The ACIT,Range-5, Ahmedabad V. M/s. Nandan Exim Ltd., Ahmedabad

ITA 459/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9360 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M MEHTA WITH G M THAKOR
• Assessee Lawyers: R P MAURYA
• Keywords: Earning of tax free income; Proportionate interest
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 121 & 459/AHD/2012 (ASSESSMENT YEAR: 2009-10) NANDAN EXIM LIMITED, CHIRIPAL HOUSE SATELLITE ROAD, SATELLITE AHMEDABAD ACIT, RANGE-5, AHMEDABAD V/S V/S ACIT, RANGE-5, AHMEDABAD NANDAN EXIM LIMITED, CHIRIPAL HOUSE SATELLITE ROAD, SATELLITE AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACN 5327L APPELLANT BY :SHRI P. M. MEHTA WITH G.M. THAKOR RESPONDENT BY : SHRI R. P. MAURYA, SR. D.R. ( )/ ORDER DATE OF HEARING : 22 -02-201 6 DATE OF PRONOUNCEMENT : 26 -02-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 121 & 459/AHD/2012 ARE CROSS APPEALS BY TH E ASSESSEE AND THE REVENUE PREFERRED AGAINST THE VERY SAME ORDER O F THE LD. CIT(A)- XI, AHMEDABAD DATED 05.12.2011 PERTAINING TO A.Y. 2 009-10. ITA NO. 121 & 459/AHD/2012 . A.Y. 2009-1 0 2 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. WE TAKE UP BOTH THE APPEALS TOGETHER. 4. ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUNDS OF AP PEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THA T HE IS NOT PRESSING GROUND NO. 1, THE SAME IS DISMISSED AS NOT PRESSED. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 59,76,398/- 5. THE A.O CONSIDERED THIS ISSUE AT PARA 2 ON PAGE 2 O F HIS ORDER. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS A ND ON PERUSAL OF THE TAX AUDIT REPORT, THE A.O FOUND THAT THE ASSESS EE HAS DEBITED PRIOR PERIOD EXPENSES OF RS. 97,37,785/-. THE A.O N OTICED THAT THE ASSESSEE HAS ONLY ADDED BACK RS. 37,61,387/-. THE A .O WAS OF THE FIRM BELIEF THAT THE ASSESSEE SHOULD HAVE ADDED BAC K THE ENTIRE AMOUNT OF PRIOR PERIOD EXPENDITURE. ACCORDINGLY, HE ADDED BACK THE BALANCE AMOUNT OF RS. 59,76,398/-. 6. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO SCHEDULE J OF THE AU DITED STATEMENT OF ACCOUNTS AND POINTED OUT THAT THE ASSESSEE HAS ADDE D BACK THE NET EFFECT OF PRIOR PERIOD INCOME/EXPENDITURE WHICH IS CORRECT AND ACCORDING TO THE LAW AND ALSO SUPPORTED BY THE ACCO UNTING PRINCIPLES. PER CONTRA, THE LD. D.R. RELIED UPON THE FINDINGS O F THE LOWER AUTHORITIES. WE HAVE CAREFULLY PERUSED THE ORDERS O F THE AUTHORITIES ITA NO. 121 & 459/AHD/2012 . A.Y. 2009-1 0 3 BELOW. WE HAVE GIVE A THOUGHTFUL CONSIDERATION TO S CHEDULE J OF THE AUDITED STATEMENT OF ACCOUNTS WHICH READS AS UNDER: - PARTICULARS OF INCOME OR EXPENDITURE OF PRIOR PERIO D CREDITED OR DEBITED TO PROFIT AND LOSS ACCOUNT PARTICULARS CREDITED (RS.) DEBITED (RS.) NET EFFEC T (RS.) RAW MATERIAL CONSUMED -- 948577 948577 EMPLOYMENT COST MANUFACTURING & OPERATING EXPENSES ADMINISTRATIVE & SELLING EXPENSES INTEREST & FINANCIAL CHARGE -- 3421926 3421926 -- 1221966 1221966 (5976398) -- (5976398) -- 4145316 4145316 (5976398) 9737785 3761387 7. A PERUSAL OF THE AFOREMENTIONED CHART CLEARLY SHOWS THAT RS. 59,76,398/- IS NOTHING BUT THE CREDIT ENTRIES IN RE SPECT OF THE EXPENDITURES DEBITED IN EARLIER YEARS BUT WRITTEN B ACK DURING THE YEAR UNDER CONSIDERATION. 8. THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CORRECTLY ADDED BACK THE NET BALANCE OF RS. 37,61,387/-. WE, THEREF ORE, REVERSE THE ITA NO. 121 & 459/AHD/2012 . A.Y. 2009-1 0 4 FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DE LETE THE ADDITION OF RS. 59,76,398/-. GROUND NO. 2 IS ALLOWED. 9. GROUND NO. 3 RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. THE ASSESSEE IS AGGRIEVED BY THE FINDING OF THE LD. CIT (A) WHO HAS UPHELD THE DISALLOWANCE OF RS. 3,11,516/- OUT OF THE TOTAL DISALLOWANCE OF RS. 39,27,981/-. 10. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O FOUND THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES TO THE TUNE OF RS. 6.23 CRORES. THE A.O WAS OF THE FIRM BE LIEF THAT PROPORTIONATE EXPENDITURE NEED TO BE DISALLOWED U/S . 14A READ WITH RULE 8D OF THE ACT AND PROCEEDED BY COMPUTING THE D ISALLOWANCE AT RS. 39,37,981/-. ASSESSEE STRONGLY AGITATED THE MAT TER BEFORE THE LD. CIT(A). IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT (A) THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVE STMENT. IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) THE EARLIER DECISIONS OF THE APPELLATE AUTHORITIES IN ASSESSEES OWN CASE. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND THE DECISIONS OF HIS PRED ECESSOR, THE LD. CIT(A) WAS CONVINCED THAT THE ASSESSEE WAS HAVING S UFFICIENT OWN FUNDS AND WAS OF THE OPINION THAT NO DISALLOWANCE N EED TO BE MADE ON PROPORTIONATE INTEREST. THE LD. CIT(A) DELETED THE ADDITION OF RS. 36,26,465/-. HOWEVER, IN SO FAR AS DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS CONCERNED, THE LD. CIT(A ) CONFIRMED THE DISALLOWANCE OF RS. 3,11,516/-. 11. AGGRIEVED BY THIS, THE FINDING OF THE LD. CIT(A) BO TH ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. LD. COUNSE L FOR THE ASSESSEE ITA NO. 121 & 459/AHD/2012 . A.Y. 2009-1 0 5 REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AU THORITIES. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDING S OF THE A.O. 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GIVEN A CAREFUL CON SIDERATION TO THE AUDITED BALANCE SHEET BEFORE US WHICH IS AT PAGE 47 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOW THAT THE ASSESSEES OWN FUNDS WERE AT RS. 116,51,19,344/- WHEREAS INVESTMENT IS 3,36,13,640/- WHICH IS AFTER CONSIDERING THE PROVISION FOR DIMINUTION IN VALUE O F INVESTMENT. OTHERWISE, THE INVESTMENT COMES TO RS. 6.23 CRORES. NEVERTHELESS, THE OWN FUNDS OF THE ASSESSEE ARE MUCH HIGHER THAN THE INVESTMENTS, THEREFORE, THERE IS NO CASE FOR THE DISALLOWANCE OF PROPORTIONATE INTEREST AS PER THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 WHICH WAS FOLLOWED BY THE HONBLE HIGH COURT IN THE CASE OF HDFC 366 ITR 505. 13. DELETION OF THE ADDITION OF RS. 36,26,465/- IS CONC ERNED, WE ALSO FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN AS SESSMENT YEARS 05- 06, 06-07, 07-08 & 08-09 HAVE DELETED THE DISALLOWA NCES MADE U/S. 14A ON IDENTICAL SET OF FACTS IN ITA NOS. 601 & 225 /AHD/2011 AND 2419/AHD/2010 AND IN ITA NO. 1260/AHD/2011. HOWEVER , IN SO FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS CONC ERNED, WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 20,000 /- AS DIVIDEND FROM SHARES. IN OUR CONSIDERED OPINION, A DISALLOWA NCE OF RS. 20,000/- SHOULD MEET THE ENDS OF JUSTICE. WE THEREFORE DIREC T THE A.O TO RESTRICT THE DISALLOWANCE TO RS. 20,000/-. ITA NO. 121 & 459/AHD/2012 . A.Y. 2009-1 0 6 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND AS SESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 02 - 2016 . SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD