M/s. CHAIR FINANCE & INVESTMENT PRIVATE LIMITED, Indore V. THE ACIT 5(1), Indore

ITA 385/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5859 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R R MEENA
• Section: 14A

Judgement Text

ITA NO.385 OF 2014 CHAIR FINANCE 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 385/IND/2014 A.Y. 2008-09 M/S. CHAIR FINANCE & INVESTMENT P. LTD., INDORE PAN AAACC 9610 M :: APPELLANT VS ACIT-5(1), INDORE :: RESPONDENT ASSESSEE BY SHRI AJAY TULSIYAN, CA RESPONDENT BY SHRI R.R. MEENA, DR DATE OF HEARING 6.1.2016 DATE OF PRONOUNCEMENT 6.1.2016 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING T HE ORDER OF LD. CIT(A)-II, INDORE, DATED 31.1.2014. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS WITH RE GARD TO THE ADDITION OF RS.16,68,913/- ON ACCOUNT OF DISALLOWAN CE U/S 14A R.W.RULE 8-D. FACTS, IN BRIEF, ARE THAT ON PERUSAL OF THE DETAILS, THE AO OBSERVED THAT THE ASSESSEE HAS INVESTED MONEY IN EQUITY CAPITAL OF SOME GROUP COMPANIES AND A PARTNERSHIP F IRM. THE ITA NO.385 OF 2014 CHAIR FINANCE 2 ASSESSEE WAS ASKED TO CLARIFY THE SAME. THE ASSESSE E SUBMITTED THAT IT IS A REGISTERED NBFC. THE EXPENSES INCURRED BY IT ARE IN RELATION TO THE ACTIVITY OF FINANCING. THE ASSESSEE HAS OUTSTANDING UNSECURED LOAN FROM M/S. ANJANI FINANCE LTD. TO THE EXTENT OF RS.729.99 LACS, WHICH HAS BEEN USED FOR FINANCING O F VARIOUS LOANS. THE ASSESSEE HAS INVESTED IN SHARES OF M/S. ANJANI FINANCE LTD. AND AGRAWAL DAL MILLS P. LTD. FURTHER, THE ASSESSEE IS PARTNER IN M/S. S.K. WAREHOUSING CORPORATION. PROFIT ON SALE O F SHARES OF PRIVATE LIMITED CO. IS EVEN OTHERWISE TAXABLE. THE INVESTMENT IN SHARES OF AGRAWAL DAL MILLS P. LTD. HAS BEEN MADE D URING THE YEAR OUT OF NEW SHARE CAPITAL ISSUED BY THE COMPANY WITH AN INTENTION TO HAVE A CONTROLLING STAKE IN A GROUP COMPANY AND NOT WITH AN INTENTION TO EARN TAX FREE DIVIDEND INCOME. THE EXP ENSES INCURRED BY THE ASSESSEE ARE IN RELATION TO ITS CORE ACTIVIT Y OF LOAN FINANCING AND NOT IN RELATION TO ITS INVESTMENT ACTIVITY. HOW EVER, THE AO MADE DISALLOWANCE OF RS.16,68,913/- U/S 14A R.W. RULE 8- D ON ACCOUNT OF EXPENSES INCURRED FOR EARNING TAX FREE INCOME. AGAI NST THE SAME, THE ASSESSEE APPROACHED THE LD. CIT(A), WHO CONFIRM ED THE ACTION OF THE AO. NOW, THE ASSESSEE IS BEFORE US. ITA NO.385 OF 2014 CHAIR FINANCE 3 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND CONTENDED THAT LD. REVENUE AUTHORITIES DID NOT CONSIDER THE SUBMISSIONS AND CONFIRMED THE ADDITION. THE WORKING OF THE AO IS NOT IN ACCORDANCE WITH SECTION 14A R.W. RULE 8D AS THE SAME IS APPLICABLE ONLY WHEN THE AO IS NOT SATISFIED WITH T HE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SUCH EX PENSES. THE EXPENSES INCURRED BY THE ASSESSEE ARE IN RESPECT OF LOAN FINANCING AND NOT IN RESPECT OF INVESTMENT ACTIVITY. THEREFOR E, THE DISALLOWANCE AT RS.16,68,913/- MADE BY THE AO UNDER THE PROVISIONS OF RULE 8D IS NOT CORRECT. LEARNED COUNS EL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO PAGE NO.82 WHER EIN THE WORKING UNDER RULE 8D R.W.S. 14A IS PLACED, AS PER WHICH, THE DISALLOWANCE WORKS OUT TO RS.70,852/-. THE FRESH IN VESTMENT OF RS.1.5 CRORE MADE IN THE SHARES OF THE ASSOCIATED P RIVATE LIMITED COMPANY DURING THE YEAR HAS BEEN MADE OUT OF THE IN TEREST FREE FUNDS WITHDRAWN FROM THE PARTNERSHIP FIRM AND THE F RESH SHARE CAPITAL INTRODUCED DURING THE YEAR. LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE JUDICIAL PR ONOUNCEMENTS, ITA NO.385 OF 2014 CHAIR FINANCE 4 WHICH ARE PLACED IN THE PAPER BOOK. ON THE OTHER HA ND, LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE . WE FIND THAT IN VIEW OF THE FACTS AND SUBMISSIONS THEREOF, AS NARRA TED ABOVE, THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. THE ASSESSEE HAS FILED A PAPER BOOK RUNNING INTO 82 PAG ES ALONG WITH WRITTEN SUBMISSIONS, WHEREIN, THE RELEVANT DOCUMENT S HAVE BEEN ANNEXED. ASSESSEE HAS AGITATED THAT THE DOCUMENTS H AVE NOT BEEN APPRECIATED BY THE REVENUE AUTHORITIES IN THE PROPE R PERSPECTIVE. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO MADE SUBMISSION, AS NARRATED ABOVE. ALL THESE REQUIRE CO NSIDERATION OF THE AO. THEREFORE, WE SET ASIDE THE ORDERS OF THE R EVENUE AUTHORITIES ON THIS ISSUE. THE ISSUE IS RESTORED BA CK TO THE FILE OF THE LD. AO WITH DIRECTION TO VERIFY THE CLAIM OF THE AS SESSEE IN VIEW OF THE ABOVE DISCUSSION AND JUDICIAL PRONOUNCEMENTS. T HE AO SHALL DECIDE THE ISSUE AFTER GIVING DUE OPPORTUNITY OF HE ARING TO THE ASSESSEE. THE ASSESSEE SHALL BE AT LIBERTY TO FILE ANY FURTHER EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. THUS, T HE ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.385 OF 2014 CHAIR FINANCE 5 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED PARTLY. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.1.2016 . SD/- ( D.T. GARASIA) JUDICIAL MEMBER SD/- (B.C. MEENA) ACCOUNTANT MEMBER DATED : 06.1.2016 !VYS! COPY TO: APPELLANT / RESPONDENT / CIT(A) / CIT / DR, INDORE