M/s. Premium Polyalloys Pvt. Ltd., Vadodara V. The Income Tax Officer, Ward-2(1)(3), Vadodara

ITA 372/AHD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5271 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANIL R SHAH; KINJAL SHAH ARS
• Section: 143(3); 14A

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NOS. 372 & 2387/AHD/2016 ( ASSESSMENT YEARS : 2012-13 & 2013-14) M/S. PREMIUM POLYALLOYS PVT. LTD. PLOT NO.417-418, GIDC INDUSTRIAL ESTATE, WAGHODIA, VADODARA / VS. INCOME TAX OFFICER, WARD 2(1)(3), BARODA 390007 & DY. COMM. OF INCOME- TAX CIRCLE-2(1)(2), VADODARA ./ ./ PAN/GIR NOS. : AABCP2640P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANIL R SHAH & MS. KINJAL SHAH, A.RS. / RESPONDENT BY : SHRI VEDANSHU TRIPATHI, SR.D.R. DATE OF HEARING 21/01/2019 !'# / DATE OF PRONOUNCEMENT 29/01/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE CIT(A )-2, VADODARA (CIT(A) IN SHORT), DATED 18.12.2015 & 13.07.2016 ARISING IN THE RESPECTIVE ASSESSMENT ORDERS DATED 10.02.2015 & 27. 11.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF TH E INCOME TAX ACT, 1961 (THE ACT) CONCERNING AYS. 2012-13 & 2013-2014. ITA NOS. 372 & 2387/AHD/16 [M/S. PREMIUM POLLYALLOY S PVT. LTD.] A.YS. 2012-13 & 2013-14 - 2 - 2. AS CLAIMED ON BEHALF OF THE ASSESSEE, THE FACTS ARE SIMILAR AND COMMON ISSUES ARE INVOLVED IN BOTH ASSESSMENT YEARS AND THEREFORE BOTH THE APPEALS WERE HEARD TOGETHER AND DISPOSED O F BY COMMON ORDER. ITA NO. 372/AHD/2016 - AY 2012-13 3. THE SOLITARY ISSUE IN THE CAPTIONED APPEAL CO NCERNS DISALLOWANCE OF EXPENDITURE OF RS.7,94,098/- UNDER S. 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 4. IN THE COURSE OF SCRUTINY ASSESSMENT, THE AO INTER ALIA INVOKED SECTION 14A OF THE ACT AND COMPUTED DISALLOWANCE OF EXPENDITURE ATTRIBUTABLE INVESTMENTS GIVING RISE TO EXEMPT INCO ME AS PER STATUTORY FORMULA LAID DOWN UNDER RULE 8D OF THE RULES. THE AO ACCORDINGLY DISALLOWED RS.5,98,488/- TOWARDS PROPORTIONATE INTE REST EXPENDITURE UNDER RULE 8D (2)(II) AND RS.1,95,610/- TOWARDS ADM INISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) OF THE RULES. TH E CIT(A) CONFIRMED THE ACTION OF THE AO. 5. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE POINTED OUT THAT INTEREST FREE SURPLUS FUN DS AT ITS DISPOSAL SUBSTANTIALLY IN EXCESS OF THE CORRESPONDING INVEST MENTS GIVING RISE TO THE TAX FREE INCOME. THE LEARNED AR THUS SUBMITTED THAT THERE IS NO WARRANT IN INVOKING RULE 8D(2)(II) PROPORTIONATE IN THE DISALLOWANCE IN VIEW OF THE LONG LINE OF JUDICIAL PRECEDENTS IN THE GIVEN SITUATION. WE STRAIGHTWAY FIND MERIT IN THE PLEA OF THE ASSESS EE WITH REGARD TO THE JUDICIAL PRECEDENTS IN THE CASE OF PR.CIT VS. S INTEX INDUSTRIES LTD. [2018] 403 ITR 418 (GUJ) AND CIT VS. RELIANCE UTILI TIES & POWER LTD. [2009] 313 ITR 340 (BOM.). ITA NOS. 372 & 2387/AHD/16 [M/S. PREMIUM POLLYALLOY S PVT. LTD.] A.YS. 2012-13 & 2013-14 - 3 - 6. THE DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENDIT URE UNDER RULE 8D(2)(III) IS HOWEVER SUSTAINED IN THE ABSENCE OF A NY COGENT REASON FOR DEPARTURE FROM THE STATUTORY FORMULA. CONSEQUE NTLY, THE DISALLOWANCE OF RS.5,98,488/- IS DELETED AND THE RE MAINING DISALLOWANCE OF RS.1,95,610/- IS SUSTAINED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IN AY 2012 -13 IS PARTLY ALLOWED. ITA NO. 2387/AHD/2016 - AY 2013-14 8. THE ASSESSEE IN THE CAPTIONED APPEAL IS AGGRIEVE D BY THE ORDER OF THE CIT(A) TOWARDS; (I) DISALLOWANCE OF PROPORTIONA TE INTEREST AMOUNTING TO RS.12,83,379/- BY INVOKING SECTION 14A OF THE ACT IN TERMS OF FORMULA LAID DOWN UNDER RULE 8D(2)(II) OF THE RULES AND (II) DISALLOWANCE OF EMPLOYEES CONTRIBUTIONS TO PROVIDEN T FUNDS AMOUNTING TO RS.86,786/- UNDER S.2(24)(X) R.W.S. 36 (1)(VA) OF THE ACT. 9. GROUND NO.1 IS SIMILAR TO THE GRIEVANCE RAISED I N AY 2012-13 DISCUSSED IN PRECEDING PARAS. IN VIEW OF THE SIMIL ARITY OF THE FACTS I.E. THE OWN FUNDS (INTEREST FREE FUNDS IN EXCESS OF THE CORRESPONDING INVESTMENT YIELDING TAX FREE INCOME), WE DO NOT SEE ANY JUSTIFICATION IN THE ACTION OF THE REVENUE AUTHORITIES INDULGING IN PROPORTIONATE DISALLOWANCE ON INTEREST EXPENDITURE. THE AO IS AC CORDINGLY DIRECTED TO DELETE THE DISALLOWANCE OF PROPORTIONATE INTERES T EXPENDITURE CARRIED OUT UNDER RULE 8D(2)(II) OF THE RULES. 10. IN THE RESULT, GROUND NO.1 OF THE ASSESSEES AP PEAL IS ALLOWED. ITA NOS. 372 & 2387/AHD/16 [M/S. PREMIUM POLLYALLOY S PVT. LTD.] A.YS. 2012-13 & 2013-14 - 4 - 11. GROUND NO.2 CONCERNS DISALLOWANCE OF EMPLOYEES CONTRIBUTIONS TO PROVIDENT FUND UNDER S.36(1)(VA) OF THE ACT. TH IS GROUND RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IN AY 201 3-14 IS ALSO PARTLY ALLOWED. 13. IN THE COMBINED RESULT, BOTH APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 29/01/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 29/01/201 9