The DCIT- 1(1), Indore V. M/s. D & H Secheron Electrodes Pvt. Ltd., Indore

ITA 313/IND/2013

• Counselvise Citation: 31322714 RSA 2013
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S GAUTAM
• Assessee Lawyers: S N AGRAWAL ALONG WITH SHRI
• Keywords: Earning of tax free income; Proportionate interest
• Section: 14A

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 313/IND/2013 A.Y. 2008-09 DCIT 1(1) INDORE :: APPELLANT VS M/S D&H SECHERON ELECTRODES PVT.LTD INDORE PAN AAACD 6111E` :: RESPONDENT APPELLANT BY SHRI G.S. GAUTAM RESPONDENT BY SHRI S.N.AGRAWAL ALONG WITH SHRI PANKAJ MOGRA DATE OF HEARING 20.8.2013 DATE OF PRONOUNCEMENT 20.8.2013 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 29 TH JANUARY, 2013 OF THE LEARNED FIRST APPELLATE AUTHOR ITY. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO DELETING T HE 2 DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.13,45,9 68/- UNDER THE HEAD INTEREST COMPUTED AS PER RULE 8D OF THE IT RULES READ WITH SECTION 14A OF THE INCOME TAX ACT INCURRED ON EARNING THE EXEMPTED DIVIDEND INCOME BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITIES & POWER LIM ITED. 2. THE CRUX OF ARGUMENTS ADVANCED BY SHRI G.S. GAUT AM, LEARNED SENIOR DR, IS IDENTICAL TO THE GROUND RAISE D AND PLACING RELIANCE UPON THE ASSESSMENT ORDER. ON THE OTHER H AND, SHRI S.N. AGRAWAL ALONG WITH SHRI PANKAJ MOGRA, LEARNED COUNSEL FOR THE ASSESSEE, DEFENDED THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION F ROM THE IMPUGNED ORDER :- 4.3 I HAVE CONSIDERED THE A.O.S ORDER AS WELL AS THE APPELLANTS A/R SUBMISSION. AS PER THE APPELLA NTS SUBMISSION, IT IS EVIDENT THAT THE PAID UP CAPITAL AND RESERVES AT 31.03.07 & 31.03.08 WERE RS. 19.49 CRORES & RS. 23.99 CRORES RESPECTIVELY, WHEREAS THE INVESTMENT IN SHARES AT 31/03/07 & 31/03/08 WERE 3 ONLY OF RS. 2.80 CRORES & 6.14 CRORES. THUS, IT I S SEEN THAT THE APPELLANTS OWN FUND IS MORE THAN THE INVESTMENT MADE, WHICH IS GENERATING EXEMPT INCOME. IT IS ALSO NOTICED THAT THE A.O. COULD NOT ESTABLIS H A NEXUS BETWEEN THE INTEREST EXPENDITURE AND THE INVESTMENT MADE. AS IT IS EVIDENT FROM THE PROVIS IONS OF LAW THAT THE A.O. HAS TO GIVE THE BASIS FOR WORK ING OUT SUCH EXPENDITURE RELATED TO EXEMPT INCOME AND SUCH DISALLOWANCE CANNOT BE MADE MERELY ON ESTIMATION OR CONJECTURES. AS THE APPELLANTS FUND IS MORE THAT THE INVESTMENT MADE, WHICH IS GENERATING EXEMPT INCOME, HENCE ANY KIND OF DISALLOWANCE ON INTEREST EXPENDITURE WITHOUT ANY BASE CANNOT BE HEL D JUSTIFIED IN VIEW OF THE HONBLEBOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. RELIANCE UTILITIE S AND POWER LTD. REPORTED IN 313 ITR 340 (BOM). IN THE PRESENT CASE, THE APPELLANT COMPANY HAS OWN FUNDS I N THE FORM OF SHARE CAPITAL, RESERVES AND SURPLUS, WH ICH IS MORE THAN THE INVESTMENT MADE. THUS, THE APPELLA NT HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH I T TO MEET ITS INVESTMENTS. 4 4.4 IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND ALSO KEEPING RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. SUPRA), THE DISALLOWANCE O F PROPORTIONATE INTEREST IS NOT WARRANTED U/S 14A R.W . RULE 8D(II) OF THE IT RULES AND THE SAID DISALLOWAN CE OF RS. 13,45,986/- MADE BY THE A.O. IS DELETED. 2.3 THERE IS AN UNCONTROVERTED FINDING IN THE IMPUG NED ORDER THAT OWN FUNDS OF THE ASSESSEE ARE MORE THAN THE IN VESTMENT SO MADE FOR GENERATING THE EXEMPTED INCOME AND THE ASS ESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS TO MEET OUT I TS INVESTMENT. THIS FINDING OF THE LEARNED CIT(A) WAS NOT CONTROVE RTED BY THE REVENUE AND NO MATERIAL WAS BROUGHT ON RECORD TO SU BSTANTIATE THE GROUND RAISED IN THE APPEAL. WE, THEREFORE, FI ND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND AFFIRM THE SAME. 3. THE NEXT GROUND RAISED PERTAINS TO DELETING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 1,13,568/- BY PLACI NG RELIANCE ON THE DECISION OF THE HONBLE APEX COURT. THE LEARNED SR. DR PLACED RELIANCE ON THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION DR AWN IN THE IMPUGNED ORDER. 5 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE LEARNED ASSESSING OFFICER MADE DISALLOWANCE OF PRIO R PERIOD EXPENSES WITHOUT APPRECIATING THAT THE LIABILITY IN RESPECT OF THESE EXPENSES WAS CRYSTALISED DURING THE YEAR. TH E LEARNED FIRST APPELLATE AUTHORITY HAS ALREADY DISCUSSED THE FACTS AND VARIOUS DECISIONS INCLUDING FROM HONBLE APEX COURT/HIGH CO URT AND THE TRIBUNAL. ON CONSIDERATION OF THE FACTS AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS MENTIONED IN THE ORDER OF THE LEARNED CIT(A), WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND AFFIRM THE SAME. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED COUNSEL OF BOTH THE SIDES AT TH E CONCLUSION OF THE HEARING ON 20.8.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 20.8.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2020 6