M/s. A. Infrastructure Ltd., BHILWARA V. ACIT, Circle- Bhilwara, BHILWARA

ITA 444/JODH/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5786 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 16-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.K.SAINI, VICE PRESIDENT AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO. 444/JODH/2017 (ASSESSMENT YEAR -2014-15) M/S A. INFRASTRUCTURE LTD., 1, HAMAIRGARH BHILWARA VS THE ACIT, CIRCLE, BHILWARA (APPELLANT) (RESPONDENT) PAN: AABCA7493D REVENUE BY SH. P.K. SINGI, DR ASSESSEE BY SHRI RAJENDRA JAIN, ADVOCATE DATE OF HEARING 08.05.2019 DATE OF PRONOUNCEMENT 0.905.2019 O R D E R PER N.K. SAINI, V.P. : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 27.09.2017 OF THE CIT(A), AJMER. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE SUSTENANCE OF ADDITION OF RS. 3,18,902/- MADE BY TH E ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE E-FILED ITS RETURN OF INCOME ON 28.11.2014 DECLARING AN INCOME OF RS. 1,10,02,990/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS. 1,34,700/- ON ITS I NVESTMENT IN SHARES AMOUNTING TO RS. 62,90,000/-. HE ASKED THE ASSESSEE AS TO WHY DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE INCOME TAX RULES SHOULD NOT BE MADE. IN RESPONSE, THE ASSESSE E SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, NO INVESTMENT IN SHARES HAD BEEN MADE AND THAT THE INVESTMENT WAS MADE LONG BACK OU T OF OWN FUNDS AND NO EXPENDITURE HAD BEEN INCURRED. IT WAS FURTHER S UBMITTED THAT THE ASSESSEE WAS HAVING SHAREHOLDER FUNDS FOR A SUM OF RS. 5035.44 LACS AGAINST WHICH ONLY RS. 44.90 LACS HAD BEEN INVESTED AND THERE WAS NO NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENT MADE BY THE ASSESSEE IN SHARES, THEREFORE, THE PROVISIONS OF SE CTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES WOULD NOT BE APPLI CABLE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- DCIT VS. ENERCON INDIAN LTD. 48 ITR (T) 363(MUM) DCIT VS. BINANAI INDUSTRIES LTD 178 TTJ KOL. 658 4. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MER IT IN THE SUBMISSIONS OF THE ASSESSEE AND MADE THE DISALLOWA NCE OF RS. 3,18,902/-. 3 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE ASSE SSING OFFICER. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- GRINDWELL NORTION LTD. VS. ADDL. CIT (2017) 183 TTJ MUMBAI 681 DAMODAR VALLEY CORPORATION VS. ADD.L CIT (2016) 180 TTJ (KOL) 82S CIT & ANOTHER VS. MICROLABS LTD. (2016) 383 ITR 490 (KARN.) CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM.) CIT VS. OM PRAKASH KHAITAN (2015) 376 ITR 390 (DELHI) 6. THE LD. CIT(A), HOWEVER, DID NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE ADDIT ION MADE BY THE ASSESSING OFFICER BY OBSERVING IN PARA 4.3 AS OF T HE IMPUGNED ORDER AS UNDER:- '4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STAT EMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAR EFULLY. THE APPELLANT HAS NOT FURNISHED ANY FUND FLOW STATE MENT TO SUBSTANTIATE THE CONTENTION MADE IN THE WRITTEN SUB MISSION. IT IS SEEN THAT THE AO HAS COMPUTED THE DISALLOWANCE S TRICTLY IN ACCORDANCE WITH THE SECTION 14A R.W. RULE 8D. THE COMPUTATION HAS BEEN GIVEN BY THE AO AT PARA 3.7. A S THE DISALLOWANCE OF RS. 3,18,902/- HAVE BEEN WORKED OUT BY THE AO STRICTLY IN ACCORDANCE WITH THE SECTION 14A R.W. RULE 8D, THEREFORE, THE DISALLOWANCE OF RS. 3,18,902/- MADE BY THE AO U/S 14A IS HEREBY CONFIRMED.' 4 7. NOW THE ASSESSEE IS IN APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT, JODHPUR VS. M/S ERCON COMPOSITES, JODHPUR ITA NOS. 132 & 133/JODH/2016 FOR THE ASSE SSMENT YEARS 2010-11 AND 2011-12 ORDER DATED 19.12.2016. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE CONTENTION OF THE ASSESSEE IS THAT NO INVESTMENT WA S MADE DURING THE YEAR UNDER CONSIDERATION AND WHEN THE INVESTMENT WA S MADE EARLIER, THE ASSESSEE WAS HAVING SHAREHOLDER FUNDS OF RS. 5035.4 4 LACS AGAINST WHICH ONLY RS. 44.90 LACS HAD BEEN INVESTED, AND THAT THE RE WAS NO NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT MADE BY T HE ASSESSEE. THE SAID CONTENTION OF THE ASSESSEE HAD NOT BEEN REBUT TED AT ANY STAGE. ON A SIMILAR ISSUE THE HON'BLE KARNATAKA HIGH COURT IN T HE CASE OF CIT AND ANOTHER VS. MICROLABS LTD. [2016] 383 ITR 490 (SUPR A) HELD AS UNDER:- 'WHEN INVESTMENTS ARE MADE OUT OF A COMMON POOL OF FUNDS AND NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENTS IN TAX-FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 14A OF THE INCOME- TAX ACT, 1961 CAN BE MADE.' 5 10. A SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF OF CIT VS. RELIANCE TITLISTS AND POW ER LTD. [2009] 313 ITR 340 (SUPRA) WHEREIN IT WAS HELD AS UNDER:- 'THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND / OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE, THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDINGS OF FACT BOTH BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE INTEREST WAS DEDUCTIBLE.' 11. IN THE PRESENT CASE ALSO, NON- INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENTS IN TAX FREE SECURITIES AND NOT HING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THERE WAS ANY NEXUS BET WEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FRAMING PART OF THE TO TAL INCOME. 12. WE, THEREFORE, BY KEEPING IN VIEW THE RATIO LAI D DOWN IN THE AFORESAID REFERRED TO CASES ARE OF THE VIEW THAT TH E ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) W AS NOT JUSTIFIED. ACCORDINGLY, THE SAME IS DELETED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. (ORDER PRONOUNCED IN THE COURT ON 09.05.2019) SD/- SD/- (A.T. VARKEY) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT 6 DATED : 09.05.2019 . . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / CIT 4. ( )/ THE CIT(A) 5. , , # / DR, ITAT, JODHPUR 6. & / GUARD FILE / BY ORDER / ASSISTANT REGISTRAR