Shaival Realty Pvt. Ltd., Ahmedabad V. The Dy.CIT, Circle-8, Ahmedabad

ITA 3113/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9743 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Assessee Lawyers: JIGAR M PATEL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 3113/AHD/2013 / ASSESSMENT YEAR : 2010-11 SHAIVAL REALTY PVT LTD, C/O. MUKESH M. PATEL & CO., 3-4, VITHALBHAI BHAVAN, NR. S.P. COLONY RLY CROSSING, AHMEDABAD-380013 PAN : AABCS 5607 F VS DCIT, CIRCLE-8, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : JIGAR M. PATEL, AR REVENUE BY : G.C. DAXINI, SR DR / DATE OF HEARING : 06/12/2016 / DATE OF PRONOUNCEMENT: 06/12/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, AHM EDABAD DATED 27.11.2013 FOR ASSESSMENT YEAR 2010-11. 2. THE SOLITARY GROUND RAISED IS AS UNDER:- THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING THE DISALLOWANCE OF RS.1,71,965/- U/S 14A OF THE I.T. A CT. THAT THE LEARNED CIT(A) FURTHER ERRED IN NOT APPRECIATING THE MERITS OF THE APPELLANTS CONTENTIONS THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE APPELLANTS CASE AS WELL AS IN LAW, NO DISALLOWANCE U/S 14A WAS CALLED FOR. 3. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CON TENDS THAT:- (I) A FINDING OF FACT HAS BEEN RECORDED BY LD. CIT(A) T O THE EFFECT THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE DURIN G THIS PERIOD; SMC-ITA NO. 3113/AHD/2013 SHAIVAL REALTY PVT LTD VS. DCIT AY : 2010-2011 2 (II) IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE OWNED NO N-INTEREST BEARING FUNDS IN THE FORM OF RESERVE AND SURPLUS OF RS.122, 249,196.88 AS AGAINST THE INVESTMENTS IN SHARES OF RS.32,062,600. 00. THUS, THE SURPLUS FUNDS FAR EXCEEDED THE INVESTMENTS IN SHARE S WHICH HAVE NOT YIELDED ANY EXEMPT INCOME IN THIS PERIOD. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY (P.) LTD, REPORTED IN [2015] 372 IT R 97 (GUJ). (III) FURTHER, THE HONBLE GUJARAT HIGH COURT IN VARIOUS OTHER JUDGMENTS HAS SQUARELY LAID DOWN THAT WHEN THE SURPLUS FUNDS ARE MORE THAN THE INVESTMENTS YIELDING TAX FREE INCOME, NO DISALL OWANCE U/S 14A CAN BE MADE. 4. LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HA ND, RELIED UPON THE CBDT CIRCULAR NO.5 OF 2014, WHICH IN ESSENCE DIRECT S AS UNDER:- 6. THUS, IN LIGHT OF ABOVE, CENTRAL BOARD OF DIRE CT TAXES, IN EXERCISE OF ITS POWERS UNDER SECTION 119 OF THE ACT HEREBY CLARIFIE S THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ABOVE TWO PROPOSITIONS THAT THE ASSESSEE HAS NOT EARNED A NY EXEMPT INCOME IN THIS PERIOD AND THE FACT THAT THE SURPLUS FUNDS FAR EXCE EDED THE TAX FREE INVESTMENTS, ON BOTH COUNTS, RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY ( P.) LTD (SUPRA), IT IS HELD THAT NO DISALLOWANCE CAN BE MADE U/S 14A READ WITH RULE 8D. 5.1 APROPOS LD. DRS RELIANCE ON CBDT CIRCULAR NO.5 OF 2014, WE MAY POINT OUT THAT THE CBDT CIRCULARS MAY BE BINDING UP ON THE INCOME-TAX SMC-ITA NO. 3113/AHD/2013 SHAIVAL REALTY PVT LTD VS. DCIT AY : 2010-2011 3 AUTHORITIES; HOWEVER, WHEN PUT AGAINST THE HONBLE GUJARAT HIGH COURTS JUDGMENT, THE LATTER HAVE TO PREVAIL. IN VIEW THER EOF, THE ADDITION IS DELETED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 6 TH DECEMBER, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 06/12/2016 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD