Sirhind Steels Ltd., Ahmedabad V. The ACIT., Circle-8, Ahmedabad

ITA 362/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94472 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: HIREN J TRIVEDI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ITA NO. 362/AHD/2012 / ASSESSMENT YEAR: 2008-09 SIRHIND STEEL LTD., 7 TH FLOOR, SHALIN BLDG., ASHRAM ROAD, AHMEDABAD PAN : AADCS 0853 R VS. ACIT, RANGE-8, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI HIREN J. TRIVEDI, AR REVENUE BY : SHRI DINESH SINGH, SR DR / DATE OF HEARING : 14/09/2015 / DATE OF PRONOUNCEMENT: 29/09/2015 / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, A HMEDABAD DATED 02.12.2011 FOR ASSESSMENT YEAR 2008-09. 2. GROUND NOS. 1 & 2 OF THE ASSESSEES APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPEL LANTS CASE THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN CONSIDERING IT A CASE FIT FOR ANY DISALLOWANCE WHATSOEVER IN PURSUANCE OF SECTION 14A OF THE I.T. ACT, 1961. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMST ANCES OF THE APPELLANTS CASE THE LD. CIT(A) HAS ERRED IN UPHOLDI NG THE AFORESAID DISALLOWANCE U/S 14A OF THE ACT IN A SUM OF RS.9,32 ,564. THE SAME MAY BE DELETED. ITA NO. 362/AHD/2012 SIRHIND STEEL LTD VS. ACIT AY 2008-09 2 3. THE FACTS OF THE CASE ARE THAT FOR THE YEAR UNDE R CONSIDERATION THE ASSESSEE HAD RECEIVED THE DIVIDEND INCOME OF RS.1,0 7,44,000/-. THE ASSESSEE HAS OFFERED A SUM OF RS.75,000/- AS THE EX PENDITURE INCURRED BY IT FOR THE PURPOSE OF EARNING EXEMPT INCOME. ACC ORDINGLY, IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE, THE AS SESSEE ADDED A SUM OF RS.75,000/- U/S 14A. THE ASSESSING OFFICER MADE THE DISALLOWANCE UNDER RULE 8D WHICH WAS WORKED OUT TO RS.10,07,564/ -. THE CIT(A) ALLOWED THE SET OFF OF RS.75,000/-, I.E., THE EXPEN DITURE WHICH WAS ALREADY DISALLOWED U/S 14A BY THE ASSESSEE. 4. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE HAS RELIED UPON THE DECISION OF ITAT IN TH E CASE OF M/S. DYNEMIC PRODUCTS LTD VS. DCIT IN ITA NO.2769/AHD/20 11 AND OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR INCIPAL COMMISSIONER OF INCOME TAX VS. INDIA GELTINE AND CH EMICALS LTD IN TAX APPEAL NO.276 AND 277 OF 2015. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIA GELTI NE AND CHEMICALS LTD (SUPRA) REPRODUCED THE ORDER OF THE ITAT, WHERE IN THE ITAT HAS ALLOWED THE RELIEF ON THE IDENTICAL FACTS. THE CON CLUDING PARAGRAPH OF THE ITAT WAS AS UNDER:- ITA NO. 362/AHD/2012 SIRHIND STEEL LTD VS. ACIT AY 2008-09 3 9. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME TAX (APPEALS) COULD NOT PINPOINT ANY ERROR IN THE COMPUTATION OF DISALLOWANCE MADE BY THE ASSESSEE OF RS.2,00,000 /- IN EARNING TAX FREE DIVIDED INCOME. IN THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, DISALLOWANCE OF RS.6,22,228/- COULD NOT HAVE BEEN M ADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). OUR ABOVE VIEW FINDS SUPPORT FROM THE DE CISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CON SOLIDATED PHOTO & FINVEST LTD. (2012) 211 TAXMAN 184 (DEL.). THEREFORE, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOW ANCE OF RS.6,22,228/-. THUS, GROUND NO.1 OF APPEAL OF THE ASSESSEE IS ALLO WED. 7. THE ABOVE FINDING OF THE ITAT WAS APPROVED BY TH EIR LORDSHIPS OF HONBLE JURISDICTIONAL HIGH COURT WITH THE FOLLOW ING OBSERVATIONS:- WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN B Y THE LEARNED TRIBUNAL AND THE REASONS GIVEN BY THE LEARNED TRIBU NAL WHILE DELETING THE DISALLOWANCE OF INTEREST EXPENSES UNDER SECTION 14A OF THE ACT. 8. THE ITAT, AHMEDABAD BENCH IN THE CASE OF DYNEMIC PRODUCTS LIMITED (SUPRA) HELD AS UNDER:- 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THE FIRST PARAGRAPH, THE ASSESSING OFFICER HAS RECORDED THE FINDING THAT SOM E DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT IS WARRANTED. IN PARAGRAP H 2, THE ASSESSING OFFICER HAS RECORDED THAT THE ASSESSEE HAS OFFERED THE EXPENSES OF RS.18,43,737/- AS EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME AND ADDED BACK THE SAME TO THE TOTAL INCOME. IN THE THIRD PARAGRAPH, THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM ON THE GROUND THAT THE DISALLOWANCE IS TO BE MADE AS PER RULE 8D OF THE IN COME-TAX RULES. IN OUR OPINION, THE DISALLOWANCE IS TO BE MADE AS PER RULE 8D ONLY AFTER THE ASSESSING OFFICER RECORDS HIS SATISFACTION THAT THE AMOUNT OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE AS SESSEE FOR THE PURPOSE OF EARNING OF EXEMPT INCOME IS INCORRECT. T HE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE INCORRECT MERELY ON T HE GROUND THAT THE WORKING OF THE EXPENDITURE HAS NOT BEEN MADE BY THE ASSESSEE AS PER RULE 8D. IF THE INTERPRETATION OF THE ASSESSING OF FICER IS ACCEPTED, THEN ITA NO. 362/AHD/2012 SIRHIND STEEL LTD VS. ACIT AY 2008-09 4 THE WORKING OF DISALLOWANCE UNDER RULE 8D WOULD COM E COMPULSORY MAKING THE PROVISIONS OF SECTION 14A(2) AS WELL AS R ULE 8D(1) REDUNDANT. THE ASSESSING OFFICER HAS NOT GIVEN ANY OTHER REASON FOR NOT ACCEPTING THE ASSESSEES WORKING OF THE EXPENDI TURE CLAIMED TO HAVE BEEN INCURRED FOR EARNING OF EXEMPT INCOME. THEREFO RE, WE ARE OF THE OPINION THAT NO SATISFACTION WAS RECORDED BY THE AS SESSING OFFICER FOR REJECTING THE ASSESSEES CLAIM WITH REGARD TO EXPEN DITURE INCURRED FOR EARNING OF EXEMPT INCOME. WITHOUT RECORDING SUCH SA TISFACTION, THE ASSESSING OFFICER CANNOT PROCEED TO COMPUTE THE DIS ALLOWANCE AS PER RULE 8D(2). IN VIEW OF ABOVE, WE DELETE THE ADDITIO N MADE BY THE ASSESSING OFFICER U/S 14A READ WITH 8D(2) OF THE IN COME-TAX RULES. 9. ON THE FACTS OF THE ASSESSEES CASE, BOTH THE AB OVE DECISIONS, I.E., THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT A S WELL AS ITAT WOULD BE SQUARELY APPLICABLE. IN THIS CASE ALSO, T HE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION HOW THE ESTIMATE OF THE ASSESSEE THAT IT INCURRED A SUM OF RS.75,000/- FOR EARNING THE EX EMPT INCOME WAS INCORRECT. THE ASSESSING OFFICER CAN PROCEED TO WO RK OUT THE DISALLOWANCE UNDER RULE 8D ONLY AFTER HIS SATISFACT ION THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE IS NOT CORRECT . IN FACT, THE ASSESSING OFFICER HAS NOT DISCUSSED AT ALL THAT THE SUM OF RS.75,000/- IS ALREADY OFFERED BY THE ASSESSEE AS EXPENDITURE INCU RRED FOR EARNING OF EXEMPT INCOME. HE SIMPLY PROCEEDED TO MAKE THE DIS ALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME-TAX ACT. AS HE LD BY THE ITAT, AHMEDABAD BENCH AND THE HONBLE JURISDICTIONAL HIGH COURT THAT UNLESS THE ASSESSING OFFICER RECORD HIS SATISFACTIO N DISPUTING THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, HE CANNOT PROCEED TO WORK OUT THE DISALLOWANCE UNDE R RULE 8D. ADMITTEDLY, NO SUCH SATISFACTION IS RECORDED BY THE ASSESSING OFFICER. HE, IN FACT, DID NOT NOTICE THAT ANY DISALLOWANCE W AS ALREADY MADE BY THE ASSESSEE. THE CIT(A) TOOK NOTE OF THE DISALLOW ANCE MADE BY THE ITA NO. 362/AHD/2012 SIRHIND STEEL LTD VS. ACIT AY 2008-09 5 ASSESSEE, BUT HE SIMPLY GAVE THE SET OFF OF SUCH DI SALLOWANCE MADE BY THE ASSESSEE. IN VIEW OF ABOVE, IN OUR OPINION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMPUTING THE DISALLOWANCE UND ER RULE 8D. ACCORDINGLY, WE, RESPECTFULLY FOLLOWING THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIA GELTI NE AND CHEMICALS LTD (SUPRA) AND ITAT IN THE CASE OF DYNEMIC PRODUCT S LIMITED (SUPRA), DELETE THE DISALLOWANCE SUSTAINED BY THE C IT(A) AND ALLOW GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL. 10. THE OTHER GROUNDS IN THE ASSESSEES APPEAL WERE NOT PRESSED AT THE TIME OF HEARING BEFORE US; THEREFORE, THEY ARE REJECTED AS NOT PRESSED. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE COURT ON 29 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 29/09/2015 BIJU T., 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