SLC Projects Pvt.Ltd., Visakhapatnam, V. ACIT, Central Circle-2, Visakhapatnam

ITA 513/VIZ/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3947 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 25-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI SHANKAR NARAYAN
• Keywords: Capital asset; Revision of order; Depreciation; Earning of tax free income; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 41(2); 263

Judgement Text

ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.513/VIZAG/2017 ( / ASSESSMENT YEAR: 2013-14) SLC PROJECTS PVT. LTD. VISAKHAPATNAM ACIT, CENTRAL CIRCLE - 2 VISAKHAPATNAM [PAN NO. AAJCS8616C ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI I. KAMA SASTRY, AR / RESPONDENT BY : SHRI RAVI SHANKAR NARAYAN, DR / DATE OF HEARING : 01.05.2018 / DATE OF PRONOUNCEMENT : 04.05.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, {CIT(A)}, V ISAKHAPATNAM VIDE ITA NO.483/2015-16/CIT(A)-3/VSP/2017-18 DATED 31.8. 2017 FOR THE ASSESSMENT YEAR 2013-14. ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 2 2. GROUND NO.1 IS RELATED TO THE DEPRECIATION ON VE HICLES. THE ASSESSEE IS A CIVIL AND ELECTRICAL CONTRACTOR AND FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON VEHICLES @ 30% AS AGAINST ALLOWABLE RATE OF 15%. THEREFORE, THE A .O. HAS CALLED FOR THE EXPLANATION AS TO WHY THE DEPRECIATION SHOULD NOT B E RESTRICTED TO 15% ON VEHICLES. THE A.O. HAS GIVEN MORE THAN FIVE OPP ORTUNITIES TO THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECIATION SHOU LD NOT BE RESTRICTED TO 15% AND THE ASSESSEE DID NOT FURNISH ANY EXPLANA TION. THE DEPRECIATION ON VEHICLES IS ALLOWED AT HIGHER RATE @ 30% ON COMMERCIAL VEHICLES WHICH ARE RUNNING ON HIRE. IF THE VEHICLE S ARE USED IN THE BUSINESS OF THE ASSESSEE, ELIGIBLE DEPRECIATION IS @ 15% ON VEHICLES. IN THE INSTANT CASE, THOUGH ASSESSEE HAD CLAIMED THE D EPRECIATION @ 30%, NO EVIDENCE WAS PRODUCED BEFORE THE A.O. TO PROVE T HAT THE ASSESSEE HAD USED THE VEHICLES FOR RUNNING THEM ON HIRE. TH EREFORE, THE A.O. RESTRICTED THE DEPRECIATION @ 15% AND DISALLOWED TH E BALANCE AMOUNT OF ` 13,07,021/- 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A). BEFORE THE LD. CIT(A) ALSO, THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL EVIDENCE TO SHOW THAT THE VEH ICLES ARE USED IN RUNNING THEM ON HIRE. THE ASSESSEE HAS NEITHER PRO DUCED THE ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 3 AGREEMENT NOR ANY DOCUMENT AT THE TIME OF APPEAL AL SO. THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A.O. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE HAS TAKEN UP THE MATTER TO THE TRIBUNAL. 5. DURING THE APPEAL HEARING, THE LD. A.R. ARGUED T HAT IN THE EARLIER YEARS, THE ASSESSEE HAS USED THE VEHICLES FOR RUNNI NG ON HIRE AND THE VEHICLES WERE INCLUDED IN THE BLOCK OF ASSETS FOR T HE PURPOSE OF DEPRECIATION @ 30%, HENCE ARGUED THAT ONCE THE ASSE TS ARE INCLUDED IN THE BLOCK, THE SAME CANNOT BE ALTERED AND THE DEPRE CIATION REQUIRED TO BE ALLOWED CONTINUOUSLY AT HIGHER RATE, IRRESPECTIV E OF ITS USAGE. THE LD. A.R. FURTHER ARGUED THAT AFTER INTRODUCTION OF CONCEPT OF BLOCK OF ASSETS, INDIVIDUAL ASSET IS NO MORE IN VOGUE AND TH E ASSETS ARE GROUPED INTO THE BLOCK OF ASSETS AND DEPRECIATION IS ALLOWE D ON SUCH BLOCK. THEREFORE, ARGUED THAT SINCE THE VEHICLES ARE INCLU DED IN 30% DEPRECIATION BLOCK, THE ASSESSEE WOULD BE CONTINUOU SLY ENTITLED FOR THE HIGHER RATE OF DEPRECIATION IRRESPECTIVE OF ITS USA GE IN THE SUBSEQUENT YEARS. THE ASSESSEE ALSO RELIED ON THE DECISIONS O F HONBLE DELHI HIGH COURT IN THE CASE OF CIT(A) VS. OSWAL AGRO MILLS (3 41 ITR 0647), AND THE CIT(A) VS. YAMAHA MOTOR INDIA LIMITED 328 ITR 0297 AND ARGUED THAT SINCE THE ASSESSEE HAS USED THE VEHICLES FOR COMMER CIAL PURPOSE IN THE ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 4 EARLIER YEARS AND THE ASSETS WERE GROUPED IN THE BL OCK OF ASSETS AS PER SECTION 43(6)(C) OF THE INCOME TAX ACT, 1961 (HEREI NAFTER CALLED AS 'THE ACT'), THE ASSET CANNOT BE SHIFTED FROM HIGHER DEPR ECIATION BLOCK TO LESSER RATE OF DEPRECIATION BLOCK. 6. ON THE OTHER HAND, THE LD. D.R. ARGUED THAT THOU GH THE ASSESSEE HAS INCLUDED THE VEHICLES IN THE BLOCK OF ASSETS OF COMMERCIAL VEHICLES, THE ASSESSEE HAS NOT USED THE VEHICLES FOR RUNNING THEM ON HIRE. THE ASSESSEES BUSINESS IS CIVIL AND ELECTRICAL CONTRAC TS. THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF RUNNING THE VEHICLES ON HIRE AND IT WAS USED ONLY FOR THE PURPOSE OF ASSESSEES BUSINESS. THERE FORE, THERE IS A CHANGE IN USAGE OF VEHICLES FROM RUNNING THEM ON HI RE TO USING THEM FOR OWN BUSINESS PURPOSE. THEREFORE, ARGUED THAT THE A SSESSEE IS ENTITLED FOR NORMAL RATE OF DEPRECIATION. IT IS NOT CORRECT TO ARGUE THAT IRRESPECTIVE OF USAGE, THE ASSESSEE WOULD BE ENTITL ED TO HIGHER RATE OF DEPRECIATION PERPETUALLY. THE LD. D.R. RELIED ON T HE DECISION OF HIGH COURT OF KERALA IN THE CASE OF N.D. JOSEPH VS. CIT 325 ITR 200. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS USED THE VEHICLES FOR THE PURPOSE OF HIS OWN BUSINESS. AS PER RULE 5 SCHEDUL E OF DEPRECIATION, ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 5 THE MOTOR BUSES OR LORRIES OR TAXIES USED IN THE BU SINESS OF RUNNING THEM ON HIRE ARE ELIGIBLE FOR THE DEPRECIATION @ 30%. T HOUGH IN THE EARLIER YEARS, THE ASSESSEE CLAIMED THE DEPRECIATION @ 30% WHICH WAS ALLOWED BY THE DEPARTMENT, MERELY BECAUSE OF THE VEHICLES W ERE INCLUDED IN THE BLOCK OF ASSETS, THE HIGHER RATE OF DEPRECIATION CA NNOT BE ALLOWED UNLESS THE SAME ARE PUT TO USE FOR RUNNING THEM ON HIRE. THIS FACT OF COMMERCIAL USAGE OF VEHICLES WAS NOT ESTABLISHED BY THE ASSESSEE WITH ANY DOCUMENTARY EVIDENCE. FOR A QUERY FROM THE BEN CH, THE LD. A.R. OF THE ASSESSEE HAS ACCEPTED THAT DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS NOT USED THE VEHICLES FOR RUNNING THEM ON HIRE. THE ASSESSEE HAS RELIED ON THE DECISIONS OF DELHI HIGH COURT IN THE CASE OF CIT(A) VS. YAMAHA MOTOR INDIA PVT. LTD., 328 ITR 02 97. IN CITED CASE, THE QUESTION RAISED WAS ALLOWABILITY OF DEPRECIATIO N IN THE CASE OF DISCARDED AND WRITTEN OFF ASSETS IN THE BOOKS OF AC COUNTS AND PASSIVE USAGE OF THE VEHICLES BUT NOT THE RATE OF DEPRECIAT ION OF VEHICLES RUNNING THEM ON HIRE. IN THE CASE OF CIT(A) VS. OSWAL AGRO MILLS LIMITED (341 ITR 0647), THE ISSUE WAS ALLOWABILITY OF DEPRECIATI ON ON BLOCK OF ASSETS. HONBLE HIGH COURT HELD IN THAT CASE THAT IT IS NOT POSSIBLE TO EXCLUDE A PARTICULAR ASSET FROM THE BLOCK. FOR READY REFEREN CE, WE EXTRACT PARA NOS.29 TO 32 WHICH READS AS UNDER: ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 6 29. AS PER AMENDED SECTION 32, DEDUCTION IS TO BE ALLOW ED - 'IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE T HEREOF AS MAY BE PRESCRIBED'. THUS, THE DEPRECIATION IS ALLOWED ON BLOCK OF ASSETS, AND THE REVENUE CANNOT SEGREGATE A PARTICULAR ASSET THEREFROM ON THE GROUND THAT IT WAS NOT PUT TO USE. 30. WITH THE AFORESAID AMENDMENT, THE DEPRECIATION IS N OW TO BE ALLOWED ON THE WRITTEN DOWN VALUE OF THE 'BLOCK OF ASSETS' AT SUCH PERCENTAGE A S MAY BE PRESCRIBED. WITH THIS AMENDMENT, INDIVIDUAL ASSETS HAVE LOST THEIR IDENTITY AND CONC EPT OF 'BLOCK OF ASSETS' HAS BEEN INTRODUCED, WHICH IS RELEVANT FOR CALCULATING THE DEPRECIATION. IT WOULD BE OF BENEFIT TO TAKE NOTE OF THE CIRCULAR ISSUED BY THE REVENUE ITSELF EXPLAINING TH E PURPOSE BEHIND THE AMENDED PROVISION. THE SAME IS CONTAINED IN CBDT CIRCULAR NO. 469, DAT ED 23-9-1986, WHEREIN THE RATIONALE BEHIND THE AFORESAID AMENDMENT IS DESCRIBED AS UNDE R : '6. 3 AS MENTIONED BY THE ECONOMIC ADMINISTRATION R EFORMS COMMISSION (REPORT NO. 12, PARA 20) , THE EXISTING SYSTEM IN THIS REGARD R EQUIRES THE CALCULATION OF DEPRECIATION IN RESPECT OF EACH CAPITAL ASSET SEPARATELY AND NOT IN RESPECT OF BLOCK OF ASSETS. THIS REQUIRES ELABORATE BOOK-KEEPING AND THE PROCESS OF CHECKING BY THE ASSESSING OFFICER IS TIME CONSUMING. THE GREATER DIFFERENTIATION IN RATES, AC CORDING TO THE DATE OF PURCHASE, THE TYPE OF ASSET, THE INTENSITY OF USE, ETC. , THE MOR E DISAGGREGATED HAS TO BE THE RECORD- KEEPING. MOREOVER, THE PRACTICE OF GRANTING THE TER MINAL ALLOWANCE AS PER SECTION 32(1) ( III ) OR TAXING THE BALANCING CHARGE AS PER SECTION 41( 2) OF THE INCOME-TAX ACT NECESSITATE THE KEEPING OF RECORDS OF DEPRECIATION ALREADY AVAI LED OF BY EACH ASSET ELIGIBLE FOR DEPRECIATION. IN ORDER TO SIMPLIFY THE EXISTING CUM BERSOME PROVISIONS, THE AMENDING ACT HAS INTRODUCED A SYSTEM OF ALLOWING DEPRECIATIO N ON BLOCK OF ASSETS. THIS WILL MEAN THE CALCULATION LUMP SUM AMOUNT OF DEPRECIATION FOR THE ENTIRE BLOCK OF DEPRECIABLE ASSETS IN EACH OF THE FOUR CLASSES OF ASSETS, NAMEL Y, BUILDINGS, MACHINERY, PLANT AND FURNITURE.' 31. IT BECOMES MANIFEST FROM THE READING OF THE AFORESA ID CIRCULAR THAT THE LEGISLATURE FELT THAT KEEPING THE DETAILS WITH REGARD TO EACH AND EV ERY DEPRECIABLE ASSETS WAS TIME CONSUMING BOTH FOR THE ASSESSEE AND THE ASSESSING OFFICER. TH EREFORE, THEY AMENDED THE LAW TO PROVIDE FOR ALLOWING OF THE DEPRECIATION ON THE ENTIRE BLOC K OF ASSETS INSTEAD OF EACH INDIVIDUAL ASSET. THE BLOCK OF ASSETS HAS ALSO BEEN DEFINED TO INCLUD E THE GROUP OF ASSETS FALLING WITHIN THE SAME CLASS OF ASSETS. 32. ANOTHER SIGNIFICANT AND CONTEMPORANEOUS DEVELOPMENT , WHICH NEEDS TO BE NOTICED IS THAT THE LEGISLATURE HAS ALSO DELETED THE PROVISION FOR ALLOWING TERMINAL DEPRECIATION IN RESPECT OF EACH ASSET, WHICH WAS PREVI- OUSLY ALLOWABLE UNDER SECTION 32(1) ( III ) AND ALSO TAXING OF BALANCING CHARGE UNDER SECTION 41(2) IN THE YEAR OF SALE. INSTEAD OF THESE TWO PROVISIONS, NOW WHATEVER IS THE SALE-PROCEED OF SALE OF ANY DEPRECI ABLE ASSET, IT HAS TO BE REDUCED FROM THE BLOCK OF ASSETS. THIS AMENDMENT WAS MADE BECAUSE NO W THE ASSESSEES ARE NOT REQUIRED TO MAINTAIN PARTICULARS OF EACH ASSET SEPARATELY AND I N THE ABSENCE OF SUCH PARTICULAR, IT CANNOT BE ASCERTAINED WHETHER ON SALE OF ANY ASSET, THERE WAS ANY PROFIT LIABLE TO BE TAXED UNDER SECTION 41(2) OR TERMINAL LOSS ALLOWABLE UNDER SECT ION 32(1) ( III ) . THIS AMENDMENT ALSO STRENGTHEN THE CLAIM THAT NOW ONLY DETAIL FOR 'BLOC K OF ASSETS' HAS TO BE MAINTAINED AND NOT SEPARATELY FOR EACH ASSET. 7.1 THE ABOVE CASE LAW RELIED UP ON BY THE ASSESSEE DOES NOT HELP THE ASSESSEE. THE QUESTION IN THE INSTANT CASE IS WHETH ER THE BLOCK OF ASSETS CONSISTING OF VEHICLES WHICH WERE CLAIMED TO BE RUN NING THEM ON HIRE IS ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 7 ELIGIBLE FOR 30% DEPRECIATION OR 15% DEPRECIATION D EPENDING ON USAGE OF VEHICLES. THERE WAS NO SEGREGATION OF THE ASSETS IN A BLOCK IN THIS CASE. THE ASSESSEE FAILED TO PROVE THAT THE VEHICLE S WERE PUT TO USE FOR COMMERCIAL PURPOSE. NO EXPLANATION WAS OFFERED BY T HE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE LD. CIT(A), HENCE IT WA S CONSIDERED THAT THE ENTIRE BLOCK OF VEHICLES IN THE HIGHER RATE OF DEPR ECIATION WAS SHIFTED FOR NORMAL DEPRECIATION ACCORDING TO THE USAGE OF VEHIC LES, HENCE THERE IS NO DEVIATION FROM THE DECISION OF HONBLE HIGH COUR T AND THE SAME IS HELPFUL TO THE REVENUE ON THE FACTS OF THE CASE. 7.2 IN THE INSTANT CASE, THE ASSESSEE FAILED TO P RODUCE THE EVIDENCE BEFORE THE A.O. OR BEFORE THE CIT(A) TO SHOW THAT T HE VEHICLES WERE RUNNING ON HIRE. THE VEHICLES WERE PUT TO USE FOR THE ASSESSEES BUSINESS PURPOSES. AS PER RULE 5 AND THE SCHEDULE OF DEPRECIATION, THE ALLOWABLE DEPRECIATION IN THE CASE OF VEHICLES USED FOR THE BUSINESS PURPOSE WAS 15% BUT NOT 30%. THE LD. D.R. RELIED O N THE DECISION OF N.D. JOSEPH VS. CIT 325 ITR 200 (KERALA), WHEREIN H ONBLE HIGH COURT HELD THAT WHERE THE TRUCKS AND JCBS WERE MAINLY USE D FOR ASSESSEES OWN BUSINESS AND PARTLY LET OUT TO OTHER PURPOSE, S INCE ITEMS ARE PREDOMINANTLY USED IN THE ASSESSEES OWN BUSINESS, ASSESSEE WAS ENTITLED FOR DEPRECIATION ONLY AT NORMAL RATES. IN THE INSTANT CASE, THERE WAS NO EVIDENCE TO SHOW THAT THE VEHICLES WERE USED FOR RUNNING THEM ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 8 ON HIRE, THEREFORE, WE HOLD THAT THE ASSESSEE IS NO T ENTITLED FOR HIGHER RATE OF DEPRECIATION AND ENTITLED FOR ONLY AT NORMA L RATE OF DEPRECIATION. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE ON THIS GROUND. 8. GROUND NO.2 IS RELATED TO THE DISALLOWANCE U/S 1 4A R.W. RULE 8D INCOME TAX RULES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD MADE INVESTMENTS OF ` 15.45 CRORES IN VARIOUS COMPANIES AND NO EXPENDITURE WAS DISALLOWED AS PER SECTION 14A READ WITH RULE 8D OF THE ACT. SINCE THE ASSESSEE HAS NOT MADE ANY DISALLOWA NCE, THE A.O. MADE THE DISALLOWANCE OF ` 23,61,223/- U/S 14A READ WITH RULE 8D OF THE ACT. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LD. A.R. ARGUED THAT NO EXPENDITURE REQUIRED TO BE DISALLOWED IN CASE THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME. IN TH E INSTANT CASE, THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME WHICH I S EXEMPT U/S 14A OF THE ACT. ON IDENTICAL FACTS, THIS TRIBUNAL IN T HE CASE OF D. VEERABHADRA REDDY (HUF) VS. JCIT, KAKINADA IN ITA N O.263/VIZAG/2014 DATED 23.6.2017 FOR THE ASSESSMENT YEAR 2009-10 PLA CING RELIANCE ON HONBLE MADRAS HIGH COURT JUDGEMENT IN THE CASE OF REDINGTON INDIA LIMITED VS. ADDITIONAL CIT 77 TAXMANN. COM 257 HELD THAT NO ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 9 DISALLOWANCE IS CALLED FOR WHEN THERE IS NO EXEMPT INCOME. FOR READY REFERENCE, WE EXTRACT RELEVANT PARAGRAPH NO.6 OF TH IS TRIBUNAL ORDER WHICH READS AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS RENTAL INCOME FROM GODOWN S AND THE BUSINESS LOSS. THE ASSESSING OFFICER HAS COMPLETED THE ASSES SMENT U/S 143(3) BY ORDER DATED 04.11.2011. THE LD.CIT HAS CALLED FOR THE RECORD U/S 263 AND ISSUED THE NOTICE FOR REVISION FOR INCORRECT SET OF F OF BUSINESS LOSS AGAINST THE RENTAL INCOME. AFTER VERIFICATION OF THE MATER IAL ON RECORD, THE LD.CIT HAS DROPPED THE ISSUE WITH REGARD TO INCORRECT SET OFF OF BUSINESS LOSS AGAINST THE INCOME FROM PROPERTY WHICH WAS EXAMINED BY THE ASSESSING OFFICER. DURING THE COURSE OF REVISION PROCEEDINGS , IT HAS COME TO THE NOTICE OF LD.CIT THAT THE ASSESSEE HAS MADE INVESTM ENTS IN SHARES AND BONDS AND DID NOT MAKE DISALLOWANCE WHICH WAS REQUI RED TO BE MADE U/S14A OF IT ACT. THE ASSESSEE EXPLAINED THAT THER E WERE NO EXPENSES INCURRED IN RELATION TO THE EXEMPT INCOME WHICH WAS CLAIMED AS DEDUCTION FOR THE ASSESSMENT YEAR 2009-10. HENCE, THE ASSESS EE ARGUED BEFORE THE LD.CIT THAT SECTION 14A IS NOT APPLICABLE IN ASSESS EES CASE. AS PER THE OBSERVATION OF THE LD.CIT, THE ASSESSEE MADE THE IN VESTMENTS TO THE TUNE OF RS.19,90,625/- IN SHARES AND BONDS FROM THE BORR OWED FUNDS AND THE INTEREST EXPENDITURE RELATING TO THE EARNING OF DIV IDEND INCOME IS REQUIRED TO BE DISALLOWED U/S 14A. THOUGH CIT OPINED THAT T HE EXPENDITURE RELATING TO THE EARNING OF DIVIDEND INCOME REQUIRED TO BE DISALLOWED, THERE WAS NO FINDING GIVEN BY THE CIT IN HIS ORDER WITH R EGARD TO EARNING OF DIVIDEND INCOME. THE CIT ALSO DID NOT REBUT THE EX PLANATION OFFERED BY THE ASSESSEE STATING THAT NO EXPENDITURE WAS INCURR ED FOR MAKING THE INVESTMENTS. THE LD.DR DID NOT MAKE ANY CLARIFICATI ON WITH REGARD TO THE QUANTUM OF DIVIDEND INCOME EARNED BY THE ASSESSEE. THE LD.AR SUBMITTED PAPER BOOK ENCLOSING THE COPY OF STATEMEN T OF COMPUTATION, RETURN OF INCOME, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. IT IS SEEN FROM THE PROFIT AND LOSS ACCOUNT AND THE STATEMENT OF COMPUTATION OF INCOME THAT THE ASSESSEE HAS NOT DERIVED ANY DIVIDE ND INCOME. WHEN THE ASSESSEE HAS NO EXEMPT INCOME, THE QUESTION OF DISA LLOWANCE U/S14A R.W.RULE 8D IS NOT CALLED FOR. THE SAME VIEW IS EX PRESSED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN REDINGTON (INDIA) L TD. VS. ADDL.CIT, 77 TAXMAN.COM 257, HONBLE DELHI HIGH COURT IN CHEM IN VESTMENTS VS. CIT, 61 TAXMAN.COM 118 AND THE HONBLE GUJARAT HIGH COUR T IN PRINCIPAL CIT VS. SINTEX INDUSTRIES LTD., 82 TAXMAN.COM 171 HELD T HAT NO DISALLOWANCE IS CALLED FOR WHEN ASSESSEE MAKES SMALL INVESTMENT FRO M THE SURPLUS FUNDS. THERE WAS NO DIVIDEND INCOME EARNED BY THE ASSESSEE AND THE CASE WAS TAKEN FOR REVISION TO DISALLOW THE BUSINESS LOSS CL AIMED AGAINST THE PROPERTY INCOME WHICH WAS EXAMINED BY THE AO AND DR OPPED THE ASSESSMENT PROCEEDINGS AND THE LD.CIT ALSO SATISFIE D THAT THERE IS NO CASE FOR REVISION ON ACCOUNT OF INCORRECT SET OFF OF BUS INESS LOSS. WITH REGARD ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 10 TO THE ISSUE OF DISALLOWANCE U/S 14A AS PER THE JUD ICIAL PRONOUNCEMENTS NO DISALLOWANCE IS CALLED FOR WHEN THERE IS NO EXEM PT INCOME. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO C ASE FOR REVISION OF ORDER U/S 263 AND ACCORDINGLY WE SET ASIDE THE ORDERS OF THE CIT AND ALLOW THE APPEAL OF THE ASSESSEE. 10. SINCE THE FACTS ARE IDENTICAL, WE HOLD THAT NO DISALLOWANCE IS CALLED FOR U/S 14A OF THE ACT IN THE ABSENCE OF EXEMPT INC OME. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS SET AS IDE AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. GROUND NO.3 IS RELATED TO THE CREDIT FOR TDS. IN THE INSTANT CASE, THE ASSESSEE HAD RECEIVED ADVANCES OF ` 30.76 CRORES AND THE TAX WAS DEDUCTED BY THE PAYER ON THE ENTIRE AMOUNT WHICH WA S PAID TO THE ASSESSEE. THE ASSESSEE CLAIMED TDS OF ` 70,61,000/- IN THE RETURN OF INCOME. HOWEVER, THE A.O. ALLOWED THE TDS TO THE E XTENT OF INCOME ADMITTED IN FORM NO.26AS AS PER SECTION 199 READ WI TH RULE 37BA OF THE ACT AND DISALLOWED THE BALANCE AMOUNT OF TDS. THE ASSESSEE FILED APPEAL REQUESTING TO ALLOW THE ENTIRE CREDIT FOR TD S. AS PER SECTION 199 READ WITH RULE 37B OF THE ACT, THE CREDIT FOR TAX I S ALLOWED ONLY ON THE INCOME ADMITTED RELATABLE TO THE TDS. THEREFORE, I N THE ABSENCE OF THE RECEIPT NOT BEING ADMITTED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CI T(A) AND THE SAME IS UPHELD. ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 11 12. GROUND NO.3.1 IS RELATED TO THE ALTERNATE GROUN D WITH REGARD TO TDS CLAIM RESTRICTED BY THE A.O. THE A.O. ALLOWED TDS OF ` 12,12,924/- IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION OUT OF THE TDS AMOUNT OF ` 70,61,000/- MADE BY THE DGNP VISAKHAPATNAM. THE ASSESSEE HAS REQUESTED AS AN ALTERNATE GROUND TO AL LOW THE CREDIT FOR TDS OF THE BALANCE AMOUNT IN THE SUBSEQUENT YEAR AS AND WHEN THE INCOME IS ADMITTED. THE A.O. IS DIRECTED TO ALLOW THE CREDIT FOR TDS IN THE SUBSEQUENT YEARS AS AND WHEN THE INCOME IS ADMI TTED AS PER LAW. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NOS.4 & 5 ARE GENERAL IN NATURE WHICH DO ES NOT REQUIRE SPECIFIC ADJUDICATION. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 4 TH MAY18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 04.05.2018 VG/SPS ITA NO.513 /VIZAG/2017 SLC PROJECTS PVT. LTD., VSKP 12 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SLC PROJECTS PVT. LTD., PLOT NO. A-20, DOOR NO.50-104- 2, TPT COLONY, SEETHAMMADHARA, VISAKHAPATNAM 2. / THE RESPONDENT THE ACIT, CENTRAL CIRCLE-2, VIS AKHAPATNAM 3. + / THE PCIT (CENTRAL), VISAKHAPATNAM 4. + ( ) / THE CIT (A)-3, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM