ACIT, Chandigarh V. M/s Steel Strips Industries Ltd., Chandigarh

ITA 625/CHANDI/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63978 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GARG
• Assessee Lawyers: MANJEET SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.625 /CHD/2009 (ASSESSMENT YEAR : 2005-06) THE A.C.I.T., VS. M/S STEEL STRIPS INDUSTRIES LTD., CIRCLE 5(1), SCO 49-50, SECTOR 26, CHANDIGARH. CHANDIGARH. PAN: AAICS1498K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH GARG & MS. GURPREET KAUR RESPONDENT BY : SHRI MANJEET SINGH, DR DATE OF HEARING : 24.09.2012 DATE OF PRONOUNCEMENT : 26.09.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX(APPEALS, CHANDIGARH DATE D 25.03.2009 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION IN APPEAL NO.278/P/-07-08 DATED 25.03.2009 2 WHICH WAS MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE EXPENSES U/S 14A. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF LABOUR AND WAGES. 3. GROUND NO.1 OF APPEAL RAISED BY THE REVENUE IS G ENERAL AND HENCE THE SAME IS DISMISSED. 4. THE ISSUE IN GROUND NO.2 IS AGAINST THE DISALLOW ANCE OF PROPORTIONATE EXPENSES RELATABLE TO EXEMPT INCOME U NDER THE PROVISIONS OF SECTION 14A OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN INVESTMENT OF RS.61,08,179/- IN SHARES OF VARIOUS COMPANIES INCLUDING INVESTMENT IN GROUP COMPANIES. IT IS AN ADMITTED FACT THAT NO NEW INVESTMENT WAS M ADE DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNT OF INVESTMENT WA S SAME AS ON 31.3.2004. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.9565/- WHICH WAS EXE MPT UNDER SECTION 10(34) OF THE ACT. THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RUL ES HAD COMPUTED THE DISALLOWANCE OF RS.18,53,202/- IN RELATION TO I NVESTMENT IN SHARES UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. FU RTHER THE ASSESSEE HAD ALSO SHOWN AGRICULTURAL INCOME, WHICH WAS EXEMPT AN D THE ASSESSING OFFICER HAD WORKED OUT THE PROPORTIONATE EXPENDITUR E ATTRIBUTABLE TO THE AGRICULTURAL ACTIVITY ON THE BASIS OF CAPITAL EMPLO YED IN VIEW OF THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES AND C OMPUTED THE DISALLOWANCE OF RS.12,34,919/-. 3 6. IN APPEAL BEFORE THE CIT (APPEALS), AS NOTED IN PARA 16 AT PAGE 9 OF THE APPELLATE ORDER THE ASSESSEE HAD WORKED OUT THE EXPENSES AS PER RULE 8D AND HAD CALCULATED THE EXPENDITURE @ % OF RS.63,723/-. THE SAID EXPENDITURE WAS UPHELD BY THE CIT (APPEALS) AN D THE BALANCE WAS ALLOWED BY THE CIT (APPEALS). THE ASSESSEE IS NOT IN APPEAL AGAINST PART OF THE ADDITION UPHELD BY THE CIT (APPEALS). HOWEV ER, THE REVENUE IS IN APPEAL AGAINST THE RELIEF ALLOWED BY THE CIT (AP PEALS). 7. SHRI RAJESH GARG & MS.GURPREET KAUR APPEARED FOR THE ASSESSEE AND SHRI MANJIT SINGH, DR APPEARED FOR THE REVENUE AND PUT-FORWARD THEIR CONTENTIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED VIDE PRESENT GROUND OF APPEAL IS IN RE LATION TO COMPUTATION OF DISALLOWANCE RELATABLE TO EXEMPT INCOME EARNED B Y THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. THE HON'BLE BOMBAY HIGH COURT IN GODREJ & BOYCE VS. DCI T ITA NO.626 OF 2010 HAD HELD THAT THE PROVISIONS OF RULE 8D WERE P ROSPECTIVE IN NATURE AND WERE APPLICABLE FROM ASSESSMENT YEAR 2008-09. THE ORDER UNDER APPEAL IS RELATING TO ASSESSMENT YEAR 2005-06 AND C ONSEQUENTLY PROVISIONS OF RULE 8D ARE NOT APPLICABLE TO THE INS TANT ASSESSMENT YEAR. HOWEVER, THE ASSESSEE BY APPLYING THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES HAD COMPUTED DISALLOWANCE UNDER SE CTION 14A OF THE ACT, WHICH HAS BEEN UPHELD BY THE CIT (APPEALS). T HE ASSESSEE IS NOT IN APPEAL AGAINST THE SAME. IN VIEW OF THE ADMISSION OF THE ASSESSEE BEFORE THE CIT (APPEALS) AND ALSO KEEPING IN MIND THE QUAN TUM OF INCOME EARNED BY THE ASSESSEE FROM DIVIDEND, WE ARE IN CON FORMITY WITH THE 4 ORDER OF CIT (APPEALS) IN ALLOWING THE CLAIM OF PAR T OF EXPENDITURE AND CONFIRMING THE FIGURE OF EXPENDITURE AS COMPUTED BY THE ASSESSEE. WE ALSO UPHOLD THE ORDER OF CIT (APPEALS) IN RESPECT O F PART ALLOWANCE OUT OF AGRICULTURAL INCOME. WE DISMISS GROUND NO.2 RA ISED BY THE REVENUE. 9. THE ISSUE IN GROUND NO.3 RAISED BY THE REVENUE I S AGAINST THE ORDER OF CIT (APPEALS) IN ALLOWING PART OF THE LABO UR AND WAGES EXPENSES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED EXPENDITURE ON ACCOUNT OF LABOUR AND WAGES TOTALING RS.3,03,267/-. THE ASSESSING OFFICER NOTED THAT THE SAID EXPENDITURE W AS HIGHER WHEN COMPARED TO THE EXPENDITURE INCURRED IN THE PRECEDI NG YEAR, THOUGH THE SALES FOR THE CAPTIONED ASSESSMENT YEAR HAD DRASTIC ALLY COME DOWN. THE ASSESSING OFFICER CONSIDERED THE EXPENDITURE OF RS. 50,000/- AS REASONABLE AND MADE DISALLOWANCE OF RS.2,53,267/-. 10. BEFORE THE CIT (APPEALS) THE CONTENTION OF THE ASSESSEE WAS THAT THOUGH THERE WAS FALL IN SALES BUT THE LABOUR COULD NOT THE SHUNTED OUT AND EXPENDITURE BEING INCURRED FOR THE PURPOSE OF B USINESS, WAS ALLOWABLE EXPENDITURE. THE CIT (APPEALS) CONFIRMED THE DISALLOWANCE OF RS.1 LAC AND ALLOWED THE BALANCE CLAIM OF THE AS SESSEE. 11. THE REVENUE IS IN APPEAL AGAINST SAID ORDER OF THE CIT (APPEALS) IN ALLOWING BENEFIT OF RS.2,03,267/- TO THE ASSESSE E. HOWEVER, NO APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ADDITION OF RS.1 LAC ON ACCOUNT OF LABOUR AND WAGES. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THOUGH THERE IS FALL IN THE SALES BUT WE ARE I N AGREEMENT WITH THE STAND OF THE CIT (APPEALS) IN ALLOWING PART OF THE EXPENDITURE TOTALING RS.2,03,267/-. THE ASSESSEE IS NOT IN APPEAL AGAIN ST THE DISALLOWANCE OF 5 RS.1 LAC UNDER THE HEAD LABOUR AND WAGES. WE UPH OLD ALLOWANCE OF RS.2,03,267/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH SEPTEMBER , 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6