Navbharat Seeds Pvt. Ltd., Ahmedabad V. The Dy.CIT, Circle-3(1)(1), Ahmedabad

ITA 2597/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7923 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 08-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL PATEL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER NAVBHARAT SEEDS PVT. LTD. VASU KANAN BUILDING, OPP. GUJARAT VIDHYAPITH, ASHRAM ROAD, AHMEDABAD PAN:AAACN5362K (APPELLANT) VS THE DY. CIT, CIRCLE - 3(1)(1), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: S H RI MEHUL PATEL , A.R. DATE OF HEARING : 24 - 11 - 2 017 DATE OF PRONOUNCEMENT : 19 - 12 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMB ER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , AR IS ES FROM ORDER OF THE CIT(A) - 9, AHMEDABAD DATED 17 - 07 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2597 / A HD/20 15 A S SESSMENT YEAR 2012 - 13 I.T.A NO. 2597 /AHD/20 15 A.Y. 2012 - 13 PAGE NO NAVBHARAT SEEDS PVT. LTD. VS. DY. CIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE FOR RS. 21,012/ - ON ACCOUNT OF LATE DEPOSIT OF EPF AND ESIC. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 2,12,128/ - UNDER SECTI ON 14A RW RULE 8D. 3. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING ALL THE ARGUMENTS WHICH WERE ADVANCED DURING THE COURSE OF HEARING AS WELL AS IN WRITTEN SUBMISSION. FURTHER, THE LEARNED CIT(A) HAS ERRED IN DISMISSING THE APPEAL ON THE GROUND THAT APP ELLANT'S CONTENTION AS TO NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME, WHEN IN FACT IT WAS NEVER CONTENDED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS NOR BEFORE THE LEARNED CIT(A). 3. IN THIS CASE, RETURN OF INCOME DECLARING I NCOME OF RS. 4 , 47 , 95 , 640/ - WAS FILED ON 29 TH SEPTEMBER, 2012. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 7 TH AUGUST, 2013. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING AND TRADING OF AGRICULTURAL PRODUCT. 4. REGARDING THE DISALLOWANCE OF RS . 21012/ - TOWARD S EMPLOYEE S PROVIDENT FUND, T HE ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GROUND THAT IT WAS N OT PAID BY DUE D ATE AS PROVIDED IN THE RESPECTIVE ACT AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. THE L D. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSSEE ON THIS ISSUE BY STATING THAT ASSESSING OFFICER HAS CORRECTLY CONCLUDED IT AS EMPLOYEES S INCOME AS PER SECTION 2(24)(X) AND IT IS DEDUCTIBLE ONLY IF PAID WITHIN THE DUE DATE AS PER T HE RESPECTIVE ACT AS SPECIFIED U/S. 36(1)(VA) OF THE ACT AFTER PLACING RELIANCE ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GSRTC . DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. COUNSEL HAS NOT PRESSED THI S GROUND OF APPEAL. AFTER CONSIDERING THE ABOVE FACTS AND THE DECISION OF THE LD. CIT(A) THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS DISMISSED. I.T.A NO. 2597 /AHD/20 15 A.Y. 2012 - 13 PAGE NO NAVBHARAT SEEDS PVT. LTD. VS. DY. CIT 3 5 . REGARDING DISALLOWANCE OUT OF EXEMPT INCOME D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT ASSESSEE HAS CLAIMED EXEMPT INCOME , THEREFORE, THE A SSESSEE WAS ASKED TO EXPLAIN WHY NOT THE DISALLO WANCE OF INTEREST EXPENSES ACCORDING TO PROVISION OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE I . T . RULE SHOULD NOT BE MADE. THE ASSESSEE EXPLAINE D THAT NO DISALLOWANCE BE MADE AS IT HAS ALREADY DISALLOWED RS . 6 , 538/ - IN ITS COMPUTATION OF TO T AL INCOME U/S. 14A AND IN INTEREST ACCOUNT T HE ASSESSEE HAS NET INCOME OF RS . 91, 50 , 941/ - THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT NO EXPANSES HAS BEEN INCURRED IN RELATION TO T HE INVESTMENT MADE ON WHICH ASSESSEE HAS EARNED DIVIDEND AS EXEMPT INCOME. THE ASSESSING OFFICER HAS CONSIDERED THAT FUND OF THE ASSESSE IS MIXED FUND CONTAINING INTEREST BEARING AND NON - INTEREST BEARING FUNDS , T HEREFORE, TH E AS SESSING OFFICER HAS WORKED OUT THE DISALLOWANCE OF EXPE NSES U/S. 14A R.W. RULE 8D TO THE AMOUNT OF RS 2 , 12 , 1 28 AND ADDED TO THE TOTAL INCOME OF THE ASESSEE. 6 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS SUSTAINED THE DISALLOW ANCE MADE BY THE ASS ESSING OFFICER . 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. COUNSEL HAS MADE WRITTEN SUBMISSION ST A TING THAT DISALLOWANCE OF EXPENSES U/S. 14A R.W. RUL E 8D IS NOT CORRECT AND HE HAS POINTED OUT THAT ASSESSEE HAS EAR NED INTEREST INCOME OF RS. 1 , 00 , 46 , 535/ - AS AGAINST THE INTEREST EXPANSE S OF RS. 8 , 95 , 594/ - RESULTING IN NET I.T.A NO. 2597 /AHD/20 15 A.Y. 2012 - 13 PAGE NO NAVBHARAT SEEDS PVT. LTD. VS. DY. CIT 4 INTEREST INCOME OF R S. 91, 5 0, 941/ - , THEREFORE, NO EXPENSES SHOULD BE DISALLOWED BY T H E ASSESSING OFFICER UNDER RULE 8D . ON THE OTHER HAND, LD. DEP ARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT(A). 8 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY . WE HAVE NOTICED FROM THE COMPUTATION OF TOTAL INCOME FILED BY THE LD. COUNSEL THAT T HE ASSESSEE HAS CLAIMED TOTAL EXEMPT INCOME OF RS. 56, 313 AS DIVIDEND INCOME . T HE ASSESSING OFFICER HAS DISALLOWED AN EXPENDITURE OF RS. 2 , 12 , 128/ - U/S. 14A R.W. RULE 8D AS INCURRED TOWARDS EAR N ING EXEMPT INCOME . 9. AFTER HEARING BOTH SIDES, WE OBSERVED THAT THE DISALLOWANC E U/S. 14A IS TO BE RESTRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION BY THE ASSESSEE. IN THIS CONNECTION, WE HAVE GONE T HROUGH THE DECISION OF THE CO - ORDINATE BENCH OF ITAT, AHMEDABAD WHEREIN THE DISALLOWANCE WAS RESTRI CTED TO THE EXEMPT INCOME. I N THIS CONNECTION, WE REPRODUCE THE RELEVANT PART OF THE DECISION OF CO - ORDINATE BENCH AS UNDER: - 7. IIN THE CASE OF JIVRAJ TEA LTD. VS. DCIT, CIRCLE - 1, SURAT IN ITA NO.866/AHD/2012 AND OTHERS, THE CO - ORDINATE BENCH HELD THAT D ISALLOWANCE UNDER SECTION 14A CANNOT BE MORE THAN THE EXEMPT INCOME. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED BELOW - 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN TH E INSTANT CASE, THE ASSESSEE RECEIVED EXEMPT DIVIDEND INCOME OF RS.900/ - . THE ASSESSING OFFICER WAS OF THE OPINION THAT EXPENDITURE INCURRED FOR EARNING THE EXEMPT DIVIDEND INCOME WAS NOT ALLOWABLE TO THE ASSESSEE AND THE ASSESSEE HAS NOT DISALLOWED ANY EX PENDITURE TOWARDS THE EARNING OF THE EXEMPTED DIVIDEND INCOME, HE BY INVOKING THE PROVISIONS OF SECTION 14A I.T.A NO. 2597 /AHD/20 15 A.Y. 2012 - 13 PAGE NO NAVBHARAT SEEDS PVT. LTD. VS. DY. CIT 5 COMPUTED EXPENDITURE ATTRIBUTABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME UNDER RULE 8D OF THE INCOME - TAX RULES AND MADE DISALLOWANCE FOR INTEREST EXPENDITURE OF RS.1,49,710/ - AND ADMINISTRATIVE EXPENSES OF RS.12,750/ - . THE ASSESSEE UNSUCCESSFULLY APPEALED BEFORE THE CIT(A). THE CONTENTION OF THE ASSESSEE IS THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND FRE E RESERVES AS ON THE DATE OF BALANCE - SHEET WAS RS.17,86,69,501/ - AND THE INVESTMENTS AT THE END OF THE YEAR WAS AT RS.1,26,00,538/ - ONLY. THEREFORE, IN VIEW OF THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF HITACHI HOME AND LIFE SOLUTIONS (I ) LTD. (SUPRA) AND TORRENT POWER LTD. (SUPRA), NO DISALLOWANCE TOWARDS INTEREST EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME CAN BE MADE. REGARDING THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS.12,750/ - , WE FIND THAT THE CHANDIGARH BENCH OF THE TRIBU NAL IN THE CASE OF A.C.I.T. VS. PUNJAB STATE COOP & MARKETING FED. LTD. IN ITA NO. ITA NO.548/CHD/2011 FOR AY 2007 - 08 HAS HELD THAT DISALLOWANCE U/S. 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT DIVIDEND INCOME. THEREFORE, WE RESTRICT THE DISALLOWANCE O F ADMINISTRATIVE EXPENSES TO RS.900/ - ONLY, BEING THE EXEMPT DIVIDEND INCOME EARNED BY THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO - ORDINATE BENCH , WE ARE OF THE VIEW THAT ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, DISALLOWANCE U/S 14A OF THE ACT SHOULD BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE OF RS. 56313 AFTER EXCLUDING AMOUNT OF EXPENSES OF RS 6,538 ALREADY DISALLOWED BY THE ASSESSE E. 11. IN THE RESULT, T H E APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 12 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 19 /12 /2017 I.T.A NO. 2597 /AHD/20 15 A.Y. 2012 - 13 PAGE NO NAVBHARAT SEEDS PVT. LTD. VS. DY. CIT 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,