DCIT 3(3)(2), MUMBAI V. SMART CHIP LTD, MUMBAI

ITA 6301/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0977 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARIDR
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL GBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./6301/MUM/2016 , /ASSESSMENT YEAR: 2012-13 DY.CIT-3(3)(2) ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. SMART CHIP LTD. 714, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400 021. PAN:AABCS 2005 H ( /APPELLANT ) ( / RESPONDENT ) /C.O. NO.264/MUM/2017 M/S. SMART CHIP LTD. MUMBAI-400 021. VS. DY.CIT-3(3)(2) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAM TIWARI-DR ASSESSEE BY: SHRI SASHI TULSIYAN / DATE OF HEARING: 06/11/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 29/07/2016, OF CIT (A)- 8, MUMBAI THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.THE ASSESSEE HAS FILED CROSS OBJECTION (CO).ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF PERSONALISATION OF SMART CARDS AND SMARTCARD SYSTEM,FILED ITS RETURN OF INCOME ON 30/01/2012,DECLARING TOTAL INCOME OF R S.12.10 CRORES.THE AO COMPLETED THE ASSESSMENT, U/S. 143(3) OF THE ACT, ON 27/03/2015, DETERMINING ITS INCOME AT RS. 12.49 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DI SALLOWANCE,MADE BY THE AO, U/S.14 A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FO UND THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES WHICH ARE CAPABLE OF EARNING E XEMPT INCOME. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENSES,ATTRIBUTABLE FOR MAKING INVESTMENT,SHOULD NOT BE COMPUTED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (RULES). WHILE COMPLETING THE ASSESSMENT,HE ADDED DISALLOWAN CE OF RS. 39.49 LAKHS,U/S.14A READ R.W. R.8D,TO THE NORMAL INCOME OF THE ASSESSEE AS WELL A S TO THE BOOK PROFIT COMPUTED U/S.115 JB OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSIONS.IT ALS O RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT AS 6301/MUM/16-(12-13)- M/S. SMART CHIP LTD. 2 AGAINST AVERAGE VALUE OF INVESTMENT OF RS.16.95 CRO RES,TAKEN BY THE AO,ASSESSEES OWN FUNDS (SHARE CAPITAL AND RESERVES + SURPLUS) STOOD AT RS. 43.19 CRORES, THAT THE AMOUNT IN QUESTION WAS WAY ABOVE THE INVESTMENTS, THAT THE AO HAD NOT ESTABLISHED ANY NEXUS BETWEEN THE EXPENDITURE DISALLOWED UNDER RULE 8D. HE RELIED UPO N THE CASES OF RELIANCE UTILITIES AND POWER LTD.(313 ITR 340),FOOD LINKS SERVICES (I) PVT . LTD. (ITA/2079 TO 84/MUM/ 2011), WIMCO SEEDLINGS LTD (107 ITD 267)AND DELETED THE AD DITION MADE BY THE AO UNDER THE REGULAR PROVISIONS AS WELL AS UNDER THE MAT PROVISI ONS. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE(AR)RELIED UPON THE ORDER OF THE FAA AND STATED THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UN DER CONSIDERATION, THAT THE FUNDS OWNED BY IT WERE MORE THAN THE INVESTMENTS MADE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME NOR HAD I T CLAIMED ANY EXPENDITURE AGAINST SUCH INCOME DURING THE YEAR UNDER APPEAL,THAT THE AO HAD MADE THE DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D OF THE RULES, THAT THE FAA HAD GIVEN A CATEGORICAL FINDING OF FACT THAT OWN FUNDS OF THE A SSESSEE WERE FAR MORE THAN THE INVESTMENT MADE BY IT DURING THE YEAR UNDER CONSIDERATION.IN O UR OPINION,IF NO EXEMPT INCOME IS EARNED BY AN ASSESSEE AND NO EXPENDITURE IS CLAIMED AGAINS T SUCH INCOME, THE AO.S ARE NOT ENTITLED TO MAKE ANY DISALLOWANCE.CONSIDERING THE AVAILABILI TY OF THE FUNDS WITH THE ASSESSEE AND OTHER ABOVE-MENTIONED CIRCUMSTANCES,WE ARE OF THE O PINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO CONFI RMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. IN THE CROSS OBJECTION,THE ASSESSEE HAS SUPPORTED T HE ORDER OF THE FAA.WE HAVE ALREADY DISMISSED THE APPEAL FILED BY THE AO IN THE EARLIER PART OF OUR ORDER. SO WE ALLOW THE CROSS OBJECTION FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE AO IS DISMISSED AND THE CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2018. 03 , 2018 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03 .01.2018. JV.SR.PS. 6301/MUM/16-(12-13)- M/S. SMART CHIP LTD. 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.