Amin Equipments Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 265/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67598 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JANGID SRDR
• Assessee Lawyers: S N DIVETIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.265/AHD/2013 [ASSTT.YEAR : 2008-2009] M/S.AMIN EQUIPMENTS P. LTD. PLOT NO.222, MAKARBA NR. SARKHEJ-SANAND CROSS ROADS S.G. HIGHWAY, AHMEDABAD 382 210. PAN : AABCA 5995 J /VS. ACIT, CIR.1 AHMEDABAD. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI S.N. DIVETIA + 2 3 )/ REVENUE BY : SHRI J.P. JANGID, SR.DR 5 2 &(*/ DATE OF HEARING : 13 TH AUGUST, 2013 678 2 &(*/ DATE OF PRONOUNCEMENT : 23-08-2013 )9 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, AHMEDABAD DATED 23.11.2012 FOR THE ASSESSMENT YEAR 2008-2009. 2. THE ASSESSEE IS A DEALER OF WORKS CONTRACT MACHI NERY SALES, SERVICE AND PARTS. IT FILED ITS RETURN OF INCOME FOR A.Y.2 008-2009 ON 17.3.2009 DECLARING TOTAL INCOME AT RS.4,14,46,488/-. THE CA SE WAS SELECTED FOR SCRUTINY, AND THEREAFTER, THE ASSESSMENT UNDER SECT ION 143(3) OF THE ACT WAS MADE, AND THE TOTAL INCOME WAS DETERMINED AT RS.4,1 6,72,654/-. AGGRIEVED ITA NO.265/AHD/2013 -2- BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(A). THE CIT(A) VIDE ORDER DATED 23.11.2012 DISMISSED TH E APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US, AND HAS RAISED THE FOLLOWING EFFE CTIVE GROUNDS: 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.1,10,056/- U/S 14 A. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE DI SALLOWANCE OF RS.1,10,056/- U/S 14A WHEN THE AO HAS NOT ESTABLISH ED ANY NEXUS. 2.3 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT HAD ALREADY DISALLOWED AN AMOUNT OF RS.3,31,335/- OUT O F INTEREST PAID. HENCE FURTHER DISALLOWANCE OF RS.1,10,056/- U/S 14A IS WHOLLY UNLAWFUL. DISALLOWANCE UNDER SECTION 14A: 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.29,87,080/- WHICH WAS EXEMPT FROM TAX. HE ALSO NOTICED THAT TH E ASSESSEE HAD INVESTMENTS IN MUTUAL FUNDS AND SHARES OF VARIOUS C OMPANIES. THE ASSESSEE WAS ASKED TO EXPLAIN THE DISALLOWANCE OF RS.3,31,33 5/- MADE UNDER SECTION 14A OF THE I.T.ACT. THE ASSESSEE, INTER ALIA, SUBMITTED THAT IT HAD NOT INCURRED ANY EXPENDITURE ON THE MANAGEMENT AND ADMI NISTRATION OF SUCH INVESTMENT. THE SUBMISSIONS OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE BY THE AO, AS HE WAS OF THE VIEW THAT THE ASSESSEE MUS T HAVE INCURRED ADMINISTRATIVE EXPENSES SUCH AS DOCUMENTATION, SALA RIES OF EMPLOYEES, HANDLING THE INVESTMENT PORTFOLIO, ADMINISTRATIVE O VER HEADS LIKE STATIONERY, TELEPHONE ETC. HE ALSO NOTICED THAT THE ASSESSEE H AS MADE INVESTMENT FROM THE CURRENT ACCOUNT, AND THEREFORE, COMPOSITE FUND OF BUSINESS WAS USED FOR MAKING INVESTMENT. HE WAS, THEREFORE, OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ALSO PERTAINS TO THE INVES TMENTS WHICH RESULT IN EXEMPT INCOME, AND THEREFORE, THE ASSESSEE HAS INCU RRED BOTH ADMINISTRATIVE AND OTHER EXPENSES AND INTEREST EXPENSES IN RELATIO N TO EARNING OF EXEMPT ITA NO.265/AHD/2013 -3- INCOME. HE ACCORDINGLY FOLLOWING THE FORMULA PRESC RIBED BY RULE 8D OF THE I.T. RULES WORKED OUT THE DISALLOWANCE AT RS.4, 41,391/-. SINCE THE ASSESSEE HAD SUO MOTTO DISALLOWED RS.3,31,335/-, HE MADE DISALLOWANCE OF THE BALANCE AMOUNT OF RS.1,10,056/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: 3.2 IN THE RETURN OF INCOME FILED, THE APPELLANT I TSELF DISALLOWED RS.3,31,335/- U/S.14A. IN THE ASSESSMENT ORDER, AO HELD THAT THE WORKING OF THE SAID DISALLOWANCE AS INCORRECT. HE WORKED OUT THE DISALLOWANCE (IN ACCORDANCE WITH RULE 8D) AT RS.4,4 1,391/-. HE MADE DISALLOWANCE OF THE DIFFERENCE AMOUNT OF RS.1, 10,056/-. HENCE, THE APPELLANTS GRIEVANCE CAN BE WITH REGARD TO THIS SUM OF RS.1,10,056/- ONLY (AND NOT ON RS.4,41,391/- AS MEN TIONED IN THE GROUND BY THE APPELLANT.) 3.3 APPELLANTS CONTENTION DO NOT CONTROVERT THE O BSERVATIONS OF THE AO. NO INTERFERENCE IS CALLED. THIS GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. BEFORE US, THE LEARNED AR SUBMITTED THA T NO BORROWED FUNDS WERE UTILISED FOR THE PURPOSE OF INVESTMENT. HE FU RTHER SUBMITTED THAT THE INVESTMENTS ARE MADE FROM ICICI BANK CURRENT ACCOUN T, WHEREIN THE SALE PROCEEDS OF MACHINES WERE DEPOSITED, FOR WHICH, IT ENJOYS CREDIT FOR ONE MONTH. AFTER ONE MONTH, THE INVESTMENTS WERE LIQUI DATED AND THE PAYMENTS WERE MADE TO THE MANUFACTURER. HE FURTHER SUBMITTE D THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE FORM O F SHARE CAPITAL AND RESERVE AND SURPLUS, AND THE SAME WERE TO THE TUNE OF RS.8. 45 CRORES AS AGAINST WHICH THE INVESTMENT AS PER THE BALANCE SHEET AS ON 31.3.2008 WERE TO THE TUNE OF RS.1.92 CRORES. HE, THEREFORE, SUBMITTED T HAT OWN INTEREST FREE FUNDS WERE FAR IN EXCESS OF INVESTMENTS, AND THEREF ORE, IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF COMMISSIONER OF INCOME-TAX V. RELIANCE UTILITIES AND POWER LTD., 313 ITR 340 (BOM), NO DISALLOWANCE CAN BE MADE. ITA NO.265/AHD/2013 -4- HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. GUJARAT POWER CORPORATION LTD., TAX APPEAL NO.1587 OF 2009 DTD. 28.3.2011. HE ALSO PLACED ON RECORD COPY OF THE SAID ORDER. THE LEARNED AR THEREFORE SUBMITTED THAT SINCE NO INVEST MENT HAVE BEEN MADE USING THE BORROWED FUNDS, NO DISALLOWANCE ON ACCOUN T OF INTEREST NEEDS TO BE MADE IN THE CASE OF THE ASSESSEE. THE LEARNED D R ON THE OTHER HAND SUBMITTED THAT THE AO HAD MADE DISALLOWANCE ON ACCO UNT OF ADMINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) I.E. 0.5% OF THE AV ERAGE INVESTMENT. HE FURTHER SUBMITTED THAT THE DISALLOWANCE ON ACCOUNT OF INTEREST WAS SUO MOTTO MADE BY THE ASSESSEE AND THUS THE ASSESSEE HAS NOT BEEN DISPUTED THE SAME. HE FURTHER SUBMITTED THAT THE DISALLOWANCE H AS BEEN MADE BY AO BY FOLLOWING RULE 8D. HE THUS SUPPORTED THE ORDER OF THE AO. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HOLDS IN VESTMENTS AND FROM THE INVESTMENTS HELD BY IT, HAS EARNED INCOME WHICH IS EXEMPT FROM TAX. HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE (2010) 328 ITR 81 (BOM) HAS HELD THAT PROVISIONS OF RULE 8D WH ICH HAVE BEEN NOTIFIED W.E.F. 24 TH MARCH, 2008 ARE APPLICABLE W.E.F. A.Y.2008-2009. THE YEAR UNDER APPEAL IN THE PRESENT CASE IS A.Y.2008-2 009, AND THEREFORE FOLLOWING THE AFORESAID DECISION OF HONBLE HIGH CO URT THE PROVISIONS OF RULE 8D ARE APPLICABLE TO THE YEAR UNDER APPEAL. FR OM THE MATERIAL PLACED BEFORE US, IT IS SEEN THAT THE ASSESSEE HAD SUO MOTTO MADE THE DISALLOWANCE OF RS.3,31,335/-. AS PER THE WORKING MADE BY THE A O DISALLOWANCE AS PER RULE 8D(2) (II) ON ACCOUNT OF INTEREST IS ALSO RS.3 ,31,335/-, WHICH THEREFORE, MEANS THAT THE DISALLOWANCE ON AMOUNT OF INTEREST H AS NOT BEEN CHALLENGED BY THE ASSESSEE. THE AO HAD ONLY MADE DISALLOWANCE AS PER RULE 8D(2)(III) AT THE RATE OF 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT. THIS CALCULATION OF AO HAS NOT BEEN CONTROVERTED BY LD. AR. IT IS ALSO A FACT THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM ASSTT .YEAR 2008-2009 ONWARDS AS HELD BY HONBLE HIGH COURT. IN VIEW OF THE AFORESAID FACTS, WE ITA NO.265/AHD/2013 -5- FIND THAT DISALLOWANCE HAS BEEN WORKED OUT BY THE M ETHOD PRESCRIBED UNDER RULE 8D, AND THEREFORE, WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE, AND THUS THIS GROUND OF THE A SSESSEE IS DISMISSED. 6. THE OTHER GROUNDS WERE NOT SERIOUSLY ARGUED BY T HE LEARNED AR, AND THEREFORE, DISMISSED 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD