Gopala Merchntile Pvt. Ltd., Ahmedabad V. The ITO, Ward-2(1)(1), Ahmedabad

ITA 443/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8698 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-06-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 23-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 143(3); 14A; 115JB; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBE R GOPALA MERCANTILE PVT. LTD. 1-2, AKANKSHA APARTMENT, SOLA ROAD, NARANPURA, AHMEDABAD-380061 PAN: AAACG7149K (APPELLANT) VS THE ITO, WARD-2(1)(1), AHMEDABAD (RESPONDENT) REVENUE BY: SHRI SHYAM PRASAD, SR. D.R. ASSESSEE BY: SHRI ASEEM THAKKAR, A. R. DATE OF HEARING : 01-07-2021 DATE OF PRONOUNCEMENT : 27-07-202 1 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2014-15, ARISES FRO M ORDER OF THE CIT(A)-2, AHMEDABAD DATED 29-12-2017, IN PROCEEDIN GS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.35,440/- BEING INTEREST ATTRIBUTABLE TO EXEMP T INCOME U/S.14A OF THE ACT WHILE COMPUTING THE BOOK PROFIT U/S. L15JB OF THE I.T. ACT, 1961 2. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,53,348/- MADE BY THE ASSESSING OFFICER U/S.14A OF THE INCOME TAX ACT, 1961. ITA NO. 443/AHD/2018 ASSESSMENT YEAR 2014-15 I.T.A NO. 443/AHD/2018 A.Y. 2014-15 PAGE NO GOPALA MERCANTILE PVT. LTD. VS. ITO 2 3. THE BRIEF FACT OF THE CASE OF THE CASE IS THAT R ETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL WAS FILED ON 30 TH SEP, 2014. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE A CT WAS ISSUED ON 24 TH SEP, 2015. THE RELEVANT FACTS OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE TWO GROUNDS OF APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) AS FOLLOWS:- GROUND NO. 1(ADDITION OF RS. 35,440/- U/S. 14A OF T HE ACT WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT) 4. DURING THE COURSE OF ASSESSMENT, THE ASSESSING O FFICER HAS COMPUTED THE DISALLOWANCE OF EXPENDITURE INCURRED FOR EARNIN G EXEMPT INCOME AFTER APPLYING THE PROVISION OF SECTION 14A OF THE ACT R. W.R 8D OF THE INCOME TAX RULE TO THE AMOUNT OF RS. 4,53,348/-. THE ASSESSIN G OFFICER HAS ALSO ADDED THE AFORESAID DISALLOWANCE DETERMINED U/S. 14A WHIL E COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. 5. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT (A) AGAINST ADDING THE DISALLOWED AMOUNT U/S. 115JB OF THE ACT. THE LD. CIT(A) HAS SUSTAINED THE ADDITION TO THE EXTENT OF RS. 35,440/- WHICH WAS CO MPUTED BY THE ASSESSEE ITSELF AS INTEREST AMOUNT INCURRED FOR EARNING EXEM PT INCOME. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS CONTENDED THAT THE LD. CIT(A) HAS ERRONEOUSLY S USTAINED THE PART OF THE ADDITION AND THE SAME CANNOT BE ADDED U/S. 115JB IN VIEW OF THE DECISION OF SPECIAL BENCH OF THE ITAT DELHI IN THE CASE OF ACIT VS. VINIT INVESTMENT PVT. LTD. ON THE OTHER HAND, LD. DEPARTMENTAL REP RESENTATIVE HAS SUPPORTED THE ORDER OF LD. CIT(A). I.T.A NO. 443/AHD/2018 A.Y. 2014-15 PAGE NO GOPALA MERCANTILE PVT. LTD. VS. ITO 3 7. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAS ADD ED THE DISALLOWANCE MADE U/S. 14A TO THE BOOK PROFIT COMPUTED U/S. 115J B OF THE ACT. THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS. 35,440/- AS DISALLOWANCE COMPUTED BY THE ASSESSEE COMPANY. WI TH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE DECISION OF ACIT VS. VINIT INVESTMENT SPECIAL BENCH ITAT DELHI WHEREIN IT IS H ELD THAT EXPENDITURE INCURRED TO EARN EXEMPT INCOME NOT TO BE ADDED FOR COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. THEREFORE, FOLLOWING THE D ECISION OF THE CO-ORDINATE BENCH AS ABOVE WE CONSIDER THAT DECISION OF LD. CIT (A) IN SUSTAINING THE PART OF THE ADDITION IS NOT JUSTIFIED, THEREFORE TH E IMPUGNED ADDITION IS DELETED AND APPEAL OF THE ASSESSEE IS ALLOWED ON T HIS ISSUE. GROUND NO. 2 (CONFIRMING DISALLOWANCE OF RS. 4,53,3 48/- U/S. 14A OF THE ACT) 8. DURING THE COURSE OF ASSESSMENT, THE ASSESSING O FFICER NOTICED THAT ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 7,75,2 48/-. THE ASSESSEE WAS ASKED ABOUT THE DISALLOWANCE MADE U/S. 14A OF THE A CT FOR EARNING EXEMPT INCOME. THE ASSESSEE HAS SUBMITTED THE LEDGER ACCO UNT OF THE INVESTMENT MADE ALONG WITH COPY OF BANK ACCOUNT DEMONSTRATING INTEREST FREE LOAN OBTAINED FOR INVESTMENT IN THE SHARES AND SECURITIE S DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS ALSO ITSELF CALCULA TED THAT THE DISALLOWANCE OF INTEREST EXPENSES PERTAINING TO THE INVESTMENT MADE TO THE AMOUNT OF RS. 3,54,408/-. THE ASSESSEE HAS EXPLAINED THAT NO INT EREST BEARING FUND HAS BEEN UTILIZED FOR THE PURPOSE OF MAKING INVESTMENT IN SHARES AND SECURITIES. THE ASSESSEE HAS GIVEN THE DETAILED BREAK UP OF SOU RCE OF PAYMENT WHICH WAS INVESTED IN THE SHARES AND SECURITIES FROM WHIC H THE EXEMPT INCOME WAS I.T.A NO. 443/AHD/2018 A.Y. 2014-15 PAGE NO GOPALA MERCANTILE PVT. LTD. VS. ITO 4 EARNED. THE ASSESSING OFFICER IS NOT SATISFIED WI TH THE EXPLANATION OF THE ASSESSEE AND COMPUTED THE DISALLOWANCE OF EXPENDITU RE INCURRED TOWARDS EARNING EXEMPT INCOME U/S. 14A R.W.R. 8D OF THE I.T . RULE TO THE AMOUNT OF RS. 4,53,348/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 9. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 10. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE US THE LD. COUNSEL HAS CONTENDED THAT ASSESSEE COMPANY HAD NOT INCURRE D ANY EXPENDITURE ON ACCOUNT OF INTEREST IN RELATION TO THE INVESTMENT M ADE IN SHARES AND SECURITIES DURING THE YEAR UNDER CONSIDERATION. IT WAS FURTHE R STATED THAT INVESTMENTS WERE MADE OUT OF THE INTEREST FREE LOAN RECEIVED BY THE ASSESSEE. THE LD. COUNSEL HAS ALSO SUBMITTED THAT AS PER DETAIL FURNI SHED DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS THE TOTAL INTE REST ATTRIBUTABLE TO THE LOANS TAKEN FOR PURCHASING SHARES WAS TO THE EXTENT OF RS. 35,440/-. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUP PORTED THE ORDER OF LOWER AUTHORITIES. 11. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 4,53,348/- U/S. 14A R.W.R. 8D OF THE I.T. RULE 1961. ON PERUSAL OF THE MATERIAL ON RECORD, IT IS OBSERVED THAT DURING THE COURSE OF ASSESSMENT AND A PPELLATE PROCEEDINGS THE ASSESSEE HAS SUBMITTED THE DETAIL AND SOURCE OF FUN D AND INVESTMENT MADE IN SHARES AND SECURITIES BY REFERRING THE SUBMITTED DE TAIL THE ASSESSEE HAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT IT HAD NOT INCURRED ANY I.T.A NO. 443/AHD/2018 A.Y. 2014-15 PAGE NO GOPALA MERCANTILE PVT. LTD. VS. ITO 5 EXPENDITURE ON ACCOUNT OF INTEREST IN RELATION TO T HE INVESTMENT MADE IN SHARES AND SECURITIES DURING THE YEAR UNDER CONSIDE RATION. THE ASSESSEE COMPANY HAD FURNISHED DETAILED SOURCE OF INVESTMENT ALONG WITH THE COPIES OF LEDGER ACCOUNTS AND ACCOUNT OF THE BANK BOOK IN SUPPORT OF ITS CONTENTION THAT INVESTMENT WAS MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMPANY. THE ASSESSEE HAS ALSO DEMONSTRA TED IN ITS SUBMISSION THAT THE TOTAL INTEREST ATTRIBUTABLE ON THE LOAN TA KEN FOR PURCHASING SHARES WAS TO THE EXTENT OF RS. 35,440/-. IT IS OBSERVED THAT ASSESSING OFFICER HAS NOT DISPROVED THE SUPPORTING EVIDENCES SUBMITTED BY THE ASSESSEE WHICH DEMONSTRATE THAT IT HAS MADE INVESTMENT IN THE SHAR ES AND SECURITIES OUT OF INTEREST FREE FUNDS FROM WHICH THE EXEMPT INCOME WA S EARNED DURING THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF APP ELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS ALSO REFERRED PAGE NO 6 OF THE PAPER BOOK PERTAINING TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY FOR THE YEAR ENDED MARCH 31, 2014 AS PER WHICH TOTAL OPERATING AND GEN ERAL EXPENSES WAS INCURRED ONLY TO THE AMOUNT OF RS. 39,386. THEREFO RE, THE LD. COUNSEL HAS SUBMITTED THAT IN ANY CASE THE ADMINISTRATIVE EXPEN DITURE CANNOT BE DISALLOWED MORE THAN THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. IN THIS REGARD, THE LD. COUNSEL HAS ALSO REFERRED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF GU JARAT IN THE CASE OF PCIT VS. ADANI AGRO (P) LTD. (2018) 91 TAXMANN.COM 29 (G ) WHEREIN IT IS HELD THAT THERE WAS NO QUESTION OF DISALLOWING ADMINISTR ATIVE EXPENSES U/S. 14A R.W.R. 8D IN EXCESS OF THE TOTAL ADMINISTRATIVE EXP ENDITURE INCURRED BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE, WE RESTRICT THE DISALLOWANCE U/S. 14A TO THE EXTENT OF RS. 35,440/- AS THE AMOUNT COMPUTED B Y THE ASSESSEE PERTAINING TO THE INTEREST ATTRIBUTABLE TO THE EXEMPT INCOME A ND THE DISALLOWANCE OUT OF I.T.A NO. 443/AHD/2018 A.Y. 2014-15 PAGE NO GOPALA MERCANTILE PVT. LTD. VS. ITO 6 ADMINISTRATIVE EXPENDITURE UP TO SUCH EXPENDITURE I .E. RS. 39,386/-. ACCORDINGLY, WE RESTRICT THE TOTAL DISALLOWANCE (RS . 35,440 + RS. 39,386/-) TOTALING TO RS. 74,826/-. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-07-2021 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 27/07/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,