Nabh Tradelink Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2922/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94892 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K
• Assessee Lawyers: P M MEHTA WITH G M THAKOR
• Keywords: Business expenditure; Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ ITA. NO. 2922/AHD/2011 ( / ASSESSMENT YEAR: 2008-09) NABH TRADELINK PVT LTD J-7, BHAVNA APARTMENTS, NARAYAN NAGAR, PALDI AHMEDABAD .. APPELLANT PAN: AACCN 0488 L VERSUS DCIT, CIRCLE-5, AHMEDABAD .. RESPONDENT ASSESSEE(S) BY : SHRI P.M. MEHTA WITH G.M. THAKOR , AR REVENUE BY : SHRI A.K. PANDAY, SR. DR / DATE OF HEARING : 07/12/2015 /DATE OF PRONOUNCEMENT: 11/12/2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHM EDABAD DATED 08.09.2011 FOR ASSESSMENT YEAR 2008-09, ON TH E FOLLOWING GROUNDS:- ITA NO.2922/AHD/ 2011 NABH TRADELINK PVT LTD VS. DCIT AY :2008-09 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN CONSIDERING IT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE IT ACT READ WITH RULE 8D OF IT RULES FOR EFFECTING DISALLOWANCE OF THE APPELLANTS BUSINESS EXPENSES W HEN THE PROVISIONS OF SECTION 14 R.W. RULE 8D ARE NOT A T ALL APPLICABLE TO THIS CASE AND THIS HONBLE TRIBUNAL M AY BE PLEASED TO HOLD ACCORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION U/S 14A READ WITH RULE 8D OF ADMINISTRATIVE EXPENSES WH EN ON FACTS AND CIRCUMSTANCES OF THE CASE, NO SUCH DISALLOWANCE U/S 14A READ WITH RULE 8D IS CALLED FO R PARTICULARLY IN VIEW OF THE FACT THAT NO EXEMPT INC OME IN THE YEAR UNDER CONSIDERATION HAS BEEN EARNED BY THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION U/S 14A READ WITH RULE 8D ON THE GROUND THAT THE PROVIS IONS OF SECTION 14A(2) READ WITH SECTION 14A(3) ARE MAND ATORY IN NATURE AND ACCORDINGLY, THE RULE 8D IS APPLICABL E WHEN THE APPELLANT CLAIMS THAT IT HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF TOTAL INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION U/S 14A READ WITH RULE 8D ON THE GROUND THAT THE PROVIS IONS OF SECTION 14A(2) & (3) READ WITH RULE 8D ARE APPLI CABLE WHEN THE ABSENCE OF FINDING OF THE LD. AO AS TO ACT UALLY INCURRING OF EXPENDITURE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF TOTAL INCOME. 5. MOREOVER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN CONFIRMING THAT ENTIR E ADMINISTRATIVE EXPENSES DEBITED IN PROFIT & LOSS AC COUNT ITA NO.2922/AHD/ 2011 NABH TRADELINK PVT LTD VS. DCIT AY :2008-09 3 OF RS.2.88 LACS IS LIABLE FOR DISALLOWANCE U/S 14A READ WITH RULE 8D WHEN NO EXEMPT INCOME HAS BEEN EARNED AND MOST OF THE EXPENSES PERTAINS TO THE APPELLANT S BUSINESS OF TRADING ACTIVITIES WITH TOTAL TURNOVER OF RS.152.97 CRORES. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEF ORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN AGRO PRODUCTS , DIAMONDS AND OTHER VARIOUS COMMODITIES. THE ASSESSEE-COMPAN YS TOTAL TURNOVER OF THE YEAR UNDER CONSIDERATION WAS OF RS. 152.97 CRORES. IN THE YEAR UNDER CONSIDERATION, IT HAS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND CLAIMED IN THE RETURN OF INCOME TH E EXPENSE OF RS.2.88 LACS AS ADMINISTRATIVE EXPENSES. THE ASSES SEE-COMPANY HAS GENERATED SUFFICIENT PROFIT IN THE YEAR UNDER C ONSIDERATION AND HAS NOT EARNED ANY INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME. THE ASSESSEE-COMPANY HAS ESTABLISHED THAT THE OPENING INVESTMENT IN SHARES WAS REDUCED SUBSTANTIALLY DURI NG THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSING OFFICE R HAS DISALLOWED THE ENTIRE ADMINISTRATIVE EXPENSES OF RS .2.88 LACS U/S 14A BY APPLYING RULE 8D WITHOUT RECORDING OF FINDIN G AS TO ITA NO.2922/AHD/ 2011 NABH TRADELINK PVT LTD VS. DCIT AY :2008-09 4 ACTUALLY INCURRING OF ANY EXPENDITURE IN RELATION T O EXEMPT INCOME. THE CIT(A) CONFIRMED THE STAND ADOPTED BY ASSESSING OFFICER BY HOLDING THAT THE ENTIRE ADMINISTRATIVE E XPENSES OF RS.2.88 LACS WAS TO BE DISALLOWED U/S 14A(2)/(3) RE AD WITH RULE 8D AS AND WHEN THE ASSESSEE CLAIMED THAT IT HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO EXEMPT INCOME, PROVI SIONS OF SECTION 14A(2), (3) READ WITH RULE 8D ARE MANDATORY IN NATURE AND ACCORDINGLY, THE AMOUNT LIABLE FOR DISALLOWANCE SHALL BE QUANTIFIED AS PER THE PROVISIONS OF RULE 8D. THUS, THE EMPHASIS OF THE ASSESSEE HAS BEEN THAT NO ADMINISTRATIVE EXP ENSES HAS BEEN ALLOWABLE AT ALL AGAINST THE TAXABLE INCOME FR OM THE BUSINESS OF TRADING IN VARIOUS COMMODITIES WITH TUR NOVER OF RS.152.97 CRORES. THE STAND OF THE ASSESSEE HAS BE EN THAT THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO ITS CASE AND NO PART OF ADMINISTRATIVE EXPENSES CAN BE DISALLOWED U /S 14A OF THE ACT, BECAUSE THE ASSESSEE HAS NOT CLAIMED ANY EXEMP T INCOME. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. CORRTECH ENERGY PVT LTD IN TAX APPEAL NO.239 OF 2014, DATED 24.03.2014, HELD THAT WHERE THERE IS NO EXEMPT INCOME, THE PROV ISION OF ITA NO.2922/AHD/ 2011 NABH TRADELINK PVT LTD VS. DCIT AY :2008-09 5 SECTION 14A COULD NOT BE MADE APPLICABLE. THERE IS NOTHING ON RECORD ON BEHALF OF THE REVENUE TO SUGGEST THAT THE ASSESSEE HAS EARNED ANY EXEMPT INCOME FOR THE YEAR UNDER CONSIDE RATION, SO NO DISALLOWANCE U/S 14A COMES IN QUESTION. ACCORDI NGLY, THE ADDITION IN QUESTION U/S 14A MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. 3. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 11 TH OF DECEMBER, 2015. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 11/12/2015 *BT ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. #$% &&'( , '( / DR, ITAT, AHMEDABAD 6. %*+, / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT, AHMEDABAD