Assistant Commissioner of Income tax, Jalgaon V. Dipesh M.Kotecha, Jalgaon

ITA 562/PUN/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7733 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 08-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Question of law
• Section: 14A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.562/PUN/2017 / ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE-2, JALGAON . /APPELLANT VS. DIPESH MOTILAL KOTECHA, PADAM, TAPI NAGAR, BHUSAWAL, JALGAON 425 201 PAN : ABBPPK2142P . / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 21.06.2018 / DATE OF PRONOUNCEMENT: 27.06.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-2, NASHIK, DATED 29-12-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. GROUNDS RAISED BY THE REVENUE ARE EXTRACTED AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.41,15,404/- MA DE U/S 14A R.W RULE 8D, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD MAD E INVESTMENT IN SHARES AND AGRICULTURAL INCOME FROM WHICH SHALL BE EXEMPT FROM TAX AND THE ASSESSEE HAS ALSO NOT CONCLUSIVELY PROVED THAT THE ASSESSEE HAD NON-INTEREST BEARING FUND ON THE DATE ON WHICH IT HAD MADE INVESTMENT IN SHARES AND AGRICULTURAL LAND AND ALSO RELYING ON THE DECISION OF CIT VS HDF C BANK (2014) DTR 140, WHICH HAS NOT BECOME FINAL. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT SOURCE FOR INVESTMENT IN SHARES AND AGRICULTURAL LAND WAS OUT OF THE INTEREST BEARING L OAN FUNDS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW , THE ORDER OF THE LD.CIT(A)-II, NASHIK BE CANCELLED ON THE ABOVE ISSU E AND THAT OF THE A.O BE RESTORED. ITA NO.562/PUN/2017 DIPESH M. KOTECHA 2 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY , DELETE AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HON,BLE CI T, AS PER THE CIRCUMSTANCES OF THE CASE. 5. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONA L EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN IN APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DIRECTOR OF (1) TAPI RCC PIPE PVT. LTD.; (2) VARDHAMAN PRES TRESSED PRODUCTS PVT. LTD.; (3) JNP ROAD INFRASTRUCTURE PROJECTS PVT. LTD.; AN D (4) TAPI PRESTRESSED PRODUCTS PVT. LTD. ASSESSEE IS ALSO PROPRIE TOR OF M.K. KOTECHA ENGINEERS AND CONTRACTORS AND HE DID NOT RECEIVE ANY IN COME FROM THE SAID CONCERN. HOWEVER, THE ASSESSEE RECEIVED REMUNERATION FR OM TAPI PRESTRESSED LTD. (TPPL) AND EARNED CAPITAL GAIN ON SALE OF LAND AS WELL AS ASSESSEE EARNED INCOME FROM OTHER SOURCES. ASSESSEE FILE D THE RETURN OF INCOME ON 31-08-2012 DECLARING TOTAL INCOME AT NIL. IN THE COMPUTATION OF INCOME ASSESSEE SHOWN TOTAL LOSS AT RS.5,69,590/-. THE CA SE WAS SELECTED FOR SCRUTINY UNDER CASS. IN THE ASSESSMENT, AO NOTICED THAT ASSESSEE RECEIVED UNSECURED LOAN OF RS.5,00,000/- FROM SHRI SHAH NITIN CHANDRA DILIPKUMAR SHAH. NOTICE U/S.133(6) WAS ISSUED TO THE SAID P ARTY AND THE PARTY DENIED TO HAVE GIVEN ANY LOAN TO THE ASSESSEE. I N THE ABSENCE OF ANY EXPLANATION FOR THE SAME, AO MAKE THE ADDITION OF RS.5,00,00 0/- U/S.68 OF THE ACT AND TREATED THE SAME AS NOT GENUINE. AO ALSO NOTICED THAT THERE WAS ALSO MISTAKE IN THE CALCULATION OF DISALLOWABLE INTEREST EXPE NSES U/S.14A OF THE ACT WITH REGARD TO AVERAGE INVESTMENT. AS PER THE AO, THE SAID WORKING COMES TO RS.41,15,404/-. AT THE END OF ASSESSMENT PROCE EDINGS U/S.143(3) OF THE ACT, AO MADE ADDITION OF RS.46,15,404/- AND DETERMIN ED THE TOTAL INCOME AT RS.40,45,814/- AS AGAINST THE LOSS SHOWN BY TH E ASSESSEE AT (-) RS.5,69,590/-. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) PERUSED THE DETAILS OF COMPUTATION OF INCOME MADE BY THE ASSESSEE AS WELL AS T HE ADDITIONS MADE ITA NO.562/PUN/2017 DIPESH M. KOTECHA 3 BY THE AO. CIT(A) ALSO CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE VIDE LETTERS DATED 03-11-2016. REGARDING THE ADDITION MA DE BY THE AO U/S.14A OF THE ACT, THE CIT(A) DELETED THE SAID ADDITION REL YING ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. 160 DTR 140 (BOM.) AND THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. MR. M. BASKARAN IN ITA NO.1717/MDS/ 2013, DATED 31-07-2014. 5. REGARDING THE ADDITION OF RS.5 LAKHS MADE BY THE AO O N ACCOUNT OF UNSECURED LOAN TAKEN FROM SHRI SHAH NITICHANDRA DILIP KUMAR U/S.68 OF THE ACT, THE CIT(A) DIRECTED THE AO VERIFY THE CONTENTION OF T HE ASSESSEE THAT THE IMPUGNED LOAN WAS RECEIVED AND PAID THROUGH BANKING CHAN NELS (THROUGH CHEQUES). 6. AGGRIEVED WITH THE ORDER OF CIT(A) DELETING THE ADDITION OF RS.41,15,404/-MADE BY THE AO U/S.14A R.W. RULE 8D, THE REV ENUE IS IN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 7. BEFORE US, LD. DR FOR THE REVENUE SUBMITTED THAT ASSE SSEE MADE INVESTMENTS IN SHARES AND AGRICULTURAL LAND OUT OF INTEREST BEARING FUNDS AND THE CIT(A) HAS NOT PROPERLY APPRECIATED THE FACTS. THEREFORE, LD. DR PRAYED FOR REVERSING THE ORDER OF CIT(A) ON THIS ISSUE. 8. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A) AND SUBMITTED FOR UPHOLDING THE SAME. 9. WE HEARD BOTH THE SIDES ON THE ISSUE, PERUSED THE O RDERS OF THE REVENUE AND THE SUBMISSIONS MADE BY THE PARTIES. THE ONLY ISSUE FOR ADJUDICATION RELATES TO THE DISALLOWANCE U/S.14A OF THE ACT . WE HAVE PERUSED THE FINANCIAL STATEMENTS FURNISHED BY THE ASSESS EE WITH SPECIAL REFERENCE TO THE INTEREST FREE FUNDS/RESERVES. WE HAVE GONE THROUGH THE ITA NO.562/PUN/2017 DIPESH M. KOTECHA 4 REASONING GIVEN BY THE CIT(A) AND FIND THE SAME IS RELEVANT FOR EXTRACTION. THEREFORE, THE SAME IS REPRODUCED HERE AS UNDER : 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE APPELLANT HAS RAISED FOLLOWING CONTENTIONS AGAINST THE ADDITION MADE BY THE A.O. U/S. 14A OF THE ACT. 1) THE A.O. HAS NOT GIVEN ANY OBJECTIVE FINDING THA T THE CONTENTION OF THE APPELLANT THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME, IS INCORRECT. IN SUPPORT OF THIS CONTENTION, THE AP PELLANT HAS RELIED ON VARIOUS DECISIONS OF HON'BLE HIGH COURTS AND ALSO DECISION OF HON'BLE ITAT, PUNE. 2) THE APPELLANT IS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF CAPITAL OF RS.12.07 CRORES AND THE INVESTMENT IN SHARES AND AG RICULTURAL LANDS ETC. INCOME FROM WHICH IS EXEMPT WAS RS. 9.86 CRORES. TH EREFORE NO DISALLOWANCE U/S.14A CAN BE JUSTIFIED IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 160 DT R 140 (BOM.) THE FIRST CONTENTION OF THE APPELLANT IS REJECTED A S ON PERUSAL OF ASSESSMENT ORDER, THE CONTENTION OF THE APPELLANT IS FOUND TO BE INCORRECT. THE SECOND CONTENTION RAISED BY THE APPELLANT THAT THE APPELLANT IS HAVING SUFFICIENT INTEREST FREE FUNDS OF RS.12.06 CRORES F OR MAKING INVESTMENT IN AGRICULTURAL LANDS, SHARES ETC. OF RS.9.86 CRORES A ND HENCE ADDITION U/S.14A R.W. RULE 8D IS NOT JUSTIFIED IS SUPPORTED BY THE D ECISION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. HDFC BANK LTD. ( 2014) 160 DTR 140 (BOM.). IN THIS CASE IT HAS BEEN LAID DOWN AS UNDER : ASSESSEES OWN FUNDS AND OTHER NON INTEREST BEARIN G FUNDS BEING MORE THAN THE INVESTMENT IN INTEREST FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE W AS OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND THEREFORE, ORDER OF THE TRIBUNAL DELETING THE DISALLOWANCE U/S. 14A DOE S NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW.' IN VIEW OF THE RATIO LAID DOWN BY THE ABOVE MENTION ED DECISION OF HON'BLE BOMBAY HIGH COURT, THE SECOND CONTENTION RAISED BY THE APPELLANT IS ACCEPTED. FROM THE ABOVE DECISION OF HON'BLE BOMBAY HIGH COUR T, WHICH IS APPLICABLE TO THE CASE UNDER APPEAL IT IS ESTABLISH ED THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE ON ACCOUNT OF INTE REST TOWARDS INVESTMENT IN ASSETS EARNING EXEMPT INCOME. THE APP ELLANT HAS NOT CLAIMED ANY EXPENDITURE IN COMPUTATION OF INCOME OT HER THAN INTEREST EXPENDITURE. THEREFORE IN VIEW OF THE ABOVE DECISIO N OF HON'BLE BOMBAY HIGH COURT, THE DISALLOWANCE U/S, 14A R.W. RULE 8D IS NOT JUSTIFIED. FURTHER HON'BLE ITAT, CHENNAI HAS DECIDED THE ISSUE ABOUT DISALLOWANCE U/S. 14A IN FAVOUR OF THE ASSESSEE AFTER CONSIDERING THE CBDT CIRCULAR NO.5/2014 DATED 11/2/2014, IN THE CASE OF ACIT VS. MR. M. BASKARAN, ITA NO.1717/MDS/2013 DATED 31/7/2014 FOR A.Y. 2008- 09. IN VIEW OF THE ABOVE FACTS AND DECISIONS RELIED ON BY THE APPELLANT, THIS CONTENTION OF THE APPELLANT IS ACCEPTED. THE DISAL LOWANCE OF RS.41,15,404/- U/S.14A R.W.RULE 8D IS DELETED. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NO.1 IS ALLOWED. ITA NO.562/PUN/2017 DIPESH M. KOTECHA 5 FROM THE ABOVE, WE FIND THE CIT(A) HAS RIGHTLY APPRE CIATED THE FACTS ABOUT NON-INCURRING OF ANY EXPENDITURE FOR EARNING T HE EXEMPT INCOME. AS SUCH, THE AO HAS NOT BROUGHT ANY CONTRARY MATERIAL . CIT(A) ALSO TAKEN NOTE OF THE AVAILABILITY OF ADEQUATE INTEREST FREE FUNDS (RS.12.07 CRORES) AND APPLICABILITY OF THE BINDING DECISIONS O N THE ISSUE. WE THEREFORE, CONCUR WITH THE FINDING GIVEN BY THE CIT( A) AND THUS UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 27 TH JUNE, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-2, NASHIK 4. THE PR.CIT-2, NASHIK 5. , , SMC BENCH PUNE; 6. / GUARD FILE.