The Panipat Urban Co-operative Bank Ltd., New Delhi V. ACIT, Panipat

ITA 6214/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6533 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: SAUBHAGYA AGARWAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 154

Judgement Text

THE PANIPAT URBAN CO-OPERATIVE BANK LTD. VS. ACIT/ I.T.A.NO.6214/DEL/2016/A.Y.2012-13 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER . . /. I.T.A NO.6214/DEL/2016 / ASSESSMENT YEAR:2012-13 THE PANIPAT URBAN CO-OPERATIVE BANK LTD. C/O SHRI SAUBHAGYA AGARWAL PARTNER, A.S. LEGAL, LAW OFFICES, K-185/14, SURYA PLAZA, FIRST FLOOR, NEW FRIENDS COLONY, NEW DELHI. VS. ACIT CIRCLE, PANIPAT. PAN NO. AAALT0141K APPELLANT / RESPONDENT /ASSESSEE BY SHRI SAUBHAGYA AGARWAL, ADV. /REVENUE BY SHRI S.S. RANA, CIT (DR) / DATE OF HEARING: 06.11 .20 19 /PRONOUNCEMENT ON 0 3 . 0 2 .20 20 /O R D E R PER AMIT SHUKLA, J.M. 1. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 22.09.2016, PASSED BY THE LD. CIT(APPEALS), KARNAL IN RELATION TO THE ORDER PASSED UNDER SECTION 154 P ASSED U/S 143(3) OF THE ACT FOR AY 2012-13. IN VARIOUS GROUNDS OF APPEAL T HE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 65,83,301/- MADE U/S 14A READ WITH THE PANIPAT URBAN CO-OPERATIVE BANK LTD. VS. ACIT/ I.T.A.NO.6214/DEL/2016/A.Y.2012-13 PAGE 2 OF 4 RULE 8D AND ADDITION OF RS. 28,618/- MADE ON ACCOUN T OF SUSPENSE ACCOUNT. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A CO-OPERAT IVE SOCIETY ENGAGED IN THE BANKING BUSINESS ACTIVITY. THE MAIN INCOME OF THE ASSESSEE IS FROM INTEREST AND HAS SHOWN INVESTMENT IN MUTUAL FUNDS IN ITS BALANCE SHEET FROM WHERE IT HAS EARNED TAX FREE DIVIDEND OF RS. 27,68,083/-. THE AO OBSERVED THAT NO DISALLOWANCE HAS BEEN MADE FOR INTEREST EXPENSE AS PER RULE 8D(2)(II), EVEN THOUGH ASSESSEE HAS INCURR ED A HUGE EXPENSE OF RS. 10,09,15,163/-. HE FURTHER OBSERVED THAT ASSES SEE COULD NOT ESTABLISH THE INTEREST FREE FUNDS HAVING BEEN USED FOR INVEST ING IN MUTUAL FUNDS. ACCORDINGLY, AO COMPUTED THE DISALLOWANCE AMOUNTING TO RS. 65,83,301/- WHICH INCLUDED DISALLOWANCE UNDER RULE 8D(2)(II) OF RS. 60,50,520/- AND DISALLOWANCE OF INDIRECT EXPENSES UNDER RULE 8D(2)( III) OF RS. 5,32,781/-. 3. BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT EVEN FMPS AND DEBT FUND INSTRUMENT NAMED AS SBI CAPITAL PROTECTION OR IENTATION FUND WAS WRONGLY INCLUDED IN THE DIVIDEND YIELDING MUTUAL FU ND WHICH HAS RESULTED IN A WRONG CALCULATION OF AVERAGE INVESTMENT FOR TH E PURPOSE OF RULE 8D. ASSESSEE HAD ALSO FILED RECTIFICATION APPLICATION U /S 154 OF THE ACT BEFORE THE AO TO POINT OUT THAT INVESTMENT ON THESE FUNDS, INCOME OF WHICH IS TAXABLE SHOULD BE REMOVED. HOWEVER, SAME HAS BEEN REJECTED BY THE AO. LD. CIT(A), HOWEVER, CONFIRMED THE DISALLOWANCE MAD E BY THE AO. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE CONTENDE D THAT EVEN THE TAXABLE INVESTMENT HAS ALSO BEEN INCLUDED WHILE WOR KING OF THE AVERAGE THE PANIPAT URBAN CO-OPERATIVE BANK LTD. VS. ACIT/ I.T.A.NO.6214/DEL/2016/A.Y.2012-13 PAGE 3 OF 4 INVESTMENT WHICH SHOULD BE EXCLUDED AND, FURTHER, A SSESSEE HAS ALSO FILED REVISED COMPUTATION OF DISALLOWANCE U/S 14A AT RS. 6,21,297/-. THE AO MAY BE DIRECTED TO VERIFY THE COMPUTATION FILED BY THE ASSESSEE FOR WORKING OF THE DISALLOWANCE. LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND CIT(A) AND SUBMITTED THAT AO HA S RIGHTLY COMPUTED THE DISALLOWANCE. HOWEVER, THE PLEA OF LD. COUNSEL NEEDS TO BE VERIFIED AND HENCE, MATTER CAN BE RESTORED TO FILE OF THE AO . 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, WE FIN D THAT, BEFORE THE LD. CIT(A), AS WELL AS BEFORE THE AO IN THE RECTIFI CATION APPLICATION U/S 154, THE ASSESSEE HAS SUBMITTED THAT THE AVERAGE VA LUE OF THE INVESTMENT HAS TO BE TAKEN ON ACCOUNT OF THOSE INVESTMENTS, WH OSE INCOME DERIVED FROM ARE TREATED AS EXEMPT INCOME U/S 10. BUT DUE TO CERTAIN CLERICAL MISTAKES WHILE SUBMITTING THE AVERAGE VALUE, THE IN VESTMENT MADE IN FMPS AND DEBT INSTRUMENT WHICH DOES NOT FORM PART OF EXE MPT INCOME HAS ALSO BEEN CONSIDERED AND, ACCORDINGLY, DISALLOWANCE SHOU LD BE WORKED OUT AFTER EXCLUDING THESE INVESTMENTS. BASED ON SUCH W ORKING, REVISED COMPUTATION OF DISALLOWANCE U/S 14A HAS BEEN FILED BEFORE US ALSO. WE ARE IN TANDEM WITH CONTENTION OF THE ASSESSEE THAT ONLY THOSE INVESTMENTS SHOULD BE CONSIDERED FOR THE PURPOSE OF DISALLOWANC E WHICH HAS RENDERED EXEMPT INCOME. ACCORDINGLY, WE DIRECT THE AO TO RE MOVE THE INVESTMENTS WHILE WORKING OUT THE AVERAGE VALUE WHOSE INCOME DO ES NOT FORM PART OF THE EXEMPT INCOME AND ONLY THOSE INVESTMENTS SHOULD BE CONSIDERED WHOSE INCOME ARE EXEMPT. AO IS FURTHER DIRECTED TO VERIFY THE CALCULATION THE PANIPAT URBAN CO-OPERATIVE BANK LTD. VS. ACIT/ I.T.A.NO.6214/DEL/2016/A.Y.2012-13 PAGE 4 OF 4 AND WORK OUT THE DISALLOWANCE; AND IN ANY CASE, DIS ALLOWANCE SHOULD NOT BE LESS THAN WHAT HAS BEEN DISALLOWED SUO MOTO BY THE ASSESSEE. WITH THIS DIRECTION APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 6. AS REGARDS THE ADDITION OF RS. 28,618/- OUT OF SUSP ENSE ACCOUNT, THE AO HAS OBSERVED THAT NO DETAILS AND EXPLANATION HAV E BEEN PROVIDED BY THE ASSESSEE. THE CASE OF THE ASSESSEE WAS THAT TH E SAID AMOUNT WAS ACTUAL AND CONFIRMED LIABILITY OF THE ASSESSEE PAID IN THE SUBSEQUENT YEAR. THE LD. AO IS THUS, DIRECTED TO VERIFY THE CONTENTI ON OF THE ASSESSEE THAT THE SAID AMOUNT RELATES TO ANY ACTUAL LIABILITY OF THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 03.02.2020 SD/- SD/- (O.P. MEENA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03.02.2020 * KAVITA ARORA, SR. P.S. COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR, ITAT: DELHI BENCHES-DELHI