M/s Munjal Sales Corporation, Ludhiana V. DCIT, Ludhiana

ITA 476/CHANDI/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3802 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.476/CHD/2015 (ASSESSMENT YEAR : 2010-11) M/S MUNJAL SALES CORPORATION, VS. THE D.C.I.T., HERO NAGAR, G.T. ROAD, CIRCLE-V, LUDHIANA. LUDHIANA. PAN: AAIFM3750F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 21.12.2016 DATE OF PRONOUNCEMENT : 30.12.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA DATED 13.03.2015 FOR ASSESSME NT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THAT THE LD. CIT (A)-II HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,16,513/-ADE BY AO U/S 14 A R.W. RULE 8D OF THE INCOME TAX RULES 2 (SUBJECT TO RELIEF ON INVESTMENTS FROM WHICH NO DIVIDEND IS ACCRUES AND ARISES). 2. THAT THE LD. CIT (A)-II HAS IGNORED THE FACT THAT NO SATISFACTION HAD BEEN RECORDED BY THE AO FOR MAKING THE DISALLOWANCE IN RESPECT OF THE SUBMISSIONS MADE BEFORE HIM. 3. THAT IT HAD BEEN IGNORED THAT NO EXPENDITURE HAD BEEN INCURRED BY THE APPELLANT TO EARN EXEMPT INCOME AND ALSO THE AO HAS NOT POINTED OUT ANY EXPENDITURE HAVING BEEN INCURRED BY THE APPELLANT. 4. THAT EVEN OTHERWISE THE INVESTMENTS ON WHICH NO DIVIDEND HAD BEEN EARNED WERE NOT TO BE TAKEN INTO ACCOUNT FOR WORKING OUT THE DISALLOWANCE IF ANY. 5. THAT IN ANY CASE THE AFORESAID DISALLOWANCE IS AGAINST THE LAW AND FACTS OF THE CASE. 3. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES TO DISALLOWANCE OF EXPENSES MADE BY INVOKING THE PROVI SIONS OF SECTION 14A OF THE INCOME TAX ACT 1961. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT RETUR N DECLARING INCOME OF RS.9,50,72,250/- WAS FILED BY T HE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD INVESTMENTS OF RS.23,31,00,95/- AND RS.11,31,00,955 /- AS ON 31.03.2009 AND 31.03.2010 RESPECTIVELY INCOME FR OM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCO ME. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A MAY NOT BE MADE. AFTER 3 CONSIDERING THE ASSESSEES SUBMISSIONS ON THIS ISSUE THE ASSESSING OFFICER HELD THAT THE PROVISIONS OF SECTI ON 14A WERE APPLICABLE IN THE CASE AND ACCORDINGLY COMPUT ED THE DISALLOWANCE UNDER RULE 8D (2) (II) AT RS.1008/- AN D UNDER RULE 8D (2) (III) AT RS.8,65,504/-. AS THE ASSESSE E HAD HIMSELF DISALLOWED RS.50,000/- FURTHER DISALLOWANCE OF RS.8,16,513/- WAS MADE. 5. LD. CIT (APPEALS) FOLLOWED HIS DECISION ON IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEAR I.E. AY 2009-10 AND PARTLY ALLOWED THE ASSESS EES APPEAL HOLDING THAT NO DISALLOWANCE IS TO BE MADE W ITH RESPECT TO INVESTMENTS WHERE THERE WAS NO SCOPE OF ANY EXEMPT INCOME AND ACCORDINGLY DIRECTED THE ASSESSIN G OFFICER TO VERIFY AND RESTRICT THE DISALLOWANCE MA DE. 6. AGGRIEVED BY THE SAME THE ASSESSEE FILE THE PRESENT APPEAL BEFORE US. 7. BEFORE US LD. COUNSEL FOR THE ASSESSEE ADMITTE D THAT THE ORDER OF THE CIT (APPEALS) ON THE ISSUE IN THE PRECEDING YEAR I.E. AY 2009-10, HAD BEEN UPHELD BY THE ITAT VIDE ORDER IN ITA NO.274/CHD/2015 DATED 7.7.20 15. LD. COUNSEL THEREAFTER STATED THAT THE DISALLOWANCE UNDER SECTION 14 A COULD NOT HAVE BEEN MADE IN THE ABSENC E OF SATISFACTION OF THE AO THAT THE CLAIM OF THE ASSESS EE THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO THE INVESTMENTS, WAS INCORRECT. THE LD. COUNSEL ALS O STATED 4 THAT CERTAIN INVESTMENTS MADE BY THE ASSESSEE WERE IN THE NATURE OF STRATEGIC INVESTMENTS ON WHICH NO DISALLOWANCE UNDER SECTION 14A COULD BE MADE. LD. COUNSEL FURTHER STATED THAT THE DISALLOWANCE UNDER SECTION 14A IN ANY CASE COULD NOT HAVE BEEN MADE ON THOSE INVESTMENTS WHICH HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. LD. COUNSEL STATED THAT THERE WERE A NUMBER OF JUDICIAL DECISIONS WHICH HELD THAT IN THE ABSENCE OF SATISFACTION OF THE ASSESSING OFFICER, O N STRATEGIC INVESTMENTS MADE AND ON INVESTMENTS WHIC H DID NOT EARN ANY EXEMPT INCOME DURING THE YEAR, NO DISALLOWANCE UNDER SECTION 14A COULD BE MADE. 8. LD DR ON THE OTHER HAND, OBJECTED TO THE PLEADINGS MADE BY THE LD COUNSEL, STATING THAT THEY WERE BEING RAISED FOR THE FIRST TIME AND SHOULD THEREFO RE NOT BE ENTERTAINED. 10. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. WE FIND THAT THE ASSESSEE HAS ALL ALONG BE EN CONTENDING THAT IT HAS NOT INCURRED ANY EXPENDITURE VIS A VIS THE IMPUGNED INVESTMENTS AND THAT IN ANY CASE A DISALLOWANCE OF RS.50,000/- U/S 14A, HAS BEEN MADE BY THE ASSESSEE ITSELF. IN THIS BACKGROUND AND IN VIEW OF THE CASE LAWS RELIED UPON BY THE LD.AR REQUIRING SATISF ACTION OF THE AO THAT THE CLAIM OF THE ASSESSEE IS INCORRE CT, WE ARE OF THE VIEW THAT THE ISSUE OF SATISFACTION OF A O, NEEDS TO BE DEALT WITH. IN ANY CASE, WE FIND THAT ALL T HE ISSUES 5 RAISED BY THE LD.AR ARE LEGAL IN NATURE, RELATING T O THE SCOPE OF DISALLOWANCE WHICH CAN BE MADE U/S 14A. TH E SAME CAN THEREFORE BE ENTERTAINED IN APPEAL FOR THE FIRST TIME AS HELD BY THE APEX COURT IN NTPC LTD. VS CIT 229 ITR 383(SC). THE CIT (APPEALS) HAVING NOT DEALT WI TH THESE ASPECTS OF THE ISSUE WHILE UPHOLDING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, WE THER EFORE CONSIDER IT FIT ,IN THE INTEREST OF JUSTICE , TO RE STORE THE ISSUE BACK TO THE CIT (APPEALS) TO ADJUDICATE THE MATTER AFRESH IN ACCORDANCE WITH LAW AND IN THE LIGHT OF D ECISIONS RENDERED ON THE ISSUE. WE MAY ADD THAT THE ASSESSEE BE GRANTED FULL OPPORTUNITY OF HEARING AND IS ALSO FRE E TO MAKE ALL SUBMISSIONS NECESSARY IN SUPPORT OF HIS CONTENTIONS. 11. IN VIEW OF THE ABOVE THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THE APPEAL OF THE ASSESSEE THEREFORE STAN DS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH DECEMBER, 2016 *RATI* 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH