Royal Techno Project (India) Pvt. Ltd., Mehsana V. The ACIT, Mehsana Circle, Mehsana

ITA 2997/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6991 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Earning of tax free income; Tax effect; Capital expenditure; Rule 8D
• Section: 143(3); 14A; 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. NO. 2997/AHD/2015 (ASSESSMENT YEAR : 2012-13) ROYAL TECHNO PROJECT (INDIA) PVT. LTD., ROYAL HOUSE, OPP. SAR PATEL SOCIETY, RADHANPUR ROAD, MEHSANA 384 002. VS. ACIT, MEHSANA CIRCLE, MEHSANA 384 002. I.T.A. NO. 3394/AHD/2015 (ASSESSMENT YEAR : 2012-13) ACIT, MEHSANA CIRCLE, MEHSANA VS. ROYAL TECHNO PROJECT (INDIA) PVT. LTD., ROYAL HOUSE, OPP. SAR PATEL SOCIETY, RADHANPUR ROAD, MEHSANA 384 002. [PAN NO. AAECR 4411 R] ( APPELLANT ) .. ( RESPONDENT)/CROSS OBJECTOR ASSESSEE BY : SHRI ANIL KSHATRIYA, A.R. REVENUE BY : SHRI L. P. JAIN, SR. D.R. DATE OF HEARING 25.02.2019 DATE OF PRONOUNCEMENT 26.04.2019 O R D E R PER MAHAVIR PRASAD JUDICIAL MEMBER: THESE CROSS APPEALS FILED AGAINST EACH OTHER BY THE ASSESSEE AND REVENUE ARE AGAINST THE ORDER DATED 24.09.2015 PASSED BY THE CO MMISSIONER OF INCOME TAX (APPEALS)-GANDHINAGAR, AHMEDABAD UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) ARISING OUT OF THE SAME ORDER DATED 27.01.2015 FOR THE ASSESSMENT YEAR 2012-13 - 2 - ITA NOS.2997 & 3394/AHD/2015 ROYAL TECHNO PROJECT INDIA PVT. LTD. ASST.YEAR 2012-13 SINCE BOTH THE APPEALS RELATE TO SAME ASSESSEE THO SE ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON ORDER. FIRST WE TAKE UP ITA NO.2997/AHD/2015 FOR A.Y. 2012 -13 FOLLOWING GROUNDS HAS BEEN TAKEN BY THE ASSESSEE: (I) ON FACTS & IN LAW AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LD CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE D ISALLOWANCE OF INTEREST EXPENSES OF RS.3,65,110/- U/S 40(A)(IA) OF THE ACT, WHEN HE OUGHT TO HAVE DELETE THE SAME. (II) ON FACT & IN LAW AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF APPELLANT, THE LD CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE U/S 14A OF RS.1,47,623/- WHEN HE OUGHT TO HAVE DELETED THE SAM E. (III) ON FACTS & IN LAW AS WELL AS THE CIRCUMSTANCES OF T HE CASE OF THE APPELLANT, THE LD CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.6,65,858/- OUT OF ROC EXPENSES, WHEN HE OUGHT TO HAVE DELETED THE SAME. 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT I S A DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION ON CONTRACT BASIS WI TH GOVERNMENT AND LOCAL AUTHORITY ETC. THE APPELLANT HAS SUBMITTED ITS E-RETURN OF INCOME ON 25.09.2012 SHOWING TOTAL INCOME OF RS.82,92,610/-. THE RETURN SO FILED IS SUPPORTED BY TAX AUDIT REPORT U/S 44AB OF THE ACT. THE CASE OF THE ASSESSEE HAVING COME UNDER SCR UTINY, A NOTICE U/S 143(2) OF THE ACT WAS ISSUED. IN COMPLIANCE THERETO THE APPELLANT ATT ENDED AND SUBMITTED DETAILS CALLED FOR. THEREUPON, THE AO FINALIZED REGULAR ASSESSMENT U/S 143(3) OF THE ACT ON 27.01.2015 DETERMINING TOTAL INCOME AT RS.1,54,49,010/-. BEING AGGRIEVED, THE APPELLANT FILED AN APPEAL BEF ORE THE LD CIT(A), GANDHINAGAR, WHO HAS PASSED THE APPELLATE ORDER DATED 24.09.2015 WHEREBY THE APPELLANTS APPEAL HAS BEEN PARTLY ALLOWED. BEING AGGRIEVED AND DISSATISFIED WITH THE IMPUGNED APPELLATE ORDER, THE APPELLANT HAS PREFERRED THE PRESENT APPEAL BEFORE THE HONBLE TRIBUNAL FOR GETTING DUE JUSTICE. - 3 - ITA NOS.2997 & 3394/AHD/2015 ROYAL TECHNO PROJECT INDIA PVT. LTD. ASST.YEAR 2012-13 3. SO FAR AS GROUND NO. 1 IS CONCERNED WITH REGARD TO INTEREST EXPENSES OF RS.3,65,110/- U/S 40(A)(IA) OF THE ACT IS CONCERNED . 4. LEARNED AR HAS NOT PRESSED THIS GROUND OF APPEAL THEREFORE SAME IS DISMISSED AS NOT PRESSED. 5. GROUND NO.2 IS CONCERNED WITH REGARD TO DISALLOW ANCE OF RS.1,47,623/- U/S 14A. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN INVESTMENT OF RS. L,00,81,096/-A T THE END OF FINANCIAL YEAR RELEVANT TO A.Y.2012-13 AND THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.2,62,276/-.THE ASSESSING OFFICER QUERIED THE ASSESSEE AS TO WHY DI SALLOWANCE OF EXPENSES AS PER SECTION 14A READ WITH RULE 8D SHOULD NOT BE MADE. IN RESPON SE TO WHICH THE ASSESSEE EXPLAINED THAT THERE IS NO EXPENSES INCURRED FOR EARNING DIVI DEND INCOME AND THEREFORE, THERE IS NO JUSTIFICATION IS DISALLOWING ANY PART OF EXPENSES U /S.14A OF THE ACT. HOWEVER, WITHOUT ISSUE OF ANY FURTHER SHOW CAUSE NOTICE AND PROVIDIN G AN OPPORTUNITY TO THE ASSESSEE FOR DEFENDING ITS CASE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 1,47,623/- U/S.14A OUT OF INTEREST EXPENSES. IT IS PERTINENT T O NOTE THAT IN COMPUTATION AT PARA.7.10 AGAINST FIRST ITEM IN THE TABLE THE ASSESSING OFFIC ER HERSELF HAS MENTIONED AMOUNT OF RS.NIL AS 'EXPENDITURE INCURRED BY ASSESSEE TO EARN EXEMPTED INCOME'. YET, THE ASSESSING OFFICER HAS DISALLOWED THE SUM OF RS.1,47 ,623/-, OUT OF INTEREST AND FINANCIAL EXPENSES. IT IS SUBMITTED THAT THE ASSESSEE HAVING NOT MADE ANY EXPENDITURE RELATABLE TO INVESTMENT IN SHARES, SO THERE IS NO APPLICABILITY OF SEC. 14A R.W.R 8D. FURTHERMORE, THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, HAS STATED THAT INVESTMENT MADE IN SHARES HAS BEEN MADE OUT OF INTEREST FREE FUNDS. AS MAY BE VERIFIED FROM THE AUDITED) - 4 - ITA NOS.2997 & 3394/AHD/2015 ROYAL TECHNO PROJECT INDIA PVT. LTD. ASST.YEAR 2012-13 BALANCE SHEET, THE ASSESSEE COMPANY IS ALREADY HAVI NG SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL, AS STATED BELOW: PARTICULARS AS ON 31.03.2012 AS ON 31.03.2011 SHARE CAPITAL RS.12,29,80,000/- RS.12,27,80,000/- RESERVE AND SURPLUS RS. 1,36,34,071/ - RS. 74,84,022/ - SHARE HOLDER DEPOSITS RS. 43,86,529/- ----------- SUNDRY CREDITORS (CURRENT LIABILITIES) RS.97,85,928/- RS.1,00,31,915/- INTEREST FREE DEPOSITS RS.1,58,01,386/- RS.13,93,294/- 7. AS WE CAN SEE IN THIS YEAR THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT AND ARE CARRIED FORWARD FROM THE EARLIER YEAR. THEREFORE, W HEN ASSESSEE HAS NOT MADE ANY INVESTMENT IN THE YEAR UNDER CONSIDERATION THERE IS NO EXEMPT INCOME. SO IN SUCH CASE, NO DISALLOWANCE CAN BE MADE THUS WE ALLOW THIS GROUND OF APPEAL. 8. GROUND NO.3 IS CONCERNED WITH REGARD TO CONFIRMI NG THE DISALLOWANCE OF RS.6,65,858/- OUT OF ROC EXPENSES. 9. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE HAS INCURRED RS.6,65,858/- AS ROC EXPENSES AND LEARNED AO MADE A N ADDITION OF RS.6,65,858/- BY STATING THAT SAME IS CAPITAL EXPENDITURE. DURING TH E APPELLATE PROCEEDING BEFORE THE LEARNED CIT(A), ASSESSEE SUBMITTED DETAILED REPLY S TATING THAT EXPENSES OF RS.3,16,320/- ARE INCURRED FOR REGISTRATION AND RS.73,440/- FOR R OC CHARGES AND RS.2,47,248/- ARE INCURRED FOR STAMP DUTY EXPENSES. AS WE CAN SEE ASS ESSEE HAS MADE THIS EXPENDITURE FOR ITS BUSINESS PURPOSE AS A RUNNING REVENUE EXPENSES AND SAME IS AFTER THE COMMENCEMENT OF THE BUSINESS THEREFORE IN OUR CONSIDERED OPINION SUCH EXPENSES ARE ALLOWABLE EXPENSES. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSESSE E IS ALLOWED. - 5 - ITA NOS.2997 & 3394/AHD/2015 ROYAL TECHNO PROJECT INDIA PVT. LTD. ASST.YEAR 2012-13 NOW WE TAKE UP REVENUES APPEAL IN ITA NO.3394/AHD/ 2015 FOR A.Y. 2012-13: 10. AT THE TIME OF THE HEARING, WE OBSERVED THAT TH E TAX EFFECT IN THE APPEAL FILED BY THE REVENUE IS LESS THAN RS. 20 LACS. AS PER THE CIRCUL AR NO. 3 OF 2018 DATED 11/07/2018 ISSUED BY CBDT RECENTLY ALL PENDING APPEALS FILED B Y REVENUE ARE LIABLE TO BE DISMISSED/ WITHDRAWN/ NOT PRESSED TO REDUCE THE LITIGATION WHE RE THE TAX EFFECT DOES NOT EXCEED THE PRESCRIBED MONETARY LIMIT, I.E., RS.20 LACS. THE R ELEVANT EXTRACT OF THE CIRCULAR IS REPRODUCED BELOW: 2. IN SUPERSESSION OF THE ABOVE CIRCULAR, IT HAS BEEN DECIDED BY THE B OARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BE FORE INCOME TAX APPELLATE TRIBUNAL AND HIGH COURTS AND SLPS/ APPEAL S BEFORE SUPREME COURT KEEPING IN VIEW THE MONETARY LIMITS AND CONDI TIONS SPECIFIED BELOW. 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER : S. NO. APPEALS/ SLPS IN INCOME-TAX MATTERS MONETARY LIMIT (RS.) 1. BEFORE APPELLATE TRIBUNAL 20,00,000 2. BEFORE HIGH COURT 50,00,000 3. BEFORE SUPREME COURT 1,00,00,000 THE MONETARY LIMIT FOR FILING THE APPEALS BY THE RE VENUE BEFORE THE TRIBUNAL HAS BEEN INCREASED TO RS. 20 LACS. IT IS ALSO CLARIFIED IN THE SAID CIRCULAR THAT THE SAID MONETARY LIMIT IS APPLICABLE RETROSPECTIVELY EVEN T O THE APPEALS PENDING BEFORE THE TRIBUNAL. THE CBDT HAS ALSO INSTRUCTED THAT SUCH PE NDING APPEALS BELOW THIS SPECIFIED TAX LIMIT OF RS.20 LACS MAY BE WITHDRAWN / NOT PRESSED. IN THE CASE ON HAND, IT WAS NOTICED THAT THE TAX EF FECT ON THE DISPUTED ISSUE RAISED BY THE REVENUE IS CLAIMED TO BE LESS RS.20 LACS. THEREFORE APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISSED IN LIMINE IN TERMS OF THE ABOVE CIRCULAR. - 6 - ITA NOS.2997 & 3394/AHD/2015 ROYAL TECHNO PROJECT INDIA PVT. LTD. ASST.YEAR 2012-13 11. THE LD. DR FOR THE REVENUE FAIRLY AGREED ON THE APPLICABILITY OF THE CBDT CIRCULAR NO. 3 OF 2018. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. HOWEVER, THE REVENUE IS ON THE LIBER TY TO MOVE THE MISCELLANEOUS APPLICATION TO RECALL THE ORDER IF THE TAX EFFECT E XCEEDS THE THRESHOLD LIMIT OR THE CASE OF THE REVENUE FALLS IN ANY OF THE EXCEPTION PROVIDED IN THE AFORESAID CBDT CIRCULAR IN ANY MANNER. THE MA SHALL BE FILED WITHIN THE PRESCRIBED TIME. HENCE THE APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 26/04/2019 SD/- SD/- ( PRADIP KUMAR KEDIA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/04/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-GANDHINAGAR, AHMEDABAD. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 04.04.2019 (DICTATION PAGES 3) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.04.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 29.04.2019 5. 6. 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. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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