Hardesh Ores Private Limited, Margao V. Assistant Commissioner of Income TAx, Circle - 1, Margao

ITA 329/PAN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7723 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y V RAVIRAJ
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI , J M ITA NO. 329 / PAN . / 2017 (ASSESSMENT YEAR: 2011 - 12 ) HARDESH ORES PVT. LTD. VILLA FLORES DA SILAV, ERASMO CARVALHO STREET, MARGAO, GOA - 403 601 VS. ASST. CIT, CIRCLE - 1, MARGAO, GOA - 403 601 PAN/GIR NO. AAACH 4515 J ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI NISHANT THAKKAR RESPONDENT BY : SHRI Y. V. RAVIRAJ DATE OF HEARING : 13.11 .201 8 DATE OF PRONOUNCEMENT : 15.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PANJAI - 1 VIDE ORDER DATED 29.09.2017 , PERTAINING TO ASSESSMENT YEAR 2011 - 12. 2. THE GROUND S RAISED BY THE ASSESSEE READS AS UNDER: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) PANAJI - 1 - GOA [HEREINAFTER REFERRED TO AS CIT(A)] IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER (AO) UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES 1962 AMOUNTING TO RS. 2,54,231/ - . THE WHOLE OF THE ADDITIONS BE DELETED IN FULL. 3. THE CIT(A) ERRED IN COMING TO THE CONCLUSION THAT THE AO HAS RECORDED HIS SATISFACTION ABOUT APPELLANT'S C LAIM OF NON - INCURRING OF ANY EXPENDITURE TO EARN THE EXEMPTED INCOME WAS INCORRECT. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: IN THIS CASE, THE ASSESSING OFFICER (A.O. FOR SHORT) OBSERVED THAT O N THE BASIS OF THE BALANCE SHEET, IT WAS NOTICED THAT THE ASSESSEE IS HAVING INVESTMENTS AND THE SAID INVESTMENTS EARN ED DIVIDEND INCOME WHICH IS EXEMPT FROM T AX. SINCE THE ASSESSEE HAS NOT SHOWN ANY EXPENDITURE INCURRED, T HE ASSESSEE WAS REQUESTED TO EXPLAIN WHY DISALLOWANCE 2 ITA NO. 329/PAN./2017 U/S. 14A R.W.R, 8D SHOULD NOT BE MADE FOR THE EXPENSES INCURRED. THE LD. COUNSEL OF THE ASSESSEE APPEARED AND SUBMITTED FOLLOWING : 'THE ASSESSEE IS IN THE BUSINESS OF EXTRACTION OF IRON ORE. THE SURPLUS FUNDS OF THE BUSINESS ARE GENERALLY KEPT WITH THE BANKS. THE ASSESSEE I S APPROACHED BY NUMBER OF MUTUAL FUND MANAGERS TO MAKE INVESTMENTS IN RESPECTIVE MUTUAL FUNDS. IN ORDER TO KEEP GOOD RELATION WITH BANKS AND FINANCIAL INSTITUTION AND TO EFFECTIVELY USE THE FUNDS OF BUSINESS, THE ASSESSEE HAS INVESTED A SMALL PORTION OF FU NDS OF THE BUSINESS IN - MUTUAL FUNDS AS PER THE ADVICE OF SUCH MUTUAL FUND MANAGERS. THE SAID MUTUAL FUND OFFICIALS COME TO THE DOOR STEP OF THE ASSESSEE AND COLLECT THE FORMS AND CHEQUES AND RENDER ALL THE SERVICES AT THE DOOR STEP OF THE ASSESSEE. EXCEPT ISSUING OF CHEQUES IN FAVOUR OF THE FUND AND ACCOUNTING OF THE STATEMENTS IN BOOKS OF ACCOUNT, (THE COST OF WHICH IS NEGLIGIBLE) NO OTHER ACTIVITY DONE BY THE COMPANY AND PRACTICALLY THERE IS NO COST INCURRED BY THE ASSESSEE IN THIS REGARD. HENCE IT IS SU BMITTED THAT THERE IS NO COST INCURRED BY THE COMPANY IN RESPECT OF INCOME NOT INCLUDABLE IN THE TOTAL INCOME. UNDER THE ABOVE CIRCUMSTANCES THE DISALLOWANCE IF ANY COMPUTED UNDER RULE 8D WILL BE INCORRECT, AND UNREASONABLE AND HENCE CANNOT BE APPLIED TO A SSESSEE CASE.' 4. THE A.O. DULY CONSIDERED THE ASSESSEES SUBMISSIONS. HE WAS OF THE OPINION THAT THE EX PLANATION OFFERED THAT NO ADMINISTRATIVE EXPENDITURE IS INCURRED ON INVESTMENTS IS NOT ACCEPTABLE , AS DECISION MAKING OF INVESTMENT IN MUTUAL FUND, ISS UING OF CHEQUES & ACCOUNTING OF STATEMENTS LEADS TO ADMINISTRATIVE EXPEN SE . SINCE THE ASSESSEE HAD SHOWN NIL EXPENDITURE, THE A.O. OPINED THAT THE ADMINISTRATIVE EXPENDITURE BASED ON RULE 8D NEEDS T O BE DISALLOWED. ACCORDINGLY, HE WORKED OUT THE DISALLOWAN CE U/S . 