Nikas Corporation , Pune V. Assistant Commissioner of Income-Tax, Circle -7, Pune

ITA 446/PUN/2020

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Nikas Corporation, a partnership firm engaged in the business of reseller merchant-exporter, filed an appeal against the order of the Commissioner of Income Tax (Appeals) - 5, Pune, which was dated 10.01.2020 for the assessment year 2016-17. The firm had declared a total income of Rs.1,78,81,301 in its return filed on 08.09.2016. The Assessing Officer had completed the assessment by adding Rs.84,03,128 under section 14A, rejecting the appellant's claim that no expenditure was incurred to earn exempt income. The CIT(A) upheld this addition, leading to the present appeal. The main legal contention was whether the interest paid on the current balances of the partnership firm could be considered as part of the disallowance under section 14A.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 137074 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-11-2022
• Assessment Year: misc
• Appeal Filed On: 30-06-2022
• Other Referred Cases: Quality Industries vs. JCIT (2016) 73 taxmann.com 363 (Pune \\u2013 Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.446/PUN/2020 िनधाᭅरण वषᭅ / Assessment Year: 2016-17 Nikas Corporation, 16 B1, Sarosh Bhavan, Dr. Ambedkar Road, Camp, Pune- 411001. PAN : AAAFN9736E Vs. ACIT, Circle-7, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 5, Pune [‘the CIT(A)’] dated 10.01.2020 for the assessment year 2016-17. 2. Briefly, the facts of the case are that the appellant is a partnership firm engaged in the business of reseller merchant- exporter. The Return of Income for the assessment year 2016-17 was filed on 08.09.2016 declaring total income of Rs.1,78,81,301/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-7, Pune (‘the Assessee by : Shri Vishal D. Shah Revenue by : Shri Ramnath P. Murkunde Date of hearing : 21.11.2022 Date of pronouncement : 29.11.2022 ITA No.446/PUN/2020 2 Assessing Officer’) vide order dated 29.11.2018 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.2,62,84,429/-. While doing so, the Assessing Officer made addition of Rs.84,03,128/- u/s 14A rejecting the contention of the appellant that no expenditure was incurred to earn the exempt income. 3. Being aggrieved by above assessment order, an appeal was filed before the ld. CIT(A) contending that the appellant had not incurred any expenditure to earn the exempt income but interest liability was incurred on the credit balances lying with the firm of the partners and the interest paid to the firm of the partners, cannot be considered as part of item of expenditure which can be subjected to provisions of section 14A of the Act. However, the above contentions have been rejected by the ld. CIT(A). 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. It is contended that the interest was paid on the capital of the partnership firm, which cannot be form part of the disallowance u/s 14A of the Act placing reliance on the Co-ordinate Bench of this Tribunal in the case of Quality Industries vs. JCIT (2016) 73 taxmann.com 363 (Pune – Trib.). ITA No.446/PUN/2020 3 6. On the other hand, ld. Sr. DR placing reliance on the orders of the lower authorities submits that no interference is called for. 7. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the applicability of provisions of section 14A of the Act. The main contention of the appellant is that the assessee firm had not incurred any expenditure in form of interest paid on the capital of partnerships firm which cannot be formed part of the disallowance under the provisions of section 14A of the Act placing reliance on the decision of the Co- ordinate Bench of this Tribunal in the case of Quality Industries (supra). Further, we find that the interest was paid not on the capital of the partnership firm but paid on the current balances of the partnership firm which constitutes a loan in the hands of the partnership firm which is different from capital of the partnership firm, therefore, the contention of the appellant that the interest was paid on the capital of the partnership firm is misleading and the ratio of the decision of the Co-ordinate Bench of this Tribunal in the case of Quality Industries (supra) has no application to the facts of the present case. Therefore, the order of the ld. CIT(A) is well reasoned and we do not find any reason to interfere with the same. ITA No.446/PUN/2020 4 Accordingly, the grounds of appeal raised by the assessee stands dismissed. 8. In the result, the appeal filed by the assessee stands dismissed. Order pronounced on this 29 th day of November, 2022. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 29 th November, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-5, Pune. 4. The Pr. CIT-4, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.