Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 6716 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-10-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2011-2012
Appeal Filed On
10-04-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL, MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.629/CHD/2017 ASSESSMENT YEAR: 2011-12 ACIT VS. PUNJAB STATE INDUSTRIAL DEVELOPMENT CIRCLE 2(1) CORPORATION LTD. PLOT NO. 18 CHANDIGARH UDYOG BHAWAN, SECTOR-17 CHANDIGARH PAN NO. AABCP1599F (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ATUL GOEL DEPARTMENT BY : SH. RAVI SARANGAL DATE OF HEARING : 17/08/2017 DATE OF PRONOUNCEMENT : 31/10/2017 ORDER PER DR. B.R.R.KUMAR, AM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-2, AMRITSAR CAMP AT CHANDIGARH DT. 25/01/2017. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE 2. THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISA LLOWANCE OF RS. 37,41,67,259/- MADE UNDER SECTION 14A OF THE IT ACT TO RS. 2,95,92 0/- I.E. TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE WHEREAS THE CBDT IN C IRCULAR NO. 5/2014 HAS CLARIFIED THAT SECTION 14A PROVIDES FOR DISALLOWANC E EVEN IF NO EXEMPT INCOME IS EARNED. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. THE APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E RESTRICTION OF THE AMOUNT COMPUTED BY THE ASSESSING OFFICER FOLLOW ING RULE 8D UNDER SECTION 14A TO THE AMOUNT WHICH THE ASSESSEE HAS EARNED DIVIDEND. THE ASSESSEE HAD INVESTMENTS OF RS. 226,2 7,20,230/- IN SHARES OF DIFFERENT COMPANIES AS ON 31/03/2011 AND THE ASSESSEE 2 EARNED DIVIDEND INCOME OF RS. 29,59,20/- ON THIS IN VESTMENT DURING THE RELEVANT PREVIOUS YEAR. 4. THE ASSESSING OFFICER HAD WORKED OUT THE DISALLO WANCE AT RS. 37,41,67,259/- UNDER RULE 8D(2) CLAUSE II AND RULE 8D(2) CLAUSE III. THE LD. CIT(A) HAS DELETED THE ADDITION MADE AND RE STRICTED THE AMOUNT TO RS. 295920/-, I.E; TO THE TUNE OF THE DIV IDEND EARNED, BASED ON THE EARLIER ORDERS OF THE COORDINATE BENCH OF ITAT, CHANDIGARH FOR THE AY 2008-09 TO 2010-2011 IN ITA N O. 992 TO 99/CHD/2014 IN THE CASE OF THE ASSESSEE ITSELF. THE ORDER OF THE ITAT READS AS UNDER: IN THIS REGARD WE FIND THAT THE HONBLE BOMBAY HI GH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 IT R 340 (BOM) HAS HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABL E WITH THE ASSESSEE SUFFICIENT TO MEET ITS INVESTMENT AND AT THE SAME T IME LOAN HAS BEEN RAISED, IT CAN BE PRESUMED THAT THE INVESTMENT S WERE FROM INTEREST FREE FUNDS AND, RESULTANTLY, NO DISALLOWAN CE OF INTEREST CAN BE MADE. IN DELETING THE DISALLOWANCE OF INTEREST, THE HONBLE BOMBAY HIGH COURT RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS VS. CIT (1 997 224 ITR 627 (SC). IT IS FURTHER NOTICED THAT THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM), HAS HE LD THAT WHERE ASSESSEES CAPITAL, PROFIT, AND RESERVES ETC. WERE HIGHER THAN THE INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND, CONSEQUENTLY , NO DISALLOWANCE COULD BE MADE UNDER SECTION 14A OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN IN SEVERAL CASES INCLUDING PRIN CIPAL CIT VS. INDIA GELATINE & CHEMICALS LTD. (2015) 376 ITR 353 (GUJ). IT ERGO, BECOMES MANIFEST THAT THE DISALLOWANCE OF INTEREST AS PER CLAUSE (II) CANNOT BE MADE STRAIGHT WAY WITHOUT EXAMINING THE IMPORTANT ASPECT AS HAS BEEN DISCUSSED IN THE ABOVE DECISIONS , WHICH THE LD. CIT(A) FAILED TO TAKE NOT OF. AS NECESSARY INFORMAT ION ABOUT THE AVAILABILITY OF SHAREHOLDERS FUND VIS--VIS THE AM OUNT INVESTED IN SHARES AND OTHER SECURITIES YIELDING EXEMPT INCOME IS NOT AVAILABLE ON RECORD, WE SET ASIDE THE IMPUGNED ORDER AND REMI T THE MATTER TO THE FILE OF ASSESSING OFFICER FOR COMPUTING THE DISALLOWING UNDER CLAUSE (I) RULE 8D(2), IF ANY, IN CONSONANCE WITH V IEW TAKEN IN RELIANCE UTILITIES (SUPRA) ETC. IT IS HOWEVER MADE CLEAR THAT IN NO CASE, THE TOTAL AMOUNT OF DISALLOWANCE U/S 14A SHOU LD EXCEED THE AMOUNT OF EXEMPT INCOME AS HAS BEEN HELD BY THE HON BLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT(2015) 378 ITR 33 (DEL) AND CIT VS. HOLCIM INDIA P. LTD. (2014) 90 CCH 0891 DEL HIG H COURT. 5. SINCE THE ORDER OF THE CIT(A) IS ENTIRELY BASED ON THE FACTS AND CIRCUMSTANCES DISCUSSED IN THE ABOVE ORDER OF THE I TAT IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS AND ALSO KEEP ING IN VIEW THE FACT THAT IN THE CASE OF CIT VS. HERO CYCLES (P&H) 323 ITR 51UNDER SIMILAR CIRCUMSTANCES WHEREIN IT WAS HELD THAT THE DISALLOWANCE UNDER SECTION 14A REQUIRED CLEAR FINDING OF INCURRI NG EXPENDITURE 3 AND NO DISALLOWANCE CAN BE MADE ON THE BASIS OF PRE SUMPTION. SIMILARLY IN THE CASE OF CIT VS. EICHER LTD, 101 TT J (DEL) 369 IT WAS HELD THAT THE BURDEN IS ON THE ASSESSING OFFICER TO ESTA BLISH NEXUS OF EXPENSES INCURRED WITH THE EARNING OF EXEMPT INCOME , BEFORE MAKING ANY DISALLOWANCE UNDER SECTION 14A. HENCE, W E DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31/10/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR
