M/s Khoday Breweries Ltd , Bangalore V. Deputy Commissioner of Income TAx Circle-4(1)(1), Bangalore

ITA 2487/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4344 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 250; 13

Judgement Text

ITA NO.2487(B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL B ENGALURU BENCHES : A , B ENGALURU BEFORE SHRI P RADIP KUMAR KEDIA, AM & SMT.BEENA PILLAI, J M ITA NO. 2487 (BANG)/2017 (ASSESSMENT YEAR : 2012 - 13 ) M/S KHODAY BREWERIES LIMITED . BREWERY HOUSE, 7 TH MILE, KANAKPURA ROAD, BANGALORE - 560 0 62 PAN NO. AA ACK6732E APPELLANT VS . THE DEPUTY COMMISSIONER OF INCOME T AX , CIRCLE - 4( 1)( 1 ), BMTC BUILDING, 6THFLOOR, KORAMANAGALA, BANGALORE RESPONDENT APPELLANT BY : SHRI V. SRIDHAR, C A REVENUE BY : SHRI B.R.RAMESH, JC IT DATE OF HEARING : 24 - 0 2 - 20 20 DATE OF PRONOUNCEMENT : 26 - 02 - 2020 O R D E R PER PRA DIP KUMAR KEDIA : A M THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 , B ENGALURU DATED 30 - 08 - 2017 ARISING IN THE RESPECTIVE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE IT ACT, 1961 ( THE ACT ) RELATING TO ASSESSMENT YEAR 2012 - 13 . ITA NO.2487(B)/2017 2 2. THE SUBSTANTIVE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE TWO FOLD; I ) DISALLOWANCE CARRIED OUT BY THE AO U/S 14A OF THE ACT AGAINST THE EXEMPT INCOME EARNED BY THE ASSESSEE. II) THE ADDITION ON ACCOUNT OF NEGATIVE VALUE OF OPENING STOCK. 3. THE FIRST ISSUE DEALS WITH DISALLOWANCE OF RS.17,933/ - MA D E U/S 14A OF THE ACT , R.W.S. 80D OF THE RULES. 3.1 WE HAVE HEARD RIVAL SUBMISSIONS ON THE ISSUE. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE ASSESSEE HAS CLAIMED THAT NO EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR. HOWVER, THE CIT( A) HAS SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 17933/ - AS COMPUTED AS PER RULE 8D(2)(III)OF THE ACT. IN VIEW OF NIL EXEMPT INCOME, NO ADDITIONAL DISALLOWANCE IS PERMISSIBLE IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY P. LTD. 372 ITR 97 (GUJ.) . IN ANOTHER JUDGMENT IN THE CASE OF CIT VS. VISION FINSTOCK LTD. TAX APPEAL NO. 486 OF 2017 DATED 31.07.2017 THE HONBLE GUJARAT HIGH COURT HAS ONCE AGAIN EXPRESSED THE SIMILAR VIEW AND HELD THAT DISALLOWA NCE OF EXPENDITURE IN TERMS OF SECTION 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME ITSELF. IT IS NOTICED THAT SLP(CIVIL) [DIARY NO. 13152/2018 ] FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN VISION FINSTOCK LTD. (SUPRA ) HAS BEEN DISMISSED ON MERITS BY THE HONBLE SUPREME COURT VIDE ORDER DATED 07.05.2018. THE REFERENCE IS ALSO MADE TO THE DECISION OF HONBLE SUPREME COURT OF INDIA IN CIT VS. CHETTINAD LOGISTICS (P.) LTD. (2018) 95 TAXMANN.COM 250 (SC). THUS, IN THE LI GHT OF JUDICIAL PRECEDENTS NOTED ABOVE, NO ADDITIONAL DISALLOWANCE IS CALLED FOR UNDER S.14A OF THE ACT IN EXCESS OF EXEMPT INCOME. 3.2 GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. ITA NO.2487(B)/2017 3 4. GROUND NO.2 CONCERN S NEGATIVE VALUE OF OPENING STOCK . 4.1 IN THE COURSE OF HEARING , THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO A QUANTITATIVE STATEMENT OF B REWERY DIVISION OF THE ASSESSEE COMPANY FOR ASSESSMENT YEAR 2012 - 13 IN QUESTION AND POINTED OUT THAT THE AGGREGATE OF OPENING STOCK AMOUNTING TO RS.2,02,696/ - WITH REGARD TO EMPTY GLASS BOTTLES , SUGAR AND MAIZE FLAKE WAS ADMITTEDLY SHOWN IN THE NEGATIVE . THE A O HAS ALLEGED LACK OF EXPLANATION IN THIS REGARD AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESS E E FOR THE ASSESSMENT YEA R IN QUESTION . THE CIT(A)ALSO ENDORSED THE AFORESAID ACTION OF THE AO IN FIRST APPEAL. 4.2 IT IS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE OPENING STOCK IN NEGATIVE SPRINGS FROM INCIDENCE HAPPENED IN THE EARLIER YEARS AND THEREFORE , ANY PROFIT IN RELATION TO SUCH OPENING STOCK CAN POSSIBLY ARISE ONLY IN THE EARLIER YEARS AND THE ADDITION MADE DURING THE YEAR IN RELATION TO NEGATIVE OPENING STOCK IS WHOLLY UNJUSTIFIED. 4.3 WE FIND MERIT IN SUCH PLEA. THE OPENING STOCK IN NEGATIVE APPARENTLY BELIES THE ACCOUNTING PRACTICES. HOWEVER, S UCH NEGATIVE OPENING STOCK, IF REDUCED FROM OTHER POSITIVE STOCKS HAS ACTUALLY INCREASE D THE PROFITS OF THE YEAR. THEREFORE, NO LOSS HAS OCCURRED TO THE REVENUE PER SE IN SO FAR AS THE PROFIT OF THE ASSESSMENT YEAR 2012 - 13 IS CONCERNED . S UCH NEGATIVE OPENING STOCK WOULD PURPORTEDLY BE A CAUSE OF CONCERN FOR TRUE AND FAIR PICTURE TOWARDS BUSINESS PROFITS OF THE EARLIER YEARS. THUS, IT WILL BE FOR THE AO TO DO SO IN ACCORDANCE WITH LAW , IF CONS IDERED NECESSARY OR EXPEDIENT. WE REFRAIN FROM MAKING ANY FURTHER COMMENT IN THIS REGARD. PERTINENT TO NOTE, SUCH OBSERVATIONS SHOULD NOT BE REGARDED AS ANY FINDING OR DIRECTION FROM THE TRIBUNAL. THE ADDITION ON ACCOUNT OF NEGATIVE OPENING STOCK IS NOT P ERMISSIBLE IN THE ASSESSMENT YEAR 2012 - 13 IN QUESTION IN THE ABSENCE OF ANY CAUSE OF ACTION. ITA NO.2487(B)/2017 4 4.4 GROUND NO.2 OF THE ASSESSEE S APPEAL IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE AS S ES S EE IS ALLOWED. SD/ - S D/ - (BEENA PILLAI) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BENGALURU DATED: 26 - 02 - 2020 * AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6 .GUARD FILE BY ORDER ASST. REGISTRAR ITA NO.155(B)/2017 5