M/s. Madhu Silica Pvt. Ltd., Bhavnagar V. The ACIT., Circle-1, Bhavnagar

ITA 450/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6405 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHRI AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER M/S. MADHU SILICA PVT. LTD. PLOT NO. 53,55,56B, GIDC, CHITRA, BHAVNAGAR PAN: AABCM4381J (APPELLANT) VS THE ACIT, CIRCLE - 1, BHAVNAGAR (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI TUSHAR HEMANI, A.R. DATE OF HEARING : 06 - 02 - 2 019 DATE OF PRONOUNCEMENT : 18 - 02 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A .Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 6, AHMEDABAD DATED 27 - 01 - 2 017 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS AGAINST THE DECISION OF LD. CIT(A) IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING RS. 40 , 77 , 207/ - U/S. 14A R.W. RULE 8D OF THE IT RULE , 1962. I T A NO . 450 / A HD/20 17 A SS ESS MENT YEAR 2012 - 13 I.T.A NO. 450 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. MADHU SILICA PVT. LTD. VS. ACIT 2 3. THE FACT IN BRIEF IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAS SH OWN DIVIDEND OF RS. 1 , 70 , 27 , 593/ - CLAIM ING AS EXEMPT U/S. 10(34) OF THE IT ACT AND ALSO CLAIMED EXPENSES ON ACCOUNT OF INTEREST TO THE AMOUNT OF RS. 2 , 98 , 47 , 199/ - . THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INTEREST EXPENSES INCURRED FOR EARNING EXEMP T INCOME SHOULD NOT BE DISALLOWED AS PER PROVISIONS OF SECTION 14A OF THE ACT. THE ASSESSEE HAS FURNISHED A DETAILED SUBMISSION AS PRODUCED AT PAGE NUMBER 3 TO 5 OF THE ASSESSMENT ORDER CLAIMING THAT IT HAS NOT MADE ANY INVESTMENT IN THE SHARES / MUTU AL FUNDS BY BORROWING THE INTEREST BEARING FUNDS. THE ASSESSING OFFICER HAS NOT A GREED WITH THE EXPLANATION FILED BY THE ASSESSEE AND COMPUTED THE ALLOCATION OF EXPENSES IN RELATION TO EXEMPT INCOME FOR THE P URPOSE OF SECTION 14A R.W. RULE 8D OF THE I NCOME TAX RULE 1962 TO T HE AMOU N T OF R S. 40 , 77 , 207/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE . . 5. DURING THE COURSE OF APPEL LAT E PROCEEDINGS BEFORE US, LD. COUNSEL HAS CONTENDED THAT ASSESSEE COMPANY WAS HAVING SUFFICIENT INTEREST FREE FUND FOR MAKING INVESTMENT AND LD. CIT(A) HAS ERRED IN SUSTAINING THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND THE L D. DR HAS PLACED RELIANCE ON THE ORDER OF THE LOWER AUTHORITY. I.T.A NO. 450 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. MADHU SILICA PVT. LTD. VS. ACIT 3 WITH THE ASSISTANCE OF LD. COUNSEL WE HAVE GONE THROUGH THE MATERIAL ON RECORD AND IT IS NOTICED THAT ASSESSEE WAS HAVING SUBSTANTIAL INTEREST FREE FUND AGAINST INVESTMENT MADE BY IT AS MENTI ONED HEREUNDER : - PARTICULARS BALANCE AS AT 31.03.2012 (RS. IN LACS) BALANCE AS AT 31.03.2012 (RS. IN LACS) (A) INTEREST FREE FUNDS: SHARE CAPITAL RESERVES & SURPLUS TOTAL (B) INVESTMENTS (C) RATIO OF INTEREST FREE FUNDS & INVESTMENTS (A/B * 100) 5 40.00 14,840.41 ------------- 15,380.41 2,578.01 5.97 TIMES 480.00 12,075.20 ------------ 12,555.20 1,759.74 7.13 TIMES IN THIS CONNECTION, THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON FOLLOWING JUDICIAL PRONOUNCEMENTS : - > CIT VS. TORRENT POWER LTD. - 363 ITR 474 (GUJ.) > CIT VS. SUZLON ENERGY LTD. - 354 ITR 630 (GUJ) > CIT VS. GUJARAT POWER CORPORATION LTD. - 352 ITR 583 (GUJ) > CIT VS. HITACHI HOME & LIFE SOLUTIONS (I). LTD. - (2014) 41 TAXMANN.COM 540 (GUJ) > CIT VS. RELIANCE UTILITI ES & POWER LTD. - 313 ITR 340 (BOM) > MUNJAL SALES CORPORATION VS. < IT - 298 ITR 298 (SC). WE OBSERVE THAT IT HAS BEEN DEMONSTRATED FROM THE ABOVE MATERIAL ON RECORD THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUND IN THE FORM OF SHARE CA PITAL AND FREE RESERVES AS AGAINST THE INVESTMENT MADE FROM WICH EXEMPT INCOME WAS EARNED . AFTER CONSIDERING THE DECISION OF HON BLE HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES POWER LTD, WE CONSIDER THAT THERE WAS NO MERIT IN DISALLOWING THE INT EREST EXPENSES TO THE AMOUNT OF RS. 29 , 92 , 770/ - OUT OF THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 40 , 77 , 207/ - . HOWEVER, WE SUSTAIN THE ADDITION IN RESPECT OF ADMINISTRATIVE EXPENDITURE TO THE AMOUNT OF RS. 10 , 84 , 437/ - AS COMPUTED BY I.T.A NO. 450 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. MADHU SILICA PVT. LTD. VS. ACIT 4 THE ASSESSING OFFICER UNDER PARA 6 OF THE ASSESSMENT ORDER AS INVESTMENT CAN NOT BE MADE WITHOUT INCURRING ADMINISTRATIVE AND OTHER EXPENSES. . ACCORDINGLY, THIS APPEAL OF THE ASSESSEEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 18 - 02 - 201 9 S D/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 18 /02 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,