M/s Jindal Aluminium Limited , Bangalore V. Deputy Commissioner of Income Tax (LTU) , Bangalore

ITA 28/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2841 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-11-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: SOWMYA
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 250; 80IA; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES C BENCH: BANGALORE BEFORE SHRI A.K. GARODIA , ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NOS.27 & 28/ BANG/201 9 (ASSESSMENT YEAR S: 2008 - 09 & 2009 - 10 ) M/S. JINDAL ALUMINUM LIMITED, JINDAL NAGAR, TUMKUR ROAD, BANGALORE - 560 073 .APPELLANT PAN AAACJ4324M VS. DY . COMMISSIONER OF INCOME TAX, LTU, BANGALORE. RESPONDENT. ASSESSEE BY: SMT. SOWMYA, ADVOCATE. REVENUE BY: S MT. R. PREMI, JCIT (D.R) DATE OF HEARING : 27.02 .20 20 DATE OF PRONOUNCEMENT : 13 .0 3 .20 20 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED APPEALS FOR THE ASST YEAR 2008 - 09 AND 2009 - 10. AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , BANGALORE PASSED UNDER SECTION 143(3) ORDER GIVING EFFECT OF ITAT ORDER AND U/SEC 250 OF THE INCOME TAX ACT, 1961 (THE ACT) . SINCE THE ISSUES ARE SIMILAR AND IDENTICAL, THEY 2 ITA NOS.27 & 28/BANG/2019 ARE CLUBBED AND HEARD TOGETHER AND CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP THE APPEAL IN ITA NO.27/BANG/2019 AND THE FACTS NARRATED THEREIN. 2. THE ASS ESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL : 3. THE BRIEF FACTS OF THE CASE ARE, T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF ALUMINUM EXTRACTION AND SALE OF WIND ENERGY. THE RETURN OF INCOME WAS FILED ON 25.09 .2008 WITH TOTAL INCOME OF RS.64,34,09,295 / - AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 1.10.2010 WITH TOTAL INCOME OF RS.69,30,00,031/ - WITH DISALLOWANCE UNDER SECTION 14A OF RS.35,01,582 / - AND RESTRICTION ON CLAIM OF DEDUCTION U /SEC80 IA OF THE ACT . ON APPEAL, THE CIT (A PPEALS) HAS DIRECTED THE ASSESSING OFFICER TO 3 ITA NOS.27 & 28/BANG/2019 ALLOW DEDUCTION UNDER SECTION 80IA OF THE ACT RELYING ON THE DECISION OF ITAT IN ASSESSEE OWN CASE . WHEREAS, IN RESPECT OF DISALLOWANCE OF RS.35,01,582/ - UNDER SECTION 14A R.W. RULE 8D(2)(III) OF IT RULES, THE CIT (APPEALS) HAS DIRECTED THE ASSESSING O FFICER TO RESTRICT DISALLOWANCE TO THE EXTENT OF RS.14,40,471 / - BEING 5% OF THE AVERAGE AMOUNT OF TAX EXEMPT INVESTMENTS. SUBSEQUENTLY , APPEAL WAS FILED WITH THE TRIBUNAL IN RESPECT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT . THE HONBLE TRIBUNAL HAS UPHELD THE ORDER OF CIT (APPEALS) IN RESPECT OF INTEREST DISALLOWANCE. BUT I N RESPECT OF DISALLOWANCE UNDER SEC14AOF I T ACT , THE CO - ORDINATE BENCH OF THE TRIBU NAL HAS REMITTED THE ISSUE TO THE FILE OF ASSESSING OF FICER FOR FRESH CONSIDERATION. AS DIRECTED BY THE TRIBUNAL, AO ISSUED NOTICE TO THE ASSESSEE FOR FURNISHING BREAK UP OF EXPENDITURE AND SUBSTANTIATE THAT NO EXPENDITURE WAS INCURR ED FOR EARNING EXEMPT INCOME. THE ASSESSEE HAS FILED THE EXPLANATION S, WHEREAS AN AMOUNT OF RS.19,52,99,992 / - WAS DEBITED UNDER EMPLOYEES WELFARE AND REMUNE RATION EXPENSES, BUT COULD NOT GIVE BREAK UP OF EXPENSES WITH IDENTIFICATION OF EMPLOYEES INVOLVED IN DECISION MA KING OF I NVESTMENT ACTIVITIES. THE ASSESSEE HAS ALSO DEBITED OTHER EXPENDITU RE IN RESPECT OF TRAVEL AND MISCELLANEOUS EXPENSES INCLUDING TELEPHONE, INTERNET , PROFESSIO NAL CHARGES, TRAVELLING EXPENSES, BUT COULD NOT IDENTIFY THE EXPENSES FROM THE TOTAL CLAIM BUT MAD E GENERALIZED SUBMISSIONS THAT NO EXPENSES WERE INCURRED T OWARDS INVESTMENT ACTIVITIES. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ASSESSEE 4 ITA NOS.27 & 28/BANG/2019 EXPLANATION S THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHI CH DOES N OT FORM PART OF INCOME AND T HERE IS NO ALLOCATION OF EXPENSES INCURRED FOR DECISION MAKING OF TAX FREE INVESTMENT S FOR E ARNING EXEMPT INCOME. HENCE THE ASSESSING OFFICER RELYING ON THE JUDICIAL DECISIONS , WORKED OUT DISALLOWANCE OF 0. 5% OF TAX FREE INVEST MENTS BEING RS.14,40,471/ - AND PASSED THE ORDER GIVING EFFECT OF ITAT ORDER DT.21.03.2017. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT (APPEALS). IN RESPECT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE CIT (APPEALS) HAS CONF IRMED THE DISALLOWA NCE AND PARTLY ALLOWED THE APPEAL . AGGRIEVED BY THE CIT (AP PEALS) O RDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE CIT (APPEALS) HA S ERRED IN CONFIRM ING THE DISALLOWANCE UNDER SECTION 14A R W RULE 8D2 (III) OF I T RULES, IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDIT URE FOR EARNING TAX FREE INCOME AND SUBSTANTIATED THE ARGUMENTS WITH WRITTEN SUBMISSION S AND DE TAILS IN THE PAPER BOOK. SHE REFERRED TO THE INFORMATION SUBMITTED IN RESPECT OF EXPENDITURE INCURRED ON INVESTMENT ACTIVITIES AND THE OBSERVATIONS OF ITAT AT PAGE 44 OF THE PAPER BOOK TO EXAMINE THE CLAIM OF T HE ASSESSEE AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF CIT (APPEALS). 5 ITA NOS.27 & 28/BANG/2019 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON REC ORD. THE ONLY DISPUTED ISSUE ENVISAGED BY THE LEARNED AUTHORIZED REPRESENTATIVE WITH RESPECT TO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(2)(III) , WHERE THE CIT (APPEALS) HAS GRANTED PARTIAL RELIEF IN THE FIRST ROUND AND THE ORDER GIVING EFFECT WAS PASSED. THE A SSESSING OFFICER A S PER THE DIRECTIONS OF HONBLE TRIB UNAL CALLED FOR THE EXPLANATION S IN RESPECT OF EACH ITEM OF EXPENDITURE , TO PROVE SUCH EXPENDITURE WAS NOT INCURRED FOR EA RNING TAX FREE INCOME. THE ASSE SSEE HAS FILED INFORMATION, BUT WAS NO BREAK UP OF EXPENDITURE WAS PROVIDED UNDER EMPLOYEES REMUNERATIO N AND WELFARE OF THE EMPLOYEES INVOLVED IN DECISION MAKING OF INVESTMENT ACTIVITIES . THE INVESTMENT S ARE TO THE TUNE OF RS.28.81 CRORES , WHICH REQUIRE PROPER GUIDANCE AN D CONSTRUCTIVE DECISION MAKING . FURTHER OTHER EXPENSES ARE IN THE NATURE OF PROFESSIONAL CHARGES, TRAVELLING EXP ENSES ETC INCURRED FOR INVESTMENT OPTIONS. ON PERUSAL OF THE ASSES SMENT ORDER, WE FOUND THERE ARE NO OBSERVATION S OF THE ASSESSING OFFICER WITH RESPECT TO FILLING OF BREAKUP OF EXPENSES. THE LDAR REFERRED TO THE PAPER BOOK AT PAGE1, SUBMISSIONS BEFORE APPELLATE AUTHORITY ON THE DISALLOWANCE UNDER 14A R.W. RU LE 8D(2)(III) OF I T RULES, AND PAGE 19 WHERE THE ASSESSING OFFICER IN THE COURSE OF HEARING OF ORDER GIVING EFFECT CALLED FOR THE DETAILS AND AT PAGE 16 DETAILS OF TOTAL EXPEND IT URE FILED ON 28 - 02 - 2017 .THE LDAR VEHEMENTLY RELIED ON THE MATERIAL FILED AND DEMONSTRATED THE EMPLOYEES COST AS PER THE PROFIT AND LOSS ACCOUNT SCHEDU LE AT PAGE 101 RS.210,520,182 / - .THE LDAR 6 ITA NOS.27 & 28/BANG/2019 EXPLAINED , THE DETAILS OF EMPLOYEES WELFARE EXPENSES INCURRED AS PER SCHED ULE 18 IN THE FINANCIAL STATEMENTS, AND THE NUMBER OF EMPLOYEES IN DIFFERENT DEPARTMENTS AND THEIR PLACEMENT IN BANGALORE FACTORY PREMISES AND OTHER BRANCHES IN DIFFERENT PART OF INDIA . WE ON PERUSAL OF THE FACTS , AND EVIDENCES FOUND T HAT THE ASSESSING OFFICER REQUIRED SPECIFIC DETAILS TO BE SUBMITTED AS PER THE DIRECTIONS OF ITAT, BUT FOR THE VARIOUS REASONS THE ASSESSEE COMPANY HAS NOT SUBMITTED IN THE PROCEEDINGS. CONSIDERING THE FACTS, CIRCUMSTANCES, SUBMISSIONS , PRINCIPLES OF NATURAL JUS TICE AND MATERIAL E VIDENCES FILED. WE ARE OF THE OPINION THAT THE DIRECTIONS O F THE CO - ORDINATE BENCH OF TRIBUNAL HAS TO BE COMPLIED BY THE ASSESSE E, AND THE INFORMATION WAS SUBMITTED BY THE LDAR EXPLAINING THE ALLOCATION OF EXPENSES IN RESPECT OF THE EMPLOYEES PLACED IN DIFFERENT BRANCHES IN INDIA . WE ARE OF SUBSTANTIVE OPINION THAT THE ASSESSING OFFICER HAS TO EXAMINE AND VERIFY THE CORRECTNESS OF EVIDENCE BEFORE CONSIDERING THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(2) (III) I T RULES. ACCO RDINGLY , WE SET ASIDE THE ORDER OF CIT (APPEALS) ON THIS ISSUE AND FOR LIMITED PURPOSE RESTORE THE ENTIRE DISPUTED ISSUE AND THE STATEMENT OF EMPLOYEES REMUNERATION AND WELFARE EXPENSES AS PER SCHEDULE 18 OF THE FINANCIAL STATEMENTS, DISCLOSING EMPLOYEES PLACEMENT IN BANGALORE FACTORY AND BRANCHES IN INDIA TO THE FILE OF ASSESSING OFFICER TO VERIFY AND EXAMINE THE CORRECTNESS AND THE ASSESSEE SHOULD PROVIDE ADEQUATE OPPORTUNITY OF HEARIN G AND SHOULD COOPERATE IN SUBMITTING THE DETAILS AND ALLOW THE GROUND S OF APPEAL OF ASSESSEE FOR STATISTICAL PURPOSES. 7 ITA NOS.27 & 28/BANG/2019 6. SIMILARLY, THE ASSESSEE HAS FILED APPEAL IN ITA NO.28/BANG/2019 WHERE THE FACTS ARE IDENTICAL AND SIMILAR TO THE ITA NO.27/BANG/2019 AND THE DECISION TAKEN IN THIS CASE IS EQUALLY APPLICABLE. ACCOR DING LY, THE ORDER OF THE CIT (APPEALS) IS SET ASIDE AND RESTORE THE DISPUTED ISSUES TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS AND ALLOWS THE GROUNDS OF APPEAL OF ASSESSEE FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEALS OF ASSESS EE FOR A.YS 2008 - 09 AND 2009 - 10 ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. S D / - S D / - ( A.K. GARODIA ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 3 .03 . 20 20 . *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (APPEALS) 4. PRIN. CIT 5. DR, ITAT 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE