M/s. Manipal Resorts Company Pvt. Ltd., Bangalore V. Income -tax Officer, Ward - 4(1)(3), Bangalore

ITA 596/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6495 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-09-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Tax effect; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER I TA NO. 596 /BANG/201 9 ASSESSMENT YEAR : 20 14 - 15 M/S. MANIPAL RESORTS COMPANY PVT. LTD., NO. 65, SINGASANDRA, OFF HOSUR ROAD, MANIPAL COUNTRY ROAD, BANGALORE 560 068. PAN: AADCM1035F VS. THE INCOME TAX OFFICER, WARD 4 (1) (3), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI SHAHNAWAZ - UL - RAHMAN, JCIT (DR) DATE OF HEARING : 05 .0 9 .2019 DATE OF PRONOUNCEMENT : 25 . 10 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-4, BANGALORE DATED 18.02.2019 FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. GROUNDS OF APPEAL TAX EFFECT RELATING TO EACH GROUND OF APPEAL 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. A.O. AND THE C.I.T.(A) ERRED IN HAVING ADDED U/S.14A OF THE ACT READ WITH RULE 8D OF THE RULES A SUM OF RS.12,78,740/- BEING RELATABLE TO EXEMPT INCOME. GR.NOS.1 TO 5 NIL (SET OFF OF B/F LOSS OF RS.12,78,740/- NOT ALLOWED) 2. THAT, THE LD. C.I.T.(A) ERRED IN HAVING ENDORSED THE WRONG ASSUMPTION OF THE A.O. TO JUSTIFY THE ADDITION U/S.14A R.W.R. 8D(2)(I) OF THE RULES THAT SOME ITA NO. 596/BANG/2019 PAGE 2 OF 3 PORTION OF AUDIT FEES, TELEPHONE CHARGES, GENERAL EXPENSES ETC. MIGHT HAVE BEEN UTILIZED FOR EARNING EXEMPT INCOME WITHOUT ESTABLISHING THAT SUCH EXPENSES WERE NOT EXCLUSIVELY FOR THE PURPOSE OF EARNING OF TAXABLE INCOME. 3. THAT THE LD. A.O. ERRED AND THE C.I.T.(A) WRONGLY UPHELD THE ' QUANTIFICATION OF ADDITION U/S.14A BY APPLYING RULE 8D(2)(II) OF THE RULES ASSUMING INVESTMENT OUT OF BORROWED FUNDS IN SPITE OF THE FACT THAT AS PER AUDITED FINANCIAL STATEMENT, THERE WAS SUFFICIENT OWN FUND OUT OF WHICH INVESTMENTS IN SHARES WERE MADE AND FURTHERMORE BORROWED FUNDS WERE USED EXCLUSIVELY FOR THE BUSINESS P URPOSES. 4. THAT, THE LD. C.I.T.(A) FURTHER ERRED IN HAVING HELD THAT WHETHER INTEREST AND OTHER ADMINISTRATIVE EXPENDITURE RELATE TO OR DO NOT RELATE TO THE EXEMPT INCOME IS IMMATERIAL FOR INVOKING PROVISIONS OF SEC.14A R.W.R. 8D OF THE RULES, WHEREAS ADDITION U/S.14A ATTRACTS ONLY WHEN THERE IS EXPENDITURE DIRECTLY RELATED TO EARNING OF SUCH EXEMPT INCOME. 5. THAT, THEREFORE, AS THE ADDITION U/S.14A R.W.R. 8D OF THE RULES IS BAD IN LAW, DISALLOWANCE OF SET OFF OF BROUGHT FORWARD LOSSES TO THE EXTENT OF RS.12,78,740/- AS EXPENDITURE PERTAINING TO EXEMPT INCOME IS WITHOUT ANY VALID REASON AND LIABLE TO BE ALLOWED TO THE APPELLANT. 6. THAT, THEREFORE, AS THE ORDER OF THE LD. CIT(A)-4, BENGALURU ON THE ABOVE ISSUES SUFFERS FROM ILLEGALITY AND IS DEVOID OF ANY MERIT, THE SAME SHOULD BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. GENERAL GROUND 7. THAT, THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODIFY, SUBSITUTE, ADD TO, ABRIDGE AND/OR RESCIND ANY OR ALL OF THE ABOVE GROUNDS. GENERAL GROUND TOTAL TAX EFFECT SET OFF OF B/F LOSS OF RS.12,78,740/-NOT ALLOWED. ITA NO. 596/BANG/2019 PAGE 3 OF 3 3. THIS APPEAL WAS FIXED FOR HEARING ON 05.09.2019 AND THE NOTICE OF HEARING WAS SENT TO ASSESSEE BY RPAD AND THE SAME WAS DULY SERVED ON THE ASSESSEE AS PER AD AVAILABLE ON RECORD BUT IN SPITE OF THIS, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THERE IS NO REQUEST FOR ADJOURNMENT AND HENCE, THIS APPEAL WAS HEARD EX-PARTE QUA THE ASSESSEE. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR OF REVENUE AND WE FIND THAT THE ONLY ISSUE IN DISPUTE IS R EGARDING DISALLOWANCE MADE BY THE AO OF RS. 12,78,740/- U/S. 14A R.W. RULE 8D OF IT RULES. WE FIND THAT AS PER PAGE NO. 6 OF THE ASSESSMENT ORDER, THE AO HAS COMPUTED THE DISALLOWANCE U/S. 14A AS PER RULE 8D(2)(II) AND 8D(2)(III) BEING PROPORTIONATE INDIRECT INTEREST EXPENSES AND 0.5% OF AVERAGE INVESTMENT. WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) AS PER WHICH HE HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH OCTOBER, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.