Shri Nikhilkumar Dhirejlal Shah, Ahmedabad V. The Dy.CIT(OSD),Circle-8, Ahmedabad

ITA 3159/AHD/2010

• Counselvise Citation: 315920514 RSA 2010
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: S N DIVATIA
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

, , . .. . . .. . , , , , . .. . . .. .!'#$ !'#$ !'#$ !'#$ , % % % % & & & & IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) . ITA NO. 3159/AHD./2010 : ' ()- 2007-08 NIKHILKUMAR DHIRAJLAL SHAH, AHME DABAD (,- /APPELLANT) -VS- (PAN : AEAPS 2 687D) ACIT(OSD), CIRCLE-8, AHMEDABAD ( ./,- /RESPONDENT ) ,- 0 1 / APPELLANT BY : SHRI S.N.DIVATIA, A.R. ./,- 0 1 / RESPONDENT BY : SHRI S.P.TALATI, SR.D.R. 2'3 0 4% / DATE OF HEARING : 30/09/2011 5'( 0 4% / DATE OF PRONOUNCEMENT : 30/09/2011 / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 06-10-2010 OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AH MEDABAD CONFIRMING THE DISALLOWANCE OF RS.3,28,326/- MADE UNDER SECTION 14 A R.W.S. RULE 8D FOR THE ASSESSMENT YEAR 2007-2008. 2. AT THE TIME OF HEARING BEFORE US, SHRI S.N.DIVAT IA, APPEARING ON BEHALF OF THE ASSESSEE, PRODUCED THE DECISION OF THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT-II VS- M/S. LUBI SUBMERSIBLES LTD. IN TAX APPE AL NO.868 OF 2010 AND POINTED OUT THAT IN THE CASE OF THE ASSESSEE ALSO, THE ASSE SSEE WAS HAVING ITS OWN FUNDS IN EXCESS OF INVESTMENT MADE IN SHARES. THEREFORE, NO DISALLOWANCE IS CALLED FOR. SHRI S.P.TALATI, SR.D.R., APPEARING ON BEHALF OF THE REV ENUE, POINTED OUT THAT THIS DECISION WAS NOT AVAILABLE WHEN BOTH THE DEPARTMENTAL AUTHOR ITIES BELOW PASSED THE IMPUGNED ORDER. HE ACCORDINGLY SUGGESTED THAT IN THE INTERES T OF JUSTICE, THIS MATTER BE RESTORED TO THE FILE OF THE AO FOR RE-WORKING OUT THE DISALL OWANCE UNDER SECTION 14A R.W.S. ITA NO. 3159-AHD-10 2 RULE 8D. KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S. LUBI SUBMERSIBLES LTD. ( SUPRA ). THE COUNSEL OF THE ASSESSEE POINTED OUT THAT HE HAS NO OBJECTION BECAUSE THE BALANCE-SH EET OF THIS YEAR AS WELL AS EARLIER ASSESSMENT YEAR ARE AVAILABLE AND BEFORE THE AO, HE WILL DEMONSTRATE THAT ENOUGH OWN FUNDS WERE AVAILABLE WHEN INVESTMENTS WERE MADE IN SHARES. 3. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE GUJARAT HIGH COURT I N THE CASE OF M/S. LUBI SUBMERSIBLES LTD. ( SUPRA ) HAS HELD AS UNDER: AS CAN BE SEEN FROM THE TREATMENT ACCORDED TO THE SAID ISSUE BY THE TRIBUNAL, THE TRIBUNAL DECIDED ON THE BASIS OF PROVISIONS CON TAINED IN SECTION 14A OF THE INCOME-TAX ACT, 1961 {'ACT' FOR SHORT} WHICH STATES THAT NO DEDUCTION COULD BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. K CONCLUDED THAT THE FUNDS OF THE ASSESSEE-RESPONDENT WERE MIX FUNDS IN AS MUCH A S INVESTMENT WAS MADE IN THE PRECEDING YEARS AND THERE WAS NO FRESH INVESTME NT DURING THE YEAR UNDER CONSIDERATION. IT ALSO DID NOT AGREE WITH THE FINDI NGS OF THE ASSESSING OFFICER THAT THE INVESTMENT WAS MADE BY THE ASSESSEE OUT OF BORROWED FUNDS. THUS, FROM (HE ENTIRE GAMUT OF FACTS, THE TRIBUNAL HELD T HAT THERE WAS SUFFICIENT SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE TO INVEST AND THERE WAS NO NEXUS THAT COULD BE ESTABLISHED WITH THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING THE DIVIDEND INCOME. BY DISCUSSING AT LENGTH THE SI MILAR VIEW TAKEN BY THE COGNATE BENCH IN THE CASE OF A.C.U.I.T VS. JUPITER CORPORATE SERVICES LIMITED, IT CONCLUDED THAT IN ABSENCE OF ANY MATERIAL, IT WA S EVIDENT THAT NO EXPENDITURE HAD BEEN INCURRED BY WAY OF INTEREST WHICH COULD BE RELATED TO DIVIDEND INCOME, NOR WAS BROUGHT ANY MATERIAL TO SUGGEST THA T THE BORROWED FUNDS WERE UTILIZED FOR INVESTMENT IN SHARES. WHILE THERE WAS NO DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS WAS MADE IN THE PRECEDING AS SESSMENT YEAR, THERE WAS NO MATERIAL AVAILABLE BEFORE THE TRIBUNAL TO TAKE A DIFFERENT VIEW THAN ALREADY TAKEN IN THE EARLIER ASSESSMENT YEAR. LOGIC GIVEN F OR CONCLUSION REQUIRES NO INTERFERENCE. IT WAS ON THE BASIS OF EVIDENCE WHICH WAS PRESENTED BEFORE THE TRIBUNAL THAT THE CONCLUSION HAD BEEN ARRIVED AT WI TH REGARD TO AVAILABILITY OF ME FREE-FUNDS FOR INVESTMENT, AND THEREFORE, THIS A PPEAL MERITS NO CONSIDERATION. ACCORDINGLY, THE PRESENT TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 3.1 ADMITTEDLY, THE AFORESAID JUDGEMENT WAS NOT AVA ILABLE WHEN THE LD. CIT(A) PASSED THE IMPUGNED ORDER. WE, THEREFORE, IN THE IN TEREST OF JUSTICE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAM E TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO WILL RE-WORK OUT THE DISALLOW ANCE UNDER SECTION 14A R.W.S. 8D, ITA NO. 3159-AHD-10 3 KEEPING IN VIEW THE RATIO LAID DOWN BY THE JUDGEMEN T OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S. LUBI SUBMERSIBLES LTD. ( SUPRA ), AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6 0 5'( #' ) 30/09 /2011 ' 7 0 !3 8 THIS ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/2011. SD/- SD/- (A.K.GARODIA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/09/2011 0 00 0 .49 .49 .49 .49 :9(4) :9(4) :9(4) :9(4)- -- - 1. ,- 2. ./,- 3. 4 2> 4. 2>- - 5. 9A! .4' , , 8 6. !$ C6 , D/ F , 8 TALUKDAR/ SR. P.S.