ITO, Chandigarh V. M/s Sri Rama Steels Ltd., Manimajra

ITA 256/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73422 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Earning of tax free income
• Section: 43B; 14A; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 256/CHD/2013 ASSESSMENT YEAR : 2009-10 I.T.O. WARD 3(4) VS. SRI RAMA STEELS LTD CHANDIGARH SCO 904, NAC MANIMAJRA AAKCS 4495 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MANJIT SINGH RESPONDENT BY: NONE DATE OF HEARING 2 2.1.2014 DATE OF PRONOUNCEMENT 27.1.2 014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 31.12.2012 OF THE LD CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT( A), IS JUSTIFIED IN DELETING THE ADDITION OF RS. 1,66,70,976/- MADE ON ACCOUNT OF DISALLOWANCE FOR VIOLATION OF SECTION 40(A)(IA), 44 3B, 36(1)(VA) AND 37. 2. WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT( A), IS JUSTIFIED ON ONE HAND UPHOLDING THE ADDITION MADE U/S 14A AT RS. 2,17,649/- AND ON THE OTHER HAND ALLOWING DEDUCTION U/S 80IC. 3. WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT( A), IS JUSTIFIED ON ONE HAND UPHOLDING THE ADDITION MADE U/S 36(1)(I II) AT RS. 29,55,517/- AND ON THE OTHER HAND ALLOWING DEDUCTION U/S 80IC. 4. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUNDS / GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 5. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3 NONE APPEARED DESPITE NOTICE. IT WAS SEEN FROM T HE PERUSAL OF THE RECORD THAT ON EARLIER OCCASIONS ALS O, ONLY 2 ADJOURNMENTS HAVE BEEN TAKEN. THEREFORE WE PROCEED ED TO HEAR THE APPEAL ON EX-PARTE BASIS. 4 THE REVENUE WAS HEARD. 5 GROUND NO. 1 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R. FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER MADE CERTAIN ADD ITIONS TOTALING TO RS. 1,66,70,976/- U/S 40(A)(IA), 43B AN D 36(1)(VA) AND 37 OF THE ACT. 6 BEFORE THE ASSESSING OFFICER IT WAS SUBMITTED THA T ALTERNATIVELY DEDUCTION U/S 80IC AGAINST THE DISALL OWANCES MADE UNDER THESE SECTIONS, MAY BE ALLOWED. HOWEVER , THE ASSESSING OFFICER DID NOT AGREE WITH THESE SUBMISSI ONS AND OBSERVED THAT DISALLOWANCES MADE UNDER VARIOUS PROV ISIONS, CANNOT BE TREATED AS INCOME ELIGIBLE FOR DEDUCTION AND ACCORDINGLY REJECTED THIS GROUND. 7 ON APPEAL, THE SUBMISSIONS MADE BEFORE THE ASSES SING OFFICER WERE REITERATED AND RELIANCE WAS PLACED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN CASE OF ALLIED INDUSTRIES, 31 DTR 323 AND CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF M/S MEGA PACKAGES (ITA NO. 67/C HD/2011). 8 THE LD. CIT(A) AFTER EXAMINING THESE SUBMISSIONS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE P ARA 3.3 WHICH IS AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL AND HAVE PERUSED THE JUDGMENTS CITED BY THE LD. COUNSEL . THE DEDUCTION U/S 80IC OF THE ACT HAS BEEN DISALLOWED B Y THE ASSESSING OFFICER ON DISALLOWANCES MADE U/S 40(A)(I A), 43B, 36(1)(VA) AND 37 OF THE ACT. ALL THESE DISALLOWANCE S ARE OUT OF THE EXPENSES CLAIMED AGAINST BUSINESS INCOME AND SO THE SE DISALLOWANCES WILL HAVE THE RESULT OF INCREASING TH E PROFIT OF THE APPELLANT. HENCE, DEDUCTION U/S 80IC OF THE ACT IS TO BE CORRESPONDINGLY INCREASED IN VIEW OF THE DECISIONS OF HONBLE ITAT, CHANDIGARH IN THE CASE OF M/S MEGA PACKAGES ( SUPRA) AND OF ITAT, MUMBAI IN THE CASE OF M/S MEHA MEDICARE (S UPRA). THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW DEDUCTION U/S 3 80IC OF THE ACT IN RESPECT OF THE ENTIRE AMOUNT OF RS. 1,66,70,976/-. GROUND OF APPEAL NO. 2 IS ALLOWED. ABOVE CLEARLY SHOW THAT THE LD. CIT(A) HAS ALLOWED RELIEF ON THE BASIS OF DECISION OF THE TRIBUNAL AS WELL AS TH E DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN CASE OF ALL IED INDUSTRIES (SUPRA) AND CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF M/S MEGA PACKAGES (SUPRA). THE REFORE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E AND WE CONFIRM THE ORDER OF THE LD. CIT(A). 9 GROUND NO. 2 - AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R. FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD, WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE AN INVES TMENT OF RS. 1,09,25,000/-, RS. 2,00,000/- AND RS. 49,000/- IN THE SHARES OF M/S CHANDIGARH IRON & STEEL CO. LTD, M/S SHIVALIK SOLID WASTE PVT LTD. AND PBN LLARGE CAP FUND RESPEC TIVELY. IT WAS OBSERVED THAT SAME INVESTMENTS HAVE BEEN MADE I N THE SHARES OF OTHER COMPANIES AND INCOME FROM SUCH SHAR E HOLDING WILL BE EXEMPT THEREFORE THE PROVISIONS OF SECTION 14A ARE ATTRACTED. ACCORDINGLY HE INVOKED THE PROVISIONS O F SECTION 14A R.W.R. 8D AND MADE DISALLOWANCE OF RS. 2,17,649 /-. 10 THE LD. CIT(A) ON THIS ADDITION ALSO APPLIED SAM E THEORY THAT IT WOULD ULTIMATELY BE TREATED AS BUSINESS INC OME AND THEREFORE IN VIEW OF THE DECISION OF ALLIED INDUSTR IES (SUPRA)AND CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF M/S MEG A PACKAGES (SUPRA), THE ASSESSEE IS ENTITLED TO DEDUC TION U/S 80IC. 11 BEFORE US, THE LD. D.R. FOR THE REVENUE SUBMITTE D THAT THEORY IN CASE OF ALLIED INDUSTRIES (SUPRA)AND CHAN DIGARH 4 BENCH OF THE TRIBUNAL IN CASE OF M/S MEGA PACKAGES (SUPRA) CAN NOT BE APPLIED FOR SPECIFIC DISALLOWANCE U/S 14 A BECAUSE IT IS A PROVISION PLACED AT THE BEGINNING OF THE HEADS OF INCOME. 12 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R . FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD WE FIND THAT SEC 14A HAS BEEN PLACED AT THE BEGINNING OF VARIOUS HEA DS OF INCOME WHICH MEANS IT IS APPLICABLE TO ALL HEADS OF INCOME. THE PURPOSE OF THIS PROVISION IS NOT TO ALLOW EXPEN DITURE WHICH HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. THERE FORE IF THIS DISALLOWANCE IS TO BE NULLIFIED BY MAKING DEDUCTION U/S 80IC THEN THE PURPOSE OF THE PROVISION GETS DEFEATED. I T MAY FURTHER BE NOTED THAT WHY DEDUCTION HAS BEEN HELD TO BE ALL OWABLE U/S 80IC IN RESPECT OF OTHER DISALLOWANCES MADE U/S 40 (A)(IA), 43B, 36(1)(VA) AND 37 IS THAT THESE SECTIONS FORM P ART OF SECTIONS 28 TO 44 WHICH PERTAINS TO THE HEAD INCOM E FROM BUSINESS AND PROFESSION. THE INCOME UNDER THIS HE AD HAS TO BE COMPUTED AS PER THESE SECTIONS AND IF SOME DISAL LOWANCE IS THERE THEN SUCH DISALLOWANCE WOULD ALSO FORM PART O F INCOME UNDER THIS HEAD ONLY. THE SAME PROPOSITION IS NOT APPLICABLE IN CASE OF DISALLOWANCE U/S 14A BECAUSE THAT IS NOT PA RT OF THE PROVISIONS DEALING WITH THE COMPUTATION OF INCOME F ROM BUSINESS AND PROFESSION. THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND UPHOLD THE ADDITION OF RS. 2,17, 649/-. 13 GROUND NO. 3 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R. FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAD ADVANCED CERT AIN INTEREST FREE LOANS TO VARIOUS SISTER CONCERNS. HE RELIED O N THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE O F CIT VS. 5 ABHISHEK INDUSTRIES, 286 ITR 1 AND MADE DISALLOWANC E OUT OF INTEREST U/S 36(1)(III) AMOUNTING TO RS. 29,55,517/ -. 14 ON APPEAL THE LD. CIT(A) ALLOWED RELIEF U/S 80IC IN RESPECT OF THIS ADDITION ON SIMILAR LINES AS OBSER VED EARLIER IN RESPECT OF GROUND NO. 1. 15 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R . FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A) AS OBSERVED EARLIER DISALLOWANCE U/S 36(1)(III) WOULD GO ON TO INCREASE THE BUSINESS INCOME ONLY AND THEREFORE DEDUCTION U/S 80 IC HAS TO BE ALLOWED IN VIEW OF THE DECISION OF HON'BLE HIMAC HAL PRADESH HIGH COURT IN CASE OF ALLIED INDUSTRIES (SUPRA)AND CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF M/S MEGA PACKAGES (SUPRA). THEREFORE WE CONFIRM THE ORDER OF THE LD. CIT(A). 16 IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.1.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.1.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR