Ranadey Micronutrients Pvt.Ltd, Pune V. Deputy Commissioner of Income tax, Pune

ITA 638/PUN/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7275 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND V SONDE
• Section: 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE SHRI VIKAS AWASTHY, JM . / ITA NO. 638/PUN/2017 ! '! / ASSESSMENT YEAR : 2008-09 RANADEY MICRONUTRIENTS PVT. LTD. SHRIKRISHNA KRISHNAKEVAL TOWN SHIP, 1-A, KONDHWA KHURD, PUNE-411 048 PAN : AAACR8134R ....... / APPELLANT # / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, PUNE. / RESPONDENT APPELLANT BY : SHRI ARVIND V. SONDE RESPONDENT BY : SHRI SUDHENDU DAS / DATE OF HEARING : 19.09.2018 / DATE OF PRONOUNCEMENT : 28.09.2018 $ / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-4, PUNE DATED 10.10.2 016 FOR THE ASSESSMENT YEAR 2008-09. 2 ITA NO.638/PUN/2017 A.Y.2008-09 2. THE ONLY GROUND RAISED BY ASSESSEE IN APPEAL IS AGAIN ST DISALLOWANCE OF RS.23,22,105/- U/S.14A OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) R.W.R 8D(2)(II) OF THE IN COME TAX RULES, 1962. 3. SHRI ARVIND V. SONDE APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE IS A COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURE AND SALE OF INORGANIC AND MICRONUTRIENT MIXTU RE FERTILIZERS. DURING THE COURSE OF SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.24,83,143/- U/S.14A R .W.R. 8D(2)(II) & (III). THE DISALLOWANCE MADE UNDER PROVISIONS OF RULE 8D(2 )(II) ON ACCOUNT OF INTEREST EXPENDITURE IS RS.23,22,105/-. THE ASSESSEE EXPLAINED THAT INVESTMENT WAS MADE FROM OWN INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. INTEREST BEARING FUNDS WERE N OT UTILIZED FOR MAKING INVESTMENT. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE. AGGRIEVED WITH THE ASSESSM ENT ORDER DATED 29.11.2010, THE ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF IN COME TAX(APPEALS) WITHOUT APPRECIATING THE FACTS OF THE CASE REJ ECTED THE CONTENTIONS OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECO ND APPEAL BEFORE THE TRIBUNAL. THE LD. AR POINTED THAT THE ASSESSEE HAS INTEREST FREE FUNDS TO THE TUNE OF RS.4,83,83,857/- IN THE SHAPE OF SHARE CAPITAL, RESERVES AND SURPLUS. THE ASSESSEE MADE INVESTMENT TO THE TUNE OF RS.4,47,60,486/- OUT OF WHICH DIVIDEND YIELDING INVESTMENTS AR E ONLY TO THE TUNE OF RS.1,30,83,378/-. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE INCREASE IN DIVIDEND YIE LDING TAX FREE INVESTMENT IS RS.59,10,000/-. THE LD. AR CONTENDED THAT T HE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL 3 ITA NO.638/PUN/2017 A.Y.2008-09 HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD., REPORTE D AS 366 ITR 505. 4. ON THE OTHER HAND, SHRI SUDHENDU DAS REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONE R OF INCOME TAX (APPEALS) IN CONFIRMING DISALLOWANCE MADE UNDER RULE 8D(2)(II). 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERU SED. THE SOLITARY ISSUE RAISED BY ASSESSEE IN APPEAL IS AGAINST DISALLO WANCE MADE UNDER RULE 8D(2)(II) IN RESPECT OF INTEREST EXPENDITURE. THE A SSESSING OFFICER HAS MADE DISALLOWANCE UNDER RULE 8D(2)(III) AS WELL, HOWEVE R, THE SAME IS NOT DISPUTED BY THE ASSESSEE. THE LD. AR HAS DR AWN MY ATTENTION TO THE P & L ACCOUNT FOR THE YEAR ENDING 31 ST MARCH, 2008 AND BALANCE SHEET AS ON 31 ST MARCH, 2008. A PERUSAL OF THE BALANCE SHEET SHOWS THAT THE ASSESSEE HAS SHARE CAPITAL OF RS.75,00,000 /- AND RESERVES AND SURPLUS ARE TO THE TUNE OF RS.4,08,83,857/-. THUS, THE ASSESSEE IS HAVING INTEREST FREE FUNDS AGGREGATING TO RS .4,83,83,857/-. AS AGAINST THIS INVESTMENT BY ASSESSEE OVER A PERIOD O F TIME IS RS.4,47,60,486/-. THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF CIT VS. RELIANCE UTILITIES AND POWER LTD. REPORTED AS 313 ITR 3 40 HAS HELD THAT WHERE BOTH INTEREST FREE FUNDS AND INTEREST BEARING FUNDS ARE AVAILABLE AND THE INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT MADE, THE PRESUMPTION IS THAT THE INVESTMENT IS MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE SAID DECISION WAS RENDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CONTEXT O F SECTION 36(1)(III) OF THE ACT. THE HON'BLE HIGH COURT, THEREAFTER, APPLIED THE SAME PRINCIPLE WHILE INTERPRETING THE PROVISIONS OF SECTION 14A OF THE ACT IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA.). THE HON'BLE HIG H COURT OBSERVED THAT WHERE INVESTMENT IS MADE IN TAX FREE SECU RITIES BY THE 4 ITA NO.638/PUN/2017 A.Y.2008-09 ASSESSEE, IT WOULD BE PRESUMED TO HAVE BEEN MADE FROM O WN FUNDS IN CASE THEY ARE IN EXCESS OF INVESTMENT MADE. 6. THUS, IN THE LIGHT OF THE FACTS OF THE CASE AND THE R ATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. HDFC BANK LTD. (SUPRA.), THE DISALLOWANCE IN RESPECT OF INTEREST EX PENDITURE MADE UNDER RULE 8D(2)(II) IS DELETED. THE IMPUGNED ORDER IS MODIFIED, ACCORDINGLY, THE GROUND RAISED IN APPEAL BY THE ASSESSEE IS ALLOWE D. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 28 TH OF SEPTEMBER, 2018. SD/- ( /VIKAS AWASTHY) / JUDICIAL MEMBER / PUNE; ! ' / DATED : 28 TH SEPTEMBER, 2018. SB $%&'()'' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-4, PUNE. 4. THE PR. CIT-3, PUNE. 5. %&' () , * () , - +,- , / DR, ITAT, SMC BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.