14A UNDER RULE 8D AS UNDER: - ACCORDINGLY, THE DISALLOWANCE U/S 14A IS WORKED OUT UNDER RULE 8D AS UNDER: - (I) AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME - NIL (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: - [AXB]/C= A AMOUNT OF EXPENDITURE BY WAY OF IN TEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR - NIL B THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME APPEARING IN THE BALANCE SHEET OF THE ASS ESSEE ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR - NIL C THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; NIL 3 ITA NO. 329/PAN./2017 III) AN AMOUNT EQUAL TO ONE - HALF PE R CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. OPENING INVESTMENT : RS.40, 700/ - CLOSING INVESTMENT : RS.10,16,51,607/ - TOTAL : RS . 10,16,92,307/ - AVERAGE INVESTMENT: RS.5,08,46,154/ - 0.5% OF AVERAGE VALUE OF INVESTMENTS OF RS. 5,08,46,154/ - = RS. 2,54,231/ - HENCE, THE IMPUGNED DISALLOWANCE WAS MADE IN THE ASSESSMENT O RDER. 5. BEFORE THE LD. CIT(A) THE ASSESSEE APPEALED THAT THE ASSESSING OFFICER (A.O. FOR SHORT) HAS NOT RECORDED ANY SATISFACTION THAT THE ASSESSEE HAS INCURRED EXPENDITURE TO EAR N TAX FREE INCOME. THE LD. CIT(A) BY AN ELABORATE FINDING REJECTED THE ASSESSEES CONTENTION A ND GAVE A FINDING THAT THE A.O. HAS DULY RECORDED HIS SATISFACTION. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED T HE RECORDS. THE LD. COUNSEL OF THE ASSESSEE REITERATED THAT THERE IS NO SATISFACTION BY THE A.O. THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPT INCOME. IN THIS REGARD, HE PLACED RELIANCE ON SEVERAL TRIBUNAL DECISION IN THIS REGARD. 8. AS REGARDS THE TRIBUNALS DECISION REFERRED BY THE LD. COUNSEL OF THE ASSESSEE, WE FIND THAT THEY WERE RENDERED ON THE FACTS OF THE CASE, WITH A FINDING THAT THERE WAS NO WHISPER BY THE A.O. REGARDING HIS SATISFACTION THAT THE ASSESSEE H AS INCURRED EXP ENDITURE TO EARN EXEMPT INCOME. I N THE PRESENT CASE, WE FIND THAT IT IS NOT A WHISPER BUT A CATEGORI CAL FINDING AND SATISFACTION OF THE A.O. THAT E XPENDITURE HAS BEEN INCURRED TO EARN THE EXEMPT INCOME. IN OUR CONSIDERED OPINION, THE LD. CIT(A)S FINDING T O THIS EFFECT IS D EVOID OF ANY INFIRMITY. 4 ITA NO. 329/PAN./2017 EXCEPT FOR CALLING THE CATEGORICAL SATISFACTION OF THE A.O. , ABSENCE OF SATISFACTION , THE LD. COUNSEL OF THE ASSESSEE HAS NOT MA DE OUT ANY CASE TO NEGATE THE DISALLOWANCE U/S. 14A. H ENCE, IN TH E BACKGROUND OF THE AFORESAID D ISCUSSION , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORITIES BELOW. HENCE, WE UPHOLD THE SAME. 9. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS DISMISSED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 1 5 . 0 1 . 2 0 1 9 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PANJI CITY CONCERNED; (5) THE DR, ITAT, PANJI ; (6) GUARD FILE . BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT