Deputy Commissoner of Income Tax, Ludhiana V. M/S Vardhman Special Steels Limited, Ludhiana

ITA 574/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6525 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH ABROL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Proportionate interest
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 574/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, VS. M/S VARDHMAN SPECIAL STEELS LIMITED , CIRCLE-1, CHANDIGARH ROAD, LUDHIANA LUDHIANA PAN NO. AADCV4812B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHISH ABROL. CIT DR RESPONDENT BY : SH. SUBHASH AGGARWAL DATE OF HEARING : 11.12.2017 DATE OF PRONOUNCEMENT : 11.12.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)] -1, LUDHIANA DATED 17.01.2017. 2. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND S OF APPEAL:- 1. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CAS E IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELEING THE DISALLOWANCE MADE U/S 14A OF THE I.T. ACT, 1961, AMOUNTING TO RS. 21,66,759/-? 2 2. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE U/S 36(I)(III) OF THE I.T. ACT, 1961, DISALLOW ED PROPORTIONATE INTEREST FOR THE AMOUNT SPENT ON THE PURCHASE OF FIXED ASSETS AND CAPITAL WORK IN PROGRE SS, AMOUNTING TO RS. 40,07,108/- WITHOUT CONSIDERING T HAT ASSESSEE ALSO HAD SIGNIFICANT BORROWED FUNDS? 3. THE PERUSAL OF THE ABOVE GROUNDS OF APPEAL REVEA L THAT THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING T HE DISALLOWANCE MADE U/S 14A AS WELL AS U/S 36(1)(III) OF THE INCOME-T AX ACT, 1961 (IN SHORT 'THE ACT') MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS DELETED THE AFORESAID DISALLOWANCES WHILE OBSERVING THAT ASSESS EE COMPANY HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO COVER T HE INVESTMENTS UNDER CONSIDERATION. HE, IN THIS RESPECT HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) M/S BRIGHT ENTERPRISES PVT LTD VS. CIT (2015) 234 TAXMAN 509 (II) CIT VS. RELIANCE UTILITIES & POWER LTD (2009 ) 313 ITR 340 4. WE FIND THAT SO FAR AS THE DISALLOWANCE OF INTER EST EITHER U/S 14A READ WITH RULE 8D(2)(II) OR SECTION 36(1)(III) IS CONCER NED, THE ISSUE IS SQUARELY COVERED BY THE ABOVE REFERRED TO DECISIONS IN FAVOU R OF THE ASSESSEE. SO FAR AS THE DISALLOWANCE U/S 14A READ WITH RULE 8D(2 )(III) ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS CONCERNED, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE FORMULA PRESCRIBED UNDER RULE 8D(2)((III), FOR CALCULATING DISALLOWANCE @ 0.5% OF THE AVERAGE VALU E OF INVESTMENT, THE ASSESSING OFFICER IS REQUIRED TO ARRIVE AT THE OPEN ING BALANCE AND CLOSING BALANCE OF INVESTMENTS. HE HAS FURTHER SUBMITTED TH AT ONLY INVESTMENTS MADE BY THE ASSESSEE DURING THE YEAR, THE INCOME F ROM WHICH WAS EXEMPT, 3 WAS MUTUAL FUNDS, WHICH WERE MADE DURING THE YEAR AND WERE ALSO REDEEMED DURING THE SAME FINANCIAL YEAR. HE, THER EFORE, HAS SUBMITTED THAT SINCE THERE WAS NO OPENING AND CLOSING BALANC E OF INVESTMENTS, THE INCOME FROM WHICH WAS EXEMPT, THE COMPUTATION UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES WOULD RESULT IN NIL. THE AS SESSEE, HOWEVER, HAS SUE MOTO DISALLOWED AN AMOUNT OF RS. 10,000/- AS DI SALLOWANCE U/S 14A OF THE ACT. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE, WE FIND THAT NO FURTHER DISALLOWANCE IS C ALLED FOR. WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) WHILE DELETING THE AFORESAID DISALLOWANCE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2017 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11.12.2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR