The Dy. CIT, Circle-1(1)(1), Ahmedabad V. Adani Properties Pvt. Ltd., Ahmedabad

ITA 2806/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9694 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 11-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH A R S
• Keywords: Earning of tax free income; Proportionate interest; Rule 8D; CHAPTER IV
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER 1. ./ITA NO. 2617/AHD/2017 2. ./ITA NO. 2806/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) 1. ADANI PROPERTIES PVT.LTD. (ALSO KNOWN AS ADANI AGRO PRIVATE LIMITED) 8 TH FLOOR, SHIKHAR NR.MITHAKHALI SIX ROADS NAVRANGPURA AHMEDABAD 380 009 2. THE DCIT CIRCLE-1(1)(1) AHMEDABAD / VS. 1.THE DCIT CIRCLE-1(1)(1) AHMEDABAD 2.ADANI PROPERTIES PVT.LTD., AHMEDABAD ./ ./ PAN/GIR NO. : AABCA 3182 H ( / APPELLANTS ) .. ( / RESPONDENTS ) A SSESSEE BY : SHRI VARTIK CHOKSHI & SHRI BIREN SHAH, ARS REVENUE BY : SHRI ALOK SINGH, CIT-DR / DATE OF HEARING 18/11/2019 !' / DATE OF PRONOUNCEMENT 06/01/2020 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CROSS-APPEALS APPEALS HAVE BEEN FILED AT THE IN STANCE OF THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS)1, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- 1/DCIT CIRCLE-1(1)(1)/345/2016-17 DATED 18/09/2017 ARISING IN THE ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 2 - ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCO ME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 30 /11/2016 RELEVANT TO ASSESSMENT YEAR (AY) 2013-14. IN ASSESSEES APPEAL I.E. ITA NO. 2617/AHD/2017 FOR AY 2013-14, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : (ALL THE GROUNDS OF APPEAL ARE INDEPENDENT OF AND W ITHOUT PREJUDICE TO EACH OTHER) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.1,38,04,106/- U/S.14A R.W.R.8D OF THE ACT WHEN NO SUCH DISALLOWANCE WAS CALLED FOR. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S.14A R.W.R.8D MADE BY LD.ASSESSING OFFICER TO RS.1,38,04,106/- BEING PROPORTIONATE INTEREST DISAL LOWANCE UNDER RULE 8D(2)(II). THE CIT(A) OUGHT TO HAVE APPRECIATED THAT NO SUCH D ISALLOWANCE IS WARRANTED AS THE APPELLANT HAS SUO MOTTO DISALLOWED INTEREST EXP ENDITURE WHICH IS ATTRIBUTABLE FOR EARNING EXEMPT INCOME AND BOTH LD.ASSESSING OFF ICER AND CIT(A) HAVE NOT POINTED OUT ANY DISCREPANCY IN THE WORKING ADOPTED BY APPELLANT. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AN D/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURS E OF HEARING OF THE APPEAL. THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GROUND OF APPEAL VIDE LETTER DATED 9 TH SEPTEMBER 2019 WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, FOLLOWING THE RATIO OF HONBLE SC IN THE CASE OF PR CIT V STATE BANK OF PATIALA REPOR TED IN (2018) 99 TAXMANN.COM 286, THE DISALLOWANCE U/S.14A SHOULD NOT EXCEED THE EXEMPT INCOME EARNED BY ASSESSEE OF RS.11,83,96,894/-. ACCORDINGLY, HONBL E ITAT MAY DIRECT THE ASSESSING OFFICER TO RESTRICT DISALLOWANCE UPTO RS.11,83,96,8 94/-. ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 3 - IN REVENUES APPEAL, I.E. ITA NO.2806/AHD/2017 FOR AY 2013-14, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N RESTRICTING THE DISALLOWANCE U/S.14A OF RS.23,29,20,266/- TO RS.1,38,04,106/-. (2) THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. FIRST WE TAKE UP ASSESSEES APPEAL BEARING IT A NO. 2617/AHD/2017 FOR THE ASSESSMENT YEAR 2013-14. 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN THE MAIN AND THE ADDITIONAL GROUND OF APPEAL IS AGAINST THE CONFIRM ATION OF THE DISALLOWANCE IN PART FOR RS. 1,38,04,106 UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES ON ACCOUN T OF INTEREST EXPENSES. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE I N THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF DEALING/INVESTMENT IN SHARES, SECURITIES AND MUTUAL FUND ETC. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DECLARED EXEMPT ED INCOME AMOUNTING TO 11,83,96,894 AND MADE THE DISALLOWANCE UNDER THE PR OVISIONS OF SECTION 14A OF THE ACT AGAINST SUCH INCOME FOR 35,73,72,959.00 ONLY. HOWEVER, THE AO FOUND THAT THE DISALLOWANCE MADE BY THE ASSESSEE WAS NOT AS PER THE PROVISIONS OF RULE 8D OF INCOME TAX RULE. ACCORDINGLY, HE ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 4 - REJECTED THE WORKING FOR THE DISALLOWANCE MADE BY T HE ASSESSEE AGAINST THE EXEMPTED INCOME IN PURSUANCE TO THE PROVISIONS OF SECTION 14A OF THE ACT. THUS THE AO MADE THE DISALLOWANCE OF THE EXPEN SES AGAINST THE EXEMPTED INCOME AS PER THE PROVISIONS OF RULE 8D OF INCOME TAX RULE AS DETAILED UNDER: S. NO. PARTICULARS AMOUNT (RS.) 1. DIRECT EXPENSES 2,151.00 2. INTEREST EXPENSES 37,45,60,672.00 3. ADMINISTRATIVE EXPENSES 15,19,39,060.00 TOTAL 52,65,01,883.00 LESS: THE AMOUNT ALREADY DISALLOWED 29,35,81,617.0 0 BALANCE AMOUNT TO BE DISALLOWED 23,29,20,266. 00 IN VIEW OF THE ABOVE, THE AO DISALLOWED THE SUM OF RS. 23,29,20,266.00 UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO T HE LEARNED CIT (A) WHO HAS RESTRICTED THE AMOUNT OF DISALLOWANCE TO 1,38,04,106.00 AND DELETED THE BALANCE AMOUNT OF RS. 21,91,16,160.00 ONLY. BEING AGGRIEVED BY ORDER OF THE LEARNED CIT(A), BOT H THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. THE ASSESSEE I S IN APPEAL AGAINST THE ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 5 - CONFIRMATION OF THE ADDITION FOR 1,38,04,106.00 WHEREAS THE REVENUE IS IN APPEAL AGAINST THE DELETION OF THE ADDITION OF RS. 21,91,16,160.00. BOTH THE LEARNED AR AND THE DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW TO THE EX TENT FAVOURABLE TO THEM. 6. WE HAVE ALL THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE EXEM PTED INCOME DECLARED BY THE ASSESSEE IS OF 11,83,96,894.00 ONLY WHICH IS NOT IN DISPUTE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. C ORRTECH ENERGY PRIVATE LTD REPORTED IN 45 TAXMANN.COM 116 HAS HELD THAT THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CA NNOT EXCEED THE AMOUNT OF THE EXEMPTED INCOME. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: SECTION 14A(1) PROVIDES THAT FOR THE PURPOSE OF CO MPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLOWED IN RESPEC T OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE INSTANT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF AN Y INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBUNAL HELD THAT DISAL LOWANCE UNDER SECTION 14A COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V. WIN SOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED THAT WHERE TH E ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION, SECT ION 14A COULD HAVE NO APPLICATION. 6.1. WE ALSO FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. STATE BANK OF PATIALA ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 6 - REPORTED IN 99 TAXMANN.COM 26 WHEREIN THE SLP WAS D ISMISSED INVOLVING THE IDENTICAL FACTS AND CIRCUMSTANCES. 6.2. IN VIEW OF THE ABOVE, WE HOLD THAT THE AMO UNT OF DISALLOWANCE AS DISCUSSED ABOVE IS NOT WARRANTED IN THE PRESENT FAC TS AND CIRCUMSTANCES. AS SUCH, THE AMOUNT OF THE DISALLOWANCE UNDER SECTI ON 14A R.W.R. 8D OF INCOME TAX RULES CANNOT EXCEED THE AMOUNT OF DISALL OWANCE MADE BY THE ASSESSEE I.E. RS. 29,35,81,617.00 IN THE INCOME TAX RETURN. ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE AO IN THE CASE OF THE ASSESSEE WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD . CIT(A). SIMILARLY, WE ALSO CONFIRM THE DELETION AS MADE BY THE LEARNED CIT-A IN THE APPEAL OF THE REVENUE. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED WHEREAS THE GROUND OF APPEAL OF THE REVENUE IS DISM ISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06/01/2020 SD/- SD/- ( RAJPAL YADAV ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 06/01/2020 %.., .'.. / T.C. NAIR, SR. PS ITA NO.2617/AHD/2017 (BY ASSESSEE) AND ITA NO.2806/AHD/2017 (BY REVENUE) ADANI PROPERTIES PVT.LTD. VS. DCIT (CROSS-APPEALS) ASST .YEAR - 2013-14 - 7 - !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANTS 2. / THE RESPONDENT. 3. ()* + / CONCERNED CIT 4. + ( ) / THE CIT(A)-1, AHMEDABAD 5. ./0 '')* , )*' , ( / DR, ITAT, AHMEDABAD 6. 034 5 / GUARD FILE. / BY ORDER, . ' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 20.12.10 ( WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DRA GON ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23.12.19 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.6.1.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6.1.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER