Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0171 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-08-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
24-08-2016
Assessment Year
2009-2010
Appeal Filed On
01-07-2014
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.414/RJT/2014 / ASSTT. YEAR: 2009-2010 ACIT, CIR.1 RAJKOT. VS SHRI GIRISH R. TANTI 1 ST FLOOR, AMRUT COMMERCIAL COMPLEX SARDARNAGAR MAIN ROAD RAJKOT. ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI D.R. CHHATRE, SR.DR ASSESSEE BY : SHRI M.J. RANPURA, AR / DATE OF HEARING : 24/08/2016 / DATE OF PRONOUNCEMENT: 29/08/2016 $%/ O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: THIS IS REVENUES APPEAL AGAINST ORDER OF LD.CIT(A) , JAMNAGAR DATED 21.4.2014. ASSESSMENT YEAR INVOLVED IS 2009-10. 2. ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AGAINST DELETION OF ADDITION OF RS.1,78,14,557/- DISALLOWED UNDER SECTI ON 14A OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED RETURN OF INCOME ON 28 .07.2009 DECLARING INCOME OF RS.9,35,880/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. THE ASSESSEE IS AN INDIVID UAL AND ONE OF THE DIRECTOR OF SUZLON ENERGY LTD. AND ALSO ENGAGED IN THE BUSIN ESS OF GENERATION OF ELECTRICITY. THE ASSESSEE ALSO DERIVED DIVIDEND FRO M PUBLIC LIMITED COMPANIES AND INTEREST FROM SAVINGS ACCOUNT AND FIXED DEPOSIT HELD WITH THE BANKS, ITA NO.414/RJT/2014 2 INTEREST ON RBI BOND AND DIRECTORS SITTING FEES. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. STATED THAT ON GOIN G THROUGH THE DETAILS FURNISHED BY THE ASSESSEE IT WAS NOTICED THAT DURIN G THE YEARS UNDER CONSIDERATION THE ASSESSEE HAS TAKEN SUBSTANTIAL AM OUNT OF LOAN FROM INFRA LEASE & FINANCIAL SERVICES AND SAID LOAN WAS USED FOR INVESTMENT IN SHARES OF THE GROUP COMPANIES OF THE ASSESSEE. THE AO NOTI CED THAT ON THE SAID INVESTMENT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVE D DIVIDEND OF RS.11,60,82,000 / WHICH WAS CLAIMED AS EXEMPT UNDE R SECTION 10 [34/35] OF THE ACT. SIMULTANEOUSLY THE ASSESSEE HAS ALSO CLAIM ED DEDUCTION TO THE TUNE OF RS.1, 7814, 557/ AS ALLOWABLE INTEREST EXPENSES. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 1 4A NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE A SSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THEREFORE A SHOW CAUSE NOTICE WAS ISSUED BY THE ASSESSING OFF ICER TO THE ASSESSEE REGARDING CLAIM OF INTEREST EXPENSES WHICH ARE NOT ALLOWABLE AS PER THE PROVISIONS OF SEC.14A OF THE ACT. THE ASSESSEE HAS EXPLAINED THAT THE TOTAL INTEREST EXPENSES PAID WAS RS.1 4.85 CRORES. THE EX PENDITURE DISALLOWABLE UNDER SECTION 14A WAS WORKED OUT TO BE RS.9, 7061 , 869 AND HE HIMSELF HAD DISALLOWED EXPENSES OF RS.13,06,40,084. HE FURTHER STATED THAT ON THE OTHER HAND, HE CLAIMED DEDUCTION OF INTEREST EXPENSES OF ONLY RS.1,78,14,557/- . THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANAT ION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF DEDUCTION OF INTEREST EXPE NSES UNDER THE PROVISION OF SEC.14A OF THE ACT AND ADDED THESE EXPENSES OF RS.1 ,78,14,557 TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE HAS MADE APPEAL BEFORE THE LEARNED CIT AGAINST THE ORDER OF THE ASSESSING OFFICER. THE LEARNED CIT HAS ALLOW ED THE CLAIM OF THE ASSESSEE ON THE REASONING THAT INTEREST EXPENDITURE DISALL OWABLE UNDER SECTION 14A WAS WORKED OUT TO THE TUNE OF RS.9,70,61,869 AGAIN ST THAT THE ASSESSEE ITA NO.414/RJT/2014 3 HIMSELF HAD DISALLOWED EXPENSES OF RS.13,06 40084 BUT CLAIMED DEDUCTION FOR ONLY INTEREST EXPENDITURE OF RS.1,78,14,557. IN THIS CONNECTION THE LD CIT(A) HELD AS UNDER:- 6.3 I HAVE GONE THROUGH THE FACTS AND THE CIRC UMSTANCES OF THE CASE. THE CLAIM OF INTEREST EXPENDITURE HAS BEEN DISALLOWED U /S. 14A OF THE I T ACT, SECTION 14A ENVISAGES DISALLOWANCES OF ALL THOSE EX PENSES WHICH ARE INCURRED TO EARN EXEMPT INCOME. THE WORKING OF DISA LLOWANCE U/S. 14A IS CLEARLY SPELT OUT UNDER RULE 8D OF THE I T RULES. A S PER RULE 8D, THE APPELLANT HIMSELF HAD DISALLOWED CLAIM OF INTEREST EXPENDITURE TO THE EXTENT OF RS 13,06,40,084/-. THIS WAS .NOT CHALLENGED BY THE AO AND THE AO HAS ACCEPTED THE SAME. THEREFORE, IT CANNOT BE SAID THA T THE APPELLANT HAD NOT CONTRAVENED THE WORKING ENVISAGED UNDER RULE 8D. FO R THE BALANCE CLAIM OF INTEREST EXPENDITURE, THE APPELLANT'S 'CLAIM OF BUS INESS EXPEDIENCY HOLDS SUBSTANTIAL FORCE. THE TERM BUSINESS EXPEDIENCY HAS TO BE TAKEN VERY BROADLY. WHEN THE APPELLANT HIMSELF HAS DISALLOWED A SUBSTANTIAL PART OF THE INTEREST PAID BY HIM, IT CANNOT BE SAID THAT THE AP PELLANT HAD WRONGLY CLAIMED ONLY A SMALL PART OF THE INTEREST LIABILITY. THIS I S PARTICULARLY SO WHEN THE WORKING OF DISALLOWANCE U/S. 14A HAS BEEN RIGHTLY A RRIVED AT AS PER THE PROVISIONS OF RULE 8D. THEREFORE, THE AO WAS NOT JU STIFIED IN DISALLOWING THE CLAIM OF INTEREST EXPENDITURE TO THE TUNE OF RS.1,7 8,14,557/- AND THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELET ED. THIS GROUND OF APPEAL IS ALLOWED. 5. BEFORE US THE LEARNED DR CONTENDED THAT LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,78,14,557/WHICH WAS D ISALLOWED UNDER SECTION 14A BY THE ASSESSING OFFICER. ON THE OTHER HAND THE LEARNED COUNSEL RELIED ON THE ORDER OF LEARNED CIT (A). 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD CAREFULLY. WE FIND THAT THE ASSESSEE HAD ALREADY RE STRICTED CLAIM OF INTEREST ACCORDING TO THE PROVISION OF SECTION 14A OF THE AC T R.W.S. 8D OF THE RULES AND DISALLOWANCE OF THE INTEREST EXPENSES BY THE AS SESSING OFFICER IS AGAINST THESE PROVISION OF THE ACT.THE PROVISIONS OF SECTIO N 14A OF THE ACT ARE AS UNDER:- . 14A. [(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.] ITA NO.414/RJT/2014 4 [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE H AS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME UNDER THIS ACT :] [PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SH ALL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREA DY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ASSESSEE UNDER SECTION 154, FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2001.]' IN THIS CONNECTION, RULE 8D PRESCRIBES THE MECHANI SM FOR WORKING OUT THE DISALLOWANCE UNDER SECTION 14A AND THE ASSESSING OF FICER IS BOUND TO ADOPT RULE 8D FOR MAKING DISALLOWANCE UNDER SECTION 14A WHERE HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE I N RESPECT OF SUCH AN EXPENDITURE. WE FIND THAT THE LD.CIT(A) HAS REFERRE D THE APPLICABILITY OF RULE 8D WHILE MAKING DISALLOWANCE UNDER SEC.14A AND THE DISALLOWANCE WAS MADE ACCORDING TO THE PROCEDURE PRESCRIBED IN THESE LEGAL PROVISIONS. IN VIEW OF ABOVE FACTS AND FINDINGS WE UPHOLD THE DECISION OF LD.CIT(A)APPEAL, AND DISMISS THE APPEAL OF THE REVENUE 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (AMARJIT SINGH) ACCOUNTANT MEMBER AHMEDABAD; DATED 29/08/2016
