND. 7. THE REVENUES LATTER SUBSTANTIVE GROUND SEEKS TO REVIVE SECTION 41(1) ADDITION OF OUTSTANDING CREDITORS LIABILITY O F RS.2,53,48,895/- AS ADDED IN THE COURSE OF ASSESSMENT. THE ASSESSING O FFICER INVOKED THE ABOVE STATUTORY PROVISION FOR THE REASON THAT THE A SSESSEE HAD BEEN SHOWING THE IMPUGNED LIABILITIES FOR A TIME PERIOD EXCEEDING THREE YEARS. THE CIT(A) REVERSES THE SAME. THE CASE FILE INDICA TES THAT THIS TRIBUNAL IN AY 2009-10 (SUPRA) FOLLOWS HONBLE JURISDICTIONAL H IGH COURTS DECISION IN CIT VS. NITIN S. GARG, (2012) 22 TAXMAN.COM 59 (GUJ ) TO HOLD THAT SUCH A REASON IN ABSENCE OF ANY EVIDENCE PROVING REMISSION OR CESSATION OF LIABILITY IS NOT SUSTAINABLE. THE REVENUE DOES NOT POINT ANY EXCEPTION THERETO IN FACTS OF THE INSTANT CASE. WE ACCORDINGL Y FOLLOW JUDICIAL ITA NOS. 2476 & 2863/AHD/2013 ASSESSEE : LOK PRAKASHAN LTD A.Y. 2010-11 - 5 - CONSISTENCY TO UPHOLD THE CIT(A)S FINDINGS UNDER C HALLENGE. THIS LATTER GROUND AS WELL AS REVENUES APPEAL ITA NO.2862/AHD/ 2013 IS DECLINED. 8. THE ASSESSEES APPEAL ITA NO.2476/AHD/2013 IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. THE REVENUES APPEAL ITA NO.2 863/AHD/2013 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 10 TH NOVEMBER, 2016 AT AHMEDABAD SD/- SD/- (PRAMOD KUMAR) ( S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED 10/11/2016 *BT ! '$% &% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. % & / CONCERNED CIT 4. & ( ) / THE CIT(A) 5. ) % , % , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. TRUE COPY / BY ORDER, TRUE COPY / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD