Jamipol Ltd, Jamshedpur V. DCIT CIRCLE-2, Jamshedpur

ITA 311/RAN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9760 (ITAT-RANCHI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 28-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL JCIT LD
• Assessee Lawyers: R R MITTAL LD
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

1 ITA NO S. 311 & 312/RAN/2018 A.YS 2013 - 14 & 2014 - 15 M/S. JAMIPOL LTD PAGE 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI (BEFORE SHRI S. S. GODARA , J.M. & DR.A.L.SAINI, A.M.) IT A NO. 311 /RAN/1 8 : ASSTT. YEAR : 20 13 - 14 ITA NO. 312 /RAN/18 : ASSTT. YEAR : 20 14 - 15 M/S. JAMIPOL LTD PAN: AAACJ7475R VS D CIT, C IR - 2, JAMSHEDPUR ( ASSESSEE ) (RESPONDENT) ASSESSEE / A SSESSEE BY : SHRI R.R.MITTAL, LD. AR RESP ONDENT/ DEPARTMENT BY : SHRI P.K. MONDAL , J CIT/ LD.DR DATE OF HEARING : 11 - 01 - 2019 DATE OF PRONOUNCEMENT: 27 - 0 2 - 2019 ORDER PER BENCH : THE CAPTIONED TWO APPEAL S FILED BY THE ASSES S EE , ARE DIRECTED AGAINST ORDER DATED 03 - 07 - 2018 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS), JAMSHEDPUR , WHICH IN TURN ARISE OUT OF AN ORDER PASSED BY THE ASSESSING OF FICER U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (IN SHORT, THE ACT) . 2. SINCE THESE TWO APPEALS PERTAIN TO THE SAME ASSESSE, DIFFERENT ASSESSMENT YEARS, COMMON AND IDENTICAL ISSUES ARE INVOLVED, THEREFORE, THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 ITA NO S. 311 & 312/RAN/2018 A.YS 2013 - 14 & 2014 - 15 M/S. JAMIPOL LTD PAGE 2 3. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN THESE TWO APPEALS IS THAT THE LD CIT(A) AS WELL AS AO WAS WRONG IN MAKING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF T HE INCOME TAX RULES. ASSESSEE`S APPEAL IN ITA NO.311/R/18, FOR A.Y. 2013 - 14 IS TAKEN AS THE LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT A SSESSEE HAD NOT DISALLOWED ANY AMOUNT ON ITS OWN UNDER SECTION 14A READ WITH RULE 8D OF THE RULES . THEREFORE, AO DREW HIS PRIMA FACIE/INITIAL SATISFACTION OF APPLICATION OF SECTION 14A FOR MAKING DISALLOWANCE . HOWEVER, THE A SSESSEE CONTENDED BEFORE THE AO THAT NO BORROWED FUNDS / INTEREST BEARING FUNDS WERE DEPLOYED TO ACQUIRE THE ASSETS FROM WHICH EXEMPT INCOME WAS GENERATED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSEE MADE AN ARGUMENT THAT HIS OWN FUNDS (SHARE CAPITAL + RESERVES & SURPLUS) AT RS. 66.38 CRORES WERE FAR EXCEEDING THE RELEVANT INVESTMENT AMOUNT OF RS. 17.25 CRORES. HOWEVER , THE ASSESS ING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND MADE ADDITION UNDER RULE 8D (2) (II) AT RS.8,33,283/ - AND UNDER RULE 8D (2) (III) AT RS.8,22,840/ - . 5. ON APPEAL, THE LD CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. THE LD CIT(A) DELETED THE ADD ITION UNDER RULE 8D (2) (II) BUT CONFIRMED THE ADDITION UNDER RULE 8D (2) (III) OF THE RULES AT RS.7,86,110/ - . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT A SSESSEE FILED EVIDENCE OF BORROWINGS OF THE CURRENT YEAR AND THE PRECEDING YEAR TO DEMONSTRATE THAT THE BORROWINGS WERE FOR SPECIAL PURPOSES AND CLAIMED THAT THEY WERE UTILISED TOWARDS THOSE PURPOSES. WE NOTE THAT HON`BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX 383 ITR 0529 (BOM) , HELD THAT IN A SITUATION WHERE OWN FUNDS OR INTEREST - FREE FUNDS EXCEED ED THE AMOUNT OF RELEVANT INVESTMENT , IT MAY BE PRESUMED THAT THE 3 ITA NO S. 311 & 312/RAN/2018 A.YS 2013 - 14 & 2014 - 15 M/S. JAMIPOL LTD PAGE 3 INVESTMENT WAS FROM OWN FUNDS. THEREFORE, LD CIT(A) FOLLOWING THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD (SUPRA), DELETED THE ADDITION . HOWEVER, IN RESPECT OF RULE 8D (2) (III), WE NOTE THAT COORDINATE BENCH OF ITAT KOLKATA IN THE CASE OF REI AGRO LTD. VS. DCIT 144 ITD 141 (KOL - TRIB) HAS HELD THAT IT IS ONLY THE INVESTMENTS WHICH YIELDS DIVIDEND DURING THE PREVIOUS YEAR THAT HAS TO BE CONSIDERED WHILE ADOPTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D(2)(II) & (III) OF THE RULES. THE AFORESAID VIEW OF THE TRIBU NAL HAS SINCE BEEN AFFIRMED AS CORRECT BY THE HONBLE CALCUTTA HIGH COURT IN G.A.NO.3581 OF 2013 IN THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN THE CASE OF REI AGRO LTD. (SUPRA). THEREFORE, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UN DER RULE 8D (2) (III) TAKING INTO ACCOUNT THE DIVIDEND BEARING SECURITIES ONLY. WE ALLOW BOTH THE APPEAL FILED BY THE ASSESSEE FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSE S . ORDER PRONOUNCED IN THE OPEN COURT ON 27 - 0 2 - 2019 SD/ - SD/ - ( S. S. GODARA ) (DR. A.L.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 - 0 2 - 2019 *PRADIP (SR.PS) 4 ITA NO S. 311 & 312/RAN/2018 A.YS 2013 - 14 & 2014 - 15 M/S. JAMIPOL LTD PAGE 4 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE / ASSESSEE: M/S. JAMIPOL LIMITED, NAMDIH ROAD. BURMAMINES, JSR - 831007. 2 THE RESPONDENT/ DEPARTMENT : D CIT , C IR - 2, BAGMATI ROAD, JSR 3. THE CIT - , 4. THE CIT(A) - , 5. DR, RANCHI BENCHES, RANCHI TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / SENIOR P.S ITAT, RANCHI BENCHES