M/s. Hindprakash Exim Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-4(3), Ahmedabad

ITA 2565/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9155 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAMOD KEDIA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER ./ ITA NO. 2565/AHD/2013 / ASSESSMENT YEAR: 2009-10 M/S. HINDPRAKASH EXIM PVT LTD, 202, HINDPRAKASH HOUSE, PLOT NO.10/6, PHASE-I, GIDC, VATVA, AHMEDABAD .. APPELLANT PAN : AABCT 3020 F VS INCOME TAX OFFICER, WARD-4 (3), AHMEDABAD .. RESPONDENT ASSESSEE(S) BY : SHRI PRAMOD KEDIA , CA REVENUE BY : SHRI DILEEP KUMAR , SR - DR / DATE OF HEARING 17/12/2015 /DATE OF PRONOUNCEMENT 22/03/2016 / O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VIII, A HMEDABAD, DATED 26.08.2013 FOR ASSESSMENT YEAR 2009-10, ON TH E FOLLOWING GROUNDS. 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (APPEALS) ERRED IN UPHOLDING THE L D. AO'S ACTION OF INVOKING AUTOMATIC OPERATION OF RULE 8D O F THE IT RULES,1962 WITHOUT REBUTTING (WITH REASONS) THE APP ELLANT'S DETAILED CONTENTION THAT NO DISALLOWANCE (EITHER TO WARDS INTEREST OR TOWARDS OTHER EXPENSES) IS CALLED FOR I N VIEW OF THE FACTS OF THE CASE THE LD. CIT (A) OUGHT TO HAVE STRUCK DOWN THE ACTION OF THE LD. AO'S ACTION U/S 14A RWR 8D. THE APPELLANT, THEREFORE, PRAYS THAT THE LD. AO MAY PLE ASE BE (SMC) ITA NO. 2565/AHD/2013 HINDPRAKASH EXIM PVT LTD VS. ITO AY : 2009-10 2 DIRECTED TO DELETE THE ADDITION CONFIRMED TOWARDS I NTEREST AS WELL AS TOWARDS OTHER EXPENSES. 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION TOWARDS INTEREST MADE U/S 14A OF THE I.T. ACT, 1961 RWR 8D OF THE I T RULES, 1962 WITHOUT PROPERLY APPRECIATIN G THAT ADDITION OUGHT NOT TO HAVE BEEN MADE - A. IN VIEW OF THE FACT THAT AS THE INVESTMENTS WER E IN THE EQUITY SHARES OF UNLISTED COMPANY, ITS SALE WOULD G IVE RISE TO INCOME UNDER THE HEAD 'CAPITAL GAINS' THAT ARE NOT TAX FREE / TAX EXEMPT AND HENCE PROVISIONS OF SECTION 14A ARE NOT TRIGGERED AT ALL; B. BY PRESUMING THAT BORROWED FUNDS WERE UTILIZED I N FINANCING THE INVESTMENTS DESPITE THE FACT THAT THE APPELLANT-COMPANY HAD SUFFICIENT INTEREST FREE FUND S MORE THAN THE AMOUNT UTILIZED FOR INVESTMENTS; C. OUT OF INTEREST EXPENDITURE WHICH IS SPECIFICAL LY INCURRED FOR EARNING NON-TAX FREE INCOME - I.E. (I) OUT OF I NTEREST OF RS.7,32,801/- PERTAINING TO CASH CREDIT FACILITIES EXTENDED BY BANKERS AND (II) OUT OF INTEREST OF RS.33,218/- PERTAINING TO LATE PAYMENT OF CUSTOM DU TY. THEREFORE, APPELLANT PRAYS BEFORE YOU THAT THE LD. AO MAY PLEASE BE DIRECTED THAT ADDITION OF RS. 1,05,479/- (TOWARDS INTEREST) CONFIRMED BY THE LD. CIT(A) MAY PLEASE BE DELETED. 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION TOWARDS OTHER EXPENSES MADE U/S 14A OF THE I.T. ACT , 1961 RWR 8D OF THE I T RULES, 1962 WITHOUT PROPERLY APPR ECIATING THAT ADDITION OUGHT NOT TO HAVE BEEN MADE A. IN VIEW OF THE FACT THAT AS THE INVESTMENTS WE RE IN THE EQUITY SHARES OF UNLISTED COMPANY, ITS SALE WOULD G IVE RISE TO INCOME UNDER THE HEAD 'CAPITAL GAINS' THAT ARE NOT TAX FREE / TAX EXEMPT AND HENCE PROVISIONS OF SECTION 14A ARE NOT TRIGGERED AT ALL; B. RELYING MERELY ON LOGIC THAT IT IS NOT POSSIBLE THAT NO EXPENDITURE MIGHT HAVE BEEN INCURRED FOR EARNING TH E (SMC) ITA NO. 2565/AHD/2013 HINDPRAKASH EXIM PVT LTD VS. ITO AY : 2009-10 3 DIVIDEND INCOME AND MAKING GENERAL OBSERVATIONS WITHOUT PROPERLY APPRECIATING THAT NO ADMINISTRATIV E OR OTHER EXPENSES WERE INCURRED TOWARDS THE INVESTMENT S IN UNLISTED SHARES IN PHYSICAL FORMAT SPECIFICALLY WHEN IT IS NOT A CASE OF FREQUENT PURCHASES OR SALES OF INVESTMENTS; THEREFORE, APPELLANT PRAYS BEFORE YOU THAT THE LD. AO MAY PLEASE BE DIRECTED THAT ADDITION OF RS. 22,515/- (T OWARDS OTHER EXPENSE) CONFIRMED BY THE LD. CIT(A) MAY PLEA SE BE DELETED. 4. YOUR APPELLANT CRAVES LEAVE TO ADD / AMEND / E DIT / DELETE / CHANGE / MODIFY ALL OR ANY OF THE GROUNDS BEFORE OR AT THE TIME OF HEARING. 2. BRIEFLY STATED FACTS ARE THAT ON VERIFICATION OF THE BALANCE SHEET, THE ASSESSING OFFICER FOUND THAT THE ASSESSE E-COMPANY HAS MADE HUGE INVESTMENT OF RS.45,03,000/- IN SHARE S AND THE INCOME FROM WHICH HAS EXEMPT FROM TAX. FURTHER, AS PER THE P & L A/C., IT WAS OBSERVED THAT THAT THE ASSES SEE HAS INCURRED INTEREST EXPENDITURE ON UNSECURED LOANS. I N VIEW OF THE ABOVE, THE ASSESSEE OUGHT TO HAVE DISALLOWED TH E EXPENDITURE U/S. 14A OF THE INCOME-TAX ACT. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT AS THERE WAS NO NEXUS BETWEEN LOAN TAKEN AND THE INVESTMENT MADE, NO DEDU CTION U/S.14A SHOULD BE MADE. THIS CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE OBSERV ED THAT THE ASSESSEE HAS MADE HUGE INVESTMENT OF RS.45,03,000/- IN SHARES, THE INCOME FROM WHICH WAS EXEMPT FROM TAX. AS SUCH, (SMC) ITA NO. 2565/AHD/2013 HINDPRAKASH EXIM PVT LTD VS. ITO AY : 2009-10 4 AN AMOUNT OF RS. 1,27,994/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.14A OF THE INCOME-TAX ACT, WHICH W AS CONFIRMED BY THE CIT(A) ON APPEAL. 2.1 THE STAND OF THE ASSESSEE HAS BEEN THAT AS THE INVESTMENTS WERE IN THE EQUITY SHARES OF UNLISTED C OMPANY, ITS SALE WOULD GIVE RISE TO INCOME UNDER THE HEAD 'CAPI TAL GAINS' THAT ARE NOT TAX FREE/TAX EXEMPT AND HENCE PROVISIO NS OF SECTION 14A ARE NOT APPLICABLE. THE OTHER STAND OF THE ASSESSEE HAS BEEN THAT BY PRESUMING THE BORROWED FUNDS WERE UTILIZED IN FINANCING THE INVESTMENTS DESPITE THE FACT THAT THE ASSESSEE- COMPANY HAD SUFFICIENT INTEREST FREE FUNDS MORE THA N THE AMOUNT UTILIZED FOR INVESTMENTS. THE OTHER CONTENT ION OF THE ASSESSEE WAS THAT OUT OF INTEREST EXPENDITURE WHICH IS SPECIFICALLY INCURRED FOR EARNING NON-TAX FREE INCO ME I.E.; (I) OUT OF INTEREST OF RS.7,32,801/- PERTAINING T O CASH CREDIT FACILITIES EXTENDED BY BANKERS AND (II) OUT OF INTEREST OF RS.33,218/- PERTAINING TO LATE PAYMENT OF CUSTOM DUTY. BESIDES THIS, THE AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE HAS RELIED UPON VARIOUS JUDICIAL PRONOUNCE MENTS AND PLEADED THAT ADDITION IN QUESTION MAY BE DELETED. O N THE OTHER (SMC) ITA NO. 2565/AHD/2013 HINDPRAKASH EXIM PVT LTD VS. ITO AY : 2009-10 5 HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 2.2 AFTER CONSIDERING THE RIVAL CONTENTIONS AND MAT ERIAL ON RECORD, I, IN THE INTEREST OF JUSTICE, DEEM IT TO P ROPER TO SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RE-ADJUDICATE THE ISSUE AFRESH AFTER CONSIDERING TH E AFORESAID CONTENTIONS OF THE ASSESSEE. NEEDLESS TO MENTION THAT WHILE RE- ADJUDICATING THE ISSUE, HE WILL ALLOW ADEQUATE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22ND MARCH, 2016 A T AHMEDABAD. SD/- ( SHAILENDRA K. YADAV ) JUDICIAL MEMBER AHMEDABAD; DATED 22/03/2016 BIJU T., PS / 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. / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) !', / ITAT, AHMEDABAD