M/s. Shewani Properties, Pune V. Assistant Commissioner of Income-tax,

ITA 326/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7725 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILAJA RAI
• Assessee Lawyers: V L JAIN
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 326 /P U N/201 6 / ASSESSMENT YEAR : 20 0 9 - 1 0 M/S. SHEWANI PROPERTIES, 375, NARAYAN PETH, DULHAN COMPLEX, PUNE - 411030 . / APPELLANT PAN: A AZFS2853A VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 11 , PUN E . / RESPONDENT / APPELLANT BY : SHRI V.L. JAIN / RESPONDENT BY : S MT. SHAILAJA RAI / DATE OF HEARING : 2 6 .0 4 . 201 8 / DATE OF PRONOUNCEMENT: 2 6 . 0 4 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , PUNE - 5 , PUNE, DATED 21 . 0 1 .201 6 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM U/S 14A OF THE INCOME TAX ACT 1961 OF RS.7,72,362/ - . ITA NO. 326 /P U N/20 1 6 M/S. SHEWANI PROPERTIES 2 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POIN TED OUT THAT THE LIMITED PLEA RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT AND BE RESTRICTED TO NET INTEREST PAID AND NOT TO THE GROSS INTEREST PAID. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY TH E HONBLE BOMBAY HIGH COURT IN CIT VS. JUBILANT ENTERPRISES PVT. LTD. IN INCOME TAX APPEAL NO.1512 OF 2014, JUDGMENT D ATED 28.02.2017 AND THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN PR. CIT VS. NIRMA CREDIT AND CAPITAL PVT. LTD. IN TAX APPEAL NO.4 09 OF 2017 WITH TAX APPEAL NO.514 OF 2017, JUDGMENT DATED 31.08.2017. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRONGLY OPPOSED THE PROPOSITION MADE BY LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTE NTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF PROMOTERS AND BUILDERS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD COMPUTED DISALLOWANCE UNDER SECTION 14A OF THE ACT A T 18,42,881/ - . THE ASSESSEE WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) HAD CONSIDERED TOTAL NET INTEREST PAID BY THE ASSESSEE AND HAD POINTED OUT THAT NO DISALLOWANCE IS WARRANTED ON THIS COUNT. THE ASSESSING OFFICER HOWEVER, WAS OF THE VIEW THAT INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT TO THE PARTNERS OF CAPITAL ACCOUNT WAS 79,22,877/ - AND INTEREST PAID ON FINANCE CHARGES WAS 58,13,923/ - , TOTALING 1,37,36,800/ - . THE ASSESSING OFFI CER DENIED THE CLAIM OF ASSESSEE OF SETTING OFF OF INTEREST RECEIVED OF 40,56,925/ - AND RE - COMPUTED ITA NO. 326 /P U N/20 1 6 M/S. SHEWANI PROPERTIES 3 THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES AT 27,32,100/ - , RESULTING IN ADDITION OF 7,72,362/ - . 6. THE CIT(A) UPHEL D THE ORDER OF ASSESSING OFFICER, IN VIEW OF PROVISIONS OF RULE 8D OF THE RULES BEING INSERTED BY THE FINANCE ACT W.E.F. 24.03.2008. 7. THE CASE OF ASSESSEE BEFORE US IS THAT FOR COMPUTING DISALLOWANCE UNDER SECTION 8D(2)(II) OF THE RULES ON ACCOUNT OF INTEREST EXPENSES, NET INTEREST IS TO BE CONSIDERED IN THE HANDS OF ASSESSEE AND NOT GROSS INTEREST PAID. 8. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN CIT VS. JUBILANT ENTERPRISES PVT. LTD. (SUPRA) HAD SETTLED THE ISSUE IN THIS REGARD AND HAVE DISMI SSED THE APPEAL OF REVENUE AGAINST THE ORDER OF TRIBUNAL IN HOLDING THAT DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES IS TO BE ON THE BASIS OF NETTING OF INTEREST. 9. SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE HIGH CO URT OF GUJARAT IN PR. CIT VS. NIRMA CREDIT AND CAPITAL PVT. LTD. (SUPRA). FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT FOR THE PURPOSE OF APPLYING THE PROVISIONS OF CLAUSE (II) OF SUB - RULE (2) OF RULE 8D OF THE RULES, PRIOR TO ITS AME NDMENT W.E.F. 02.06.2006 WHAT HAS TO BE CONSIDERED AS AMOUNT OF EXPENDITURE BY WAY OF INTEREST WOULD BE INTEREST PAID BY THE ASSESSEE ON BORROWINGS MINUS INTEREST INCOME RECEIVED DURING THE FINANCIAL YEAR. SUCH IS THE PROPOSITION LAID DOWN BY THE HONBLE HIGH COURT OF GUJARAT IN PR. CIT VS. NIRMA CREDIT AND CAPITAL PVT. LTD. (SUPRA) AND APPLYING THE SAME, WE DIRECT THE ASSESSING OFFICER TO DELETE ITA NO. 326 /P U N/20 1 6 M/S. SHEWANI PROPERTIES 4 DISALLOWANCE MADE IN THE HANDS OF ASSESSEE, SINCE THE ASSESSEE HAD SUO MOTU MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE RULES BY CONSIDERING THE NET INTEREST. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED. 10 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 2 6 TH DAY OF APR IL , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 26 TH APRIL , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), PUNE - 5, PUNE ; 4. THE PR. CIT , PUNE - 4 , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE