RUBY MERRY ENTERPRISES PVT. LTD., Kota V. JCIT, Jaipur

ITA 474/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5009 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY GOYAL CA SHRI MU
• Keywords: Source of fund
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 474/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. RUBY MERRY ENTERPRISES (P) LTD. 1-GHA-1 DADA BADI EXTENSION, KOTA CUKE VS. THE JCIT (OSD) CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADCR 2727 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL , CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI MUKESH VERMA, CIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/10/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 14 /10/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), ALWAR DATED 17-03-2015 FOR THE ASSESSMENT YEAR 2008-09 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1.80 LACS MADE BY THE AO U/S 14A OF THE I.T. ACT, 1961 O N ACCOUNT OF INTEREST PAID ON LOANS TAKEN FOR SHARE APPLICATION MONEY RS. 1,60,00,000/- GIVEN TO M/S. CAREER POINT INFO SYSTE M LTD. ITA NO. 474/JP/2015 M/S. RUBY MERRY ENTERPRISES PVT. LTD. VS. JCIT (OSD ) CENTRAL CIRCLE- 3, JAIPUR . 2 2. THAT THE ORDER OF THE LD. CIT(A), CONFIRMING THE ADDITION MADE BY THE AO IS ARBITRARY, WHIMSICAL CAP RICIOUS, PERVERSE AND AGAINST THE LAW AND FACTS OF THE CASE. THE ORDER OF THE LD. CIT(A) IN THIS REGARD DESERVES TO BE SET ASIDE AND ADDITION MADE BY THE AO DESERVES TO BE DELETED. 3. THE ASSESSEE PRAYS FOR LEAVE TO ADD, TO AMEND, T O DELETE OR MODIFY THE ALL OR ANY GROUNDS OF APPEAL O N OR BEFORE THE HEARING OF APPEAL. 2.1 THE GROUND NOS. 2 AND 3 OF THE ASSESSEE ARE GEN ERAL IN NATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION. 3.1 AS REGARDS GROUND NO. 1 RAISED BY THE ASSESSEE , THE LD. AR OF THE ASSESSEE AT THE OUTSET OF THE HEARING PRAYED THAT S UCH ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE SMC B ENCH VIDE ITS ORDER DATED 06-11-2015 IN ITA NO. 475/JP/2012 (A.Y. 2009- 10) IN ASSESSEE'S OWN CASE. HENCE, THIS ISSUE IS COVERED BY ITAT ORDE R. 3.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) UPHELD THE ACTION OF THE AO. THE RELEVANT PORTION OF THE LD. CIT(A) IS REPRODUCE D AS UNDER:- 4.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL A S SUBMISSIONS MADE BY THE APPELLANT INCLUDING THE JUD ICIAL CITATION GIVEN THEREIN AND FIND THAT AN ADDITION OF RS. 1,80 ,000/- HAS BEEN MADE U/S 14A OF THE I.T. ACT BY THE AO ON ACCOUNT O F INTEREST PAID ON LOANS TAKEN FOR PAYMENT OF SHARE APPLICATION MON EY. AO HAS STATED IN THE ORDER THAT THE APPELLANT HAD MADE A F RESH INVESTMENT OF RS. 1.60 CRORES TOWARDS SHARE APPLICATION MONEY TO M/S. CAREER POINT INFOSYSTEMS LTD. AO HAS NOTED THAT PAYMENT OF RS. 1.60 CRORES WAS MADE AFTER RAISING LOANS ON WHICH INTERE ST @ 9% HAS ITA NO. 474/JP/2015 M/S. RUBY MERRY ENTERPRISES PVT. LTD. VS. JCIT (OSD ) CENTRAL CIRCLE- 3, JAIPUR . 3 BEEN PAID AND ACCORDINGLY A DISALLOWANCE OF INTERES T AMOUNTING TO RS. 1,80,000/- WAS MADE. 4.4 THE APPELLANT HAS STATED THAT INVESTMENT WAS MADE TOWARDS THE SHARES FOR EARNING OF PROFITS AND HAD BEEN WRONGLY SHOWN AS INVESTMENTS IN THE BALANCE SHEET. FURTHER, SHARE SALE AND PURCHASE IS A PART OF NORMAL BUSINESS OF T HE COMPANY AND THEREFORE, NO DISALLOWANCE MAY BE MADE. THE APPELLA NT HAS ALSO PLACED RELIANCE ON CERTAIN JUDICIAL DECISIONS TO SU BSTANTIATE ITS CONTENTIONS. 4.5 HAVING CONSIDERED THE MATERIAL PLACED ON RECORD, I FIND THAT APPELLANT HAS REITERATED THE SU BMISSIONS FILED BEFORE THE AO AND HAS NOT BEEN ABLE TO PLACE AN EVI DENCE TO CONTROVERT THE FINDINGS GIVEN BY THE AO IN THE ORDE R. APPELLANT HAS FAILED TO REUBUT OR PRODUCE THE EVIDENCE THAT INTEN TION WAS TO EARN PROFITS FROM THE INVESTMENT MADE IN THESE SHARE DUR ING THE YEAR UNDER CONSIDERATION AS NO SALE OF SUCH SHARES WAS M ADE EVEN IN THE SUBSEQUENT PERIOD. THE SHARES OF THE INVESTEE COMPA NY WERE NOT LISTED ON ANY STOCK EXCHANGE. FURTHER, AO HAS FOUND THAT SHARE APPLICATION MONEY WAS RETURNED BACK ON28-08-2008. T HE JUDICIAL DECISIONS CITED BY THE APPELLANT ARE FOUND TO BE NO T APPLICABLE TO THE FACTS OF THIS PARTICULAR CASE. 4.6 4.7 FURTHER, HON'BLE ITAT MUMBAI BENCH HAS IN THE CASE OF STREAM INTERNATIONAL SERVICE (P) LTD. ( 2013) 023 ITR (TRIB) 0070 (MUM), HELD THAT THE APPLICATION OF SEC TION 14A IS JUSTIFIED, EVEN IN NO INCOME HAS BEEN REALIZED ON S UCH INVESTMENTS. THE DISALLOWANCE OF EXPENSES INCURRED IN RELATION T O SUCH SOURCES OF INCOME IS JUSTIFIED U/S 14A OF THE I.T. ACT. IN THE CASE OF PRAKASH NAROTTAM DAS GUPTA VS. ITO (2013) 021 ITR (TRIB) 02 55 (MUM.),IT HAS BEEN HELD THAT DISALLOWANCE OF EXPENS E I.E. INTEREST PAID U/S 14A OF THE I.T. ACT IS VALID AND JUSTIFIED . ALSO HON'BLE THE HON'BLE KERALA HIGH COURT HAS UPHELD THE DISAL LOWANCE OF EXPENSES U/S 14A OF THE I.T. ACT IN THE CASE OF CAT HOLIC SYRIAN BANK VS. ADDL. CIT 349 ITR 0569 (KER.) ITA NO. 474/JP/2015 M/S. RUBY MERRY ENTERPRISES PVT. LTD. VS. JCIT (OSD ) CENTRAL CIRCLE- 3, JAIPUR . 4 4.8 CONSIDERING THE ABOVE FACTS, I HOLD THAT AO WAS JUSTIFIED IN MAKING A DISALLOWANCE OF RS. 1,80,000/ -U/S 14A OF THE I.T. ACT, 1961 AND CONFIRM THE SAME. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1 RAISE D BY THE ASSESSEE, IT IS NOTED THAT SUCH ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT, JAIPUR SMC BENCH IN ASSESSEE'S OWN CA SE (SUPRA). THE OBSERVATION OF ITAT JAIPUR SMC BENCH (SUPRA) IS REP RODUCED AS UNDER:- 3. I HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CO NSIDERED THE SAME ALONG WITH ORDERS OF TAX AUTHORITIES BELOW. I NOTE D THAT THE AO NOTED THAT THE ASSESSEE HAD PAID INTEREST @ 9% ON THE INVESTMENT M ADE AGAINST THE SHARE APPLICATION MONEY. THE BANK STATEMENT OF THE ASSESS EE REVEALED THAT THE PAYMENT OF RS. 80,00,000/- WAS MADE BY THE ASSESSEE ON 13.2.2008 AND ANOTHER PAYMENT OF RS. 80,00,000/- WAS MADE ON THE SAME DATE AGAINST THE SHARE APPLICATION MONEY OF M/S. CAREER POINT INFOSY STEM LTD. NO SHARES WERE ALLOTTED AGAINST THE INVESTMENT IN SHARE APPLICATIO N MONEY. THE AMOUNT OF RS. 1,60,00,000/- WAS RETURNED BACK ON 28.8.2008. THE A O, THEREFORE, WORKED OUT THE INTEREST @ 9% ON THE INVESTMENT MADE AGAINST SH ARE APPLICATION MONEY FROM 1.4.2008 TO 28.8.2008 AT RS. 6,00,000/- AND DI SALLOWED THE SAME UNDER SECTION 14A. IT IS THE UNDISPUTED FACT THAT THE ASS ESSEE HAS NOT CLAIMED ANY DISALLOWANCE IN RELATION TO THE INVESTMENT MADE IN SHARE APPLICATION MONEY UNDER THE PROVISIONS OF SECTION 14A. THE PROVISION S OF SECTION 14A(1) STATES THAT NO DEDUCTION SHALL BE MADE IN RESPECT OF THE E XPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. SUB-SECTION (2) OF SECTION 14A EMPOWERS THE AO TO D ETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE ITA NO. 474/JP/2015 M/S. RUBY MERRY ENTERPRISES PVT. LTD. VS. JCIT (OSD ) CENTRAL CIRCLE- 3, JAIPUR . 5 PRESCRIBED, IF THE AO, HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME. FURTHER, SUB-SECTION (3) OF SECTION 14A EM POWERS THE AO TO APPLY SUB-SECTION (2) IN A CASE WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME. IN THIS CASE I NOTED THAT EVEN THOUG H THE AO HAS MADE THE DISALLOWANCE BY RELYING ON THE PROVISIONS OF SECTIO N 14A BUT HE DID NOT COMPLY WITH THE CONDITIONS AS STIPULATED IN SECTION 14A(2) . HE HAS NOT RECORDED ANY SATISFACTION WITH REGARD TO THE INCORRECTNESS OF CL AIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE HAVING NO SU CH EVIDENCE OR MATERIAL BROUGHT TO MY NOTICE BY THE LD. D/R WHICH MAY SHOW THAT THE AO HAS GIVEN A FINDING ON THE BASIS OF ACCOUNTS MAINTAINED BY THE ASSESSEE THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. EVEN THE AO HAS NOT RECORDED THE SATISFACTION AS REGARDS TO THE CLAIM OF THE ASSESSE E. HE IS BOUND TO COMPUTE THE DISALLOWANCE IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. IN THIS REGARD IT IS THE RULE 8D WHICH HAS BEEN NOTIFI ED WITH EFFECT FROM 24.03.2008. THE ASSESSMENT YEAR INVOLVED IS THE AS SESSMENT YEAR 2009-10. I DO NOT FIND ANY WHISPER WHATSOEVER BY THE AO OR BY THE LD. D/R THAT THE AO HAS COMPUTED THE DISALLOWANCE BY APPLYING RULE 8D. IN VIEW OF THIS FACT, I AM OF THE VIEW THAT IT IS A CASE WHERE NO DISALLOWANCE CAN BE MADE. I ACCORDINGLY SET ASIDE THE ORDER OF LD. CIT (A). 4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. RESPECTFULLY FOLLOWING THE DECISION OF ITAT JAIPUR SMC BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009-10 (SUPRA), THE APPEAL OF THE ASSESSEE ON THE ISSUE IN QUESTION IS ALLOWE D. ITA NO. 474/JP/2015 M/S. RUBY MERRY ENTERPRISES PVT. LTD. VS. JCIT (OSD ) CENTRAL CIRCLE- 3, JAIPUR . 6 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 /10/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. RUBY MERRY ENTERPRISES (P) LTD. , KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE JCIT (OSD) CENTRAL CIRCLE- 3, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.474/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. 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