M/s. Munjal Auto Industries Limited, Baroda V. The ACIT, Circle-4, Baroda

ITA 3038/AHD/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9459 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRADHA KHEMKA
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER . / I.T.A. NO. 3038/AHD/2014 ( ASSESSMENT YEAR : 2011-12) MUNJAL AUTO INDUSTRIES LIMITED 187, G.I.D.C. ESTATE, WAGHODIA, DISTRICT BARODA 391760 / VS. ASSISTANT CIT CIRCLE -4, BARODA ./ ./ PAN/GIR NO. : AAACG8588L ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. SHRADHA KHEMKA, A.R. / RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. DATE OF HEARING 28/06/2019 !'# / DATE OF PRONOUNCEMENT 28/06/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-III, BARODA (CIT(A) IN SHORT), DATED 23 .09.2014 ARISING IN THE ASSESSMENT ORDER DATED 19.03.2014 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2011-12. ITA NO. 3038/AHD/14 [MUNJAL AUTO INDUSTRIES LTD. VS. ACIT] A.Y. 2011-12 - 2 - 2. IN THE CAPTIONED APPEAL, THE ASSESSEE IS AGGRIEV ED BY THE ACTION OF THE CIT(A) IN CONFIRMING THE PARTIAL DISA LLOWANCE TO THE EXTENT OF RS.14,82,534/- UNDER S.14A OF THE ACT. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE POINTED OUT AT THE OUTSET THAT THE ASS ESSEE HAS ESTIMATED AN AMOUNT OF RS.50,000/- AND HAS MADE SUO MOTU DISALLOWANCE ITSELF AS ATTRIBUTABLE TO EXEMPT INCOM E. THE AO HAS NOT RECORDED ANY OBJECTION SATISFACTION AS TO HOW T HE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF THE INCOME WHICH IS NOT INCLUDABLE IN COMPUTING TOTAL INCOME O F THE ASSESSEE EXCEEDS THE AFORESAID SUO MOTU DISALLOWANCE. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT IDENTICAL ISSUE CAME UP IN ASSESSEES OWN CASE CONCERNING AY 2009-10 BEFORE THE TRIBUNAL IN ITA NO. 2044 & 1998/AHD/2012 ORDER DATED 28.11.2016. THE LEARNED AR ACCORDINGLY URGED THAT DISALLOWANCE SUSTAINED BY TH E CIT(A) TOWARDS ADMINISTRATIVE AND MANAGERIAL EXPENSES ARE CALLED FOR AND DESERVES TO BE QUASHED. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 5. WE FIND FROM THE SUBMISSIONS OF THE ASSESSEE BEF ORE THE CIT(A) THAT A SUM OF RS.50,000/- WAS DISALLOWED BY THE ASSESSEE ITSELF SUO MOTU HAS REMAINED UNCONTROVERTED. THE IDENTICAL ISSUE IN IDENTICAL FACTS HAS COME UP IN ASSESSEES OWN CA SE BEFORE THE CO-ORDINATE BENCH CONCERNING AY 2009-10 IN ITA NO. 2044 & 1998/AHD/2012 ORDER DATED 28.11.2016. THE RELEVANT OPERATIVE PARAS FROM THE AFORESAID ORDER ARE REPRODUCED HEREU NDER: ITA NO. 3038/AHD/14 [MUNJAL AUTO INDUSTRIES LTD. VS. ACIT] A.Y. 2011-12 - 3 - 12. WE FIND THAT THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) A SUM OF RS.50,000/- HAS BEEN DISALLOWED BY THE ASS ESSEE ITSELF SUO MOTU HAS REMAINED UNCONTROVERTED. ON A BROADER CONS IDERATION, WE ALSO NOTE THAT THE INVESTMENTS WERE LARGELY MADE I N THE EARLIER YEARS AND HAS BEEN CARRY FORWARDED IN THE CURRENT YEAR WI TH A VERY FEW MOVEMENTS THEREIN. THE ASSESSEE HAS COMPUTED DISAL LOWANCE WHICH WAS CLAIMED TO BE SUFFICIENT BY THE ASSESSEE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. NOTWITHSTANDI NG THE AFORESAID STAND OF THE ASSESSEE ON THIS ACCOUNT, THE AO MECHA NICALLY APPLIED RULE 8D(2)(III) WITHOUT EXAMINING THE MERITS OF TH E ASSESSEES STAND AND WITHOUT RECORDING ANY SATISFACTION AS TO HOW TH E DISALLOWANCE OFFERED BY THE ASSESSEE IS INCORRECT HAVING REGARD TO ACCOUNT OF THE ASSESSEE. WE NOTE THAT NO LACK OF SATISFACTION WI TH REGARD TO THE CORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE IN RESP ECT OF SUCH EXPENDITURE IN RELATION TO THE EXEMPT INCOME HAS BE EN RECORDED BY THE AO AS CONTEMPLATED UNDER SECTION 14A(2) OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT UNDER THE CIRCUMSTANCES, W HERE THE REVENUE HAS FAILED TO RECORD DISSATISFACTION ON THE CORREC TNESS OF THE CLAIM OF THE ASSESSEE WITH RESPECT TO DISALLOWANCE OFFERE D, IT IS NOT OPEN FOR IT TO RESORT RULE 8D(2)(III) IN TERMS OF IT R ULES, 1962. WE FIND THAT IN TERMS OF SECTION 14A OF THE IT ACT R.W.RUL E 8D OF IT RULES, THE ONUS IS ON THE AO TO SHOW HOW THE ASSESSEES CL AIM IS INCORRECT. A BARE READING OF SECTION 14A OF THE ACT WOULD SUGG EST THAT ITS APPLICABILITY IS NOT AUTOMATIC. IT IS HEDGED BY CO NDITION PRESCRIBED THEREIN. SECTION 14A INHERES IN IT THE CONCEPT OF REASONABLENESS. THE FORMIDABLE AMOUNT OF EXPENDITURE CANNOT BE SAID TO BE ATTRIBUTABLE TO TAX-FREE INCOME BY APPLYING A STRAI GHT JACKET FORMULA AS PER RULE 8D(2)(III) OF THE IT RULES WITHOUT DEMO NSTRATING INCORRECTNESS IN THE OFFER OF DISALLOWANCE MADE BY THE ASSESSEE. HENCE, WE ARE DISPOSED TO ADJUDICATE THE ISSUE IN F AVOUR OF THE ASSESSEE. THUS, THE ORDER OF CIT(A) ON DISALLOWANC E OF ADMINISTRATIVE AND MANAGERIAL EXPENSES STANDS VACAT ED. ITA NO. 3038/AHD/14 [MUNJAL AUTO INDUSTRIES LTD. VS. ACIT] A.Y. 2011-12 - 4 - 6. THERE BEING NO SUBSTANTIVE VARIATION IN FACTS, T HE CONCLUSION DRAWN IN EARLIER ASSESSMENT YEAR SHALL APPLY MUTATIS MUTANDIS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE AO TO DELETE THE DISALLOWANCE MADE UNDER RULE 8D(2) (III) TOWARDS ADMINISTRATIVE AND MANAGERIAL EXPENSES ETC. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 28/06/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 28/06/201 9