Unison Metal Limited, Ahmedabad V. The Dy. CIT, Circle-8, Ahmedabad

ITA 2498/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6035 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.2498/AHD/2014 ASSTT. YEARS: 2010-11 UNISON METAL LIMITED PLOT NO.5015, PHASE-IV RAMOL CHAR RASTA, GIDC VATVA, AHMEDABAD 382 445. PAN : AAACU 2489 A VS. DCIT, CIR.8, AMBAWADI AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : NONE REVENUE BY : SHRI PRASOON KABRA, SR.DR / DATE OF HEARING : 04/05/2017 / DATE OF PRONOUNCEMENT: 08/05/2017 &'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER O F THE LD.CIT(A) DATED 5.6.2014 PASSED FOR THE ASSTT.YEAR 2010-11. 2. IN GROUND NO.1 AND 2 IT HAS PLEADED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.1,08,718/- AND RS.94,820/ - WHICH WERE ADDED BY THE AO ON THE GROUND THAT THE ASSESSEE FAILED TO DE POSIT PF AND ESI CONTRIBUTIONS OF THE EMPLOYEES WITHIN DUE DATE PROV IDED IN THOSE ACTS. 3. THE ASSESSEE HAS PLEADED IN THE GROUND THAT SUCH DISALLOWANCE DESERVES TO BE DELETED IN VIEW OF JUDGMENT OF THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD., 213 CTR 268. ITA NO.2498/AHD/2014 2 4. IN RESPONSE TO THE NOTICE OF HEARING NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD. THE LD.DR HAS POINTED OUT THAT AS FAR AS GRIEVANCE RAISED BY THE ASSESSEE IN GROUND NOS.1 AND 2 ARE CONCERNED, THESE ARE SQUAREL Y RECOVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPN., 366 ITR 170 WHEREIN THE HONBLE COURT HAS UPHELD DISALLOWANCE OF EMPLOYEES PF AND E SI CONTRIBUTION, IF NOT PAID BY AN ASSESSEE BEFORE THE DUE DATE OF THE RESP ECTIVE ACCOUNTS. THEREFORE, WE DO NOT FIND ANY MERIT IN GROUND NOS.1 AND 2. 6. IN GROUND NO.3, GRIEVANCE OF THE ASSESSEE IS THA T THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.69,693/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. 7. IT EMERGES OUT FROM THE RECORD THAT THE LD.AO HA D NOTICED AN INVESTMENT OF RS.4,59,46,802/- IN THE BALANCE SHEET . HE DIRECTED THE ASSESSEE TO DEMONSTRATE EXPENSES CARVED OUT BY IT WHICH IS A TTRIBUTABLE TO SUCH INVESTMENT, WHICH WILL GENERATE TAX FREE INCOME. T HE LD.AO HAS EXAMINED THIS ASPECT IN THE LIGHT OF RULE 8D OF THE INCOME T AX RULES AND WORKED OUT DISALLOWANCE AT RS.69.693/-. THIS DISALLOWANCE HAS BEEN UPHELD BY THE LD.CIT(A) UNDER CLAUSE (III) OF RULE 8D AT THE RATE OF 0.5% OF AVERAGE INVESTMENT. DISCUSSION MADE BY THE AO ON THIS ISSU E READS AS UNDER: 5.3 GROUND NO. (C) WITH SUB-GROUND ARE INTERLINKED AND AGAINST THE DISALLOWANCE U/S 14A OF THE ACT. READ WITH RULE 8D FOR THE AMOUNT OF RS. 6,15,876/-. THE A.O. AFTER CONSIDERING THE INVE STMENT OF APPELLANT IN BALANCE SHEET OF RS. 4,59,46,802/- AND PART OF T HE SAME IN INDIAN COMPANIES (INCOME IN THE FORM OF DIVIDEND 7 LONG TE RM CAPITAL GAIN IS EXEMPT), AFTER REJECTION OF A.O'S EXPLANATION, HELD THAT BORROWED FUND ITA NO.2498/AHD/2014 3 WERE UTILIZED BY APPELLANT FOR MAKING SUCH INVESTME NT. THE A.O. DRAWN HIS SATISFACTION THAT IN THE ABSENCE OF ANY EXPENDI TURE DISALLOWED BY APPELLANT U/S 14A OF THE ACT, SUCH DISALLOWANCE ARE MANDATORY TO BE COMPUTED AS PER RULE 8D AND COMPUTED DISALLOWANCES OF RS. 6,15,876/-. IT IS EVIDENT FROM AUDITED P & L A/C AND BALANCE SH EET THAT APPELLANT WAS HAVING RS. 1,14,17,500/- INVESTMENT IN M/S MANG ALAM ALLOYS LTD. AS ON 31/03/2009 AND DURING PREVIOUS YEAR SHARES WE RE SOLD TO HAVE LONG TERM CAPITAL GAIN (BEING NON LISTED CO. SHARE) AND BALANCE INVESTMENT AT RS. 23,77,500/-. BESIDES THIS THERE I S INVESTMENT IN A FIRM M/S MANGLAM STEEL & ALLOYS LTD. VIETNAM AT RS. 3,54 ,55,955/- AS ON 31/03/2010 WHICH IS A FOREIGN COMPANY AND DIVIDEND IS TAXABLE. THERE ARE OTHER INVESTMENT IN SHARE OF MEHTA ALLOYS LTD., UNISON FORGING LTD., GREEN ENVIRONMENT SERVICES CO-OP SOCIETY LIMI TED., RANJAN POLYESTER LIMITED , SAKET PROJECTS LTD. AND IN INDI AN PARTNERSHIP FIRM. THE APPELLANT UNDER THE HEAD 'OTHER INCOME' IN P & L A/C AT SCHEDULE 12 OF RS. 1,50,99,656/- INCLUDED SHARE OF INCOME FR OM PARTNERSHIP FIRM OF RS. 3,29,599/- AND PROFIT ON SALE OF INVESTMENT OF RS. 1,31,60,000/-. THE APPELLANT HAS EXEMPTED INCOME OF RS. 7,96,600/- BEING SHARE OF PROFIT FROM FIRM IN STATEMENT OF TOTAL INCOME AND T HE RELATABLE EXPENDITURE WERE NOT DISALLOWED. I AM INCLINED WITH A.O. THAT IN THE CASE OF APPELLANT CONSIDERING THE SHARE OF PROFIT F ROM INDIAN PARTNERSHIP FIRM EXEMPTED DISALLOWANCES OF RELATABL E EXPENDITURE REQUIRED TO BE MADE AS PER MANDATORY RULE 8D FOR SE CTION 14A OF THE ACT. BUT, CONSIDERING THE DETAILS AS SUBMITTED BY A PPELLANT IN APPEAL (AS EVIDENT IN EARLIER YEARS TAX AUDIT REPORT) THAT ALL SUCH INVESTMENT WERE OLD AND MADE OUT OF SURPLUS FUND, THERE IS NO INVES TMENT OF BORROWED FUND AND A.O. IS NOT JUSTIFIED IN CONSIDERING THE I NTEREST DISALLOWANCE. FURTHER, INVESTMENT IN M/S MANGLAM STEEL & ALLOYS L TD. VIETNAM DOES NOT GIVE RISE TO TAX FREE DIVIDEND, THE INVESTMENT IS NOT REQUIRED TO BE CONSIDERED IN RULE 8D. I AM INCLINED WITH APPELLANT AND THEREFORE THE WORKING OF DISALLOWANCES OF SUCH EXPENDITURE UNDER RULE 8D WILL BE AS FOLLOWS: (I) AS PER RULE 8D (2)(I) NIL (DIRECT EXPENSES) (II) AS PER RULE 8D(2)(II) NIL (INTEREST DISALL.) (III) 0.5 % OF AV. INVESTMENT AS PER RULE 8D(2)(III) BEING INDIRECT EXPENSE. ITA NO.2498/AHD/2014 4 0.5% OF RS. 1,39,38,547 = RS. 69,693 NOTE : AV. INVESTMENT = OPENING INVESTMENT + CLOSIN G INVESTMENT = (37374488 - 19988240)+(45946802 - 35455955) 2 = 17386248+10490847 2 = 27877095 2 = RS. 1,39,38,547 (CONSIDERING M/S MANGLAM STEEL & ALLOYS LT D. VIETNAM AS TAXABLE INVESTMENT PREPOSITION) THEREFORE, THE DISALLOWANCES U/S.14A OF THE ACT,, READ WITH RULE 8D COMES TO RS.69,693/-. THE AO IS DIRECTED TO DEL ETE THE BALANCE ADDITION OF RS.5,46,183/- (6,15,876 69,693). THE APPELLANT GETS PART RELIEF. ALL THE GROUNDS ARE TREATED AS PARTLY ALLO WED. 8. AFTER GOING THROUGH THE FINDINGS OF THE LD.CIT(A ), WE DO NOT FIND ANY REASON TO INTERFERE IN IT. THE LD.CIT(A) HAS RECOR DED A FINDING THAT INVESTMENTS ARE OLD INVESTMENT, AND THEREFORE, INTE REST EXPENDITURE CANNOT BE ALLOCATED TOWARDS THIS INVESTMENT. THE ONLY AMOUN T WHICH HAS BEEN RETAINED BY THE LD.CIT(A) IS ADMINISTRATIVE EXPENDITURE, WHI CH CAN BE WORKED OUT AT 0.5% OF AVERAGE INVESTMENT. CONSIDERING THIS FINDI NG OF THE LD.CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE IN IT. ACCORDINGLY , THE APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 8 TH MAY, 2017 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/05/2017