M/s. RGP Moulds Pvt . Ltd., Kanpur V. Joint. Commissioner of Income Tax (OSD), Kanpur

ITA 496/LKW/2013

• Counselvise Citation: 49623714 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 02-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.496/LKW/2013 ASSESSMENT YEAR:2010 - 11 JT.CIT(OSD), CIRCLE - 6, KANPUR. VS M/S RGP MOULDS PVT. LTD., C - 6, UDYOG KUNJ, PANKI SITE - 5 INDUSTRIAL ESTATE, KANPUR. PAN:AACCR0739E (RESPONDENT) (APPELLANT) SHRI AKSHEY KUMAR GUPTA, F.C.A. APPELLANT BY SHRI PRAMOD KUMAR, D.R. RESPONDENT BY 26/02/2015 DATE OF HEARING 31 /03/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, KANPUR DATED 26/03/2013 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IS ARBITRARILY MAKING ADDITION OF RS.1,16,216/ - DISALLOWING INTEREST U/S 14A TREATING SAME AS RELATABLE EXPENSES INCURRED TO EARN EXEMPT INCOME. BECAUSE THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IS ARBITRARILY MAKING ADDITION OF RS.44,500/ - DISALLOWING EXPENSES U/S 14A TREATING SAME AS RELATABLE EXPENSES INCURRED TO EARN EXEMPT INCOME. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09, THE COPY OF TRIBUNAL ORDER IS AVAILABLE ON PAGE NO. 4 TO 12 OF THE PAPER BOOK. HE DRAWN OUR ATTENTION TO PARA NO. 7 2 OF THE TRIBUNAL ORDER WHEREIN IT IS HELD THAT THE DISALLOWANCE TO THE EXTENT OF 0.5% OF THE AVERAGE INVESTMENT IS PERFECTLY ALL RIGHT AND THERE IS NO INFIRMITY IN THE SAME BUT REGARDING DISALLOWANCE OUT OF INTEREST EXPENDITURE, IT WAS HELD BY THE TRIBUNAL THAT SINCE THE ENTIRE EXPENDITURE ON INTEREST IS FOR THE PURPOSE OF BUSINESS AND ON ASSETS USED THEREIN, NO DISALLOWANCE OUT OF INTEREST EXPENDITURE IS JUSTIFIED U/S 14A. HE SUBMITTED THAT THE DETAILS OF UTILIZATION OF LOANS TAKEN DURING FINANCIAL YEAR 2005 - 06 TO 2009 - 10 ARE AVAILABLE ON PAGE NO. 2 & 3 OF THE PAPER BOOK AND FROM THE SAME, IT CAN BE SEEN THAT ENTIRE BORROWED FU NDS WERE SPECIFICALLY UTILIZED FOR BUSINESS PURPOSES AND HENCE, IN THE PRESENT YEAR ALSO, NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST EXPENDITURE. 4. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDE RED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 5. 6 OF HIS ORDER THAT THE ASSESSEE HAS MADE PAYMENT OF INTEREST OF RS.11,15,720/ - AND ON PAGES 2 & 3 OF THE PAPER BOOK, THE ASSESSEE HAS FURNISHED THE DETAILS OF ENTIRE BORROWED FUNDS ON WHICH THIS INTEREST AMOUNT OF RS.11.15 WAS PAID BY THE ASSESSEE. AS PER THESE DETAILS, IT IS CLAIMED THAT ALL THESE LOANS WERE UTILIZED FOR BUSINESS OF THE ASSESSEE COMPANY BY WAY OF IMPORT OF MACHINERY FOR BUSINESS USE AND IN VIEW OF TH IS SPECIFIC DETAIL THAT ALL THE BORROWED FUNDS WERE UTILIZED FOR BUSINESS PURPOSE, NO PART OF THE INTEREST EXPENDITURE CAN BE CONSIDERED FOR DISALLOWANCE U/S 14A. IF THE ASSESSEE CAN ESTABLISH THIS CLAIM THAT ALL BORROWED FUNDS ON WHICH INTEREST WAS PAID W ERE UTILIZED IN COURSE OF EARNING TAXABLE INCOME, THEN NO DISALLOWANCE IS TO BE MADE U/S 14A OUT OF INTEREST BUT THERE IS NO FINDING OF ANY OF THE AUTHORITIES BELOW IN THIS REGARD. IN FACT, IN THE PAPER BOOK ALSO, THE ASSESSEE HAS NOT FURNISHED THE MANDATO RY CERTIFICATE AS TO WHETHER THESE DOCUMENTS WERE FILED BEFORE THE LOWER AUTHORITIES AND HENCE, IN NORMAL 3 CIRCUMSTANCES, THE PAPER BOOK IS LIABLE TO BE IGNORED. BUT IN VIEW OF THE TRIBUNAL DECISION IN ASSESSEES OWN CASE IN A.Y. 2008 08 AND 2009 10, HO LDING THAT ENTIRE INTEREST EXPENDITURE FOR THOSE TWO YEARS WERE FOR EARNING TAXABLE BUSINESS INCOME, WE FEEL THAT IN THE INTEREST OF JUSTICE, THIS ASPECT OF THE MATTER MAY BE RESTORED TO THE FILE OF LEARNED CIT (A) FOR FRESH DECISION BY EXAMINING THIS CLAI M. HENCE, WE SET ASIDE THE ORDER OF LEARNED CIT (A) ON THIS PART OF THE ISSUE AND RESTORE THE MATTER TO HIS FILE FOR FRESH DECISION. HE MAY OBTAIN REMAND REPORT FROM A.O. IF FELT NECESSARY AND HE SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSI ON AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 6. REGARDING DISALLOWANCE OF 0.5% OF AVERAGE INVESTMENT IN RESPECT OF ADMINISTRATIVE EXPENSES, WE FOLLOW THE TRIBUNAL DECISION IN ASSESSEES OWN CASE AND CONFIRM THIS DISALLOWANCE. I N THIS MANNER, WE CONFIRM THE DISALLOWANCE TO THE EXTENT OF RS.44,500/ - AS WORKED OUT BY THE ASSESSING OFFICER IN PARA 5.5 OF HIS ORDER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED I N THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 /03/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR