DCIT 6(1)(1), MUMBAI V. ANIL PRINTERS LTD, MUMBAI

ITA 645/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1110 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMARAGGARWAL, ACCOUNTANT MEMBER ITA NO.645/MUM/2017 ASSESSMENT YEAR : 2012-13 DY . COMMISSIONER OF INCOME TAX, (CIR)-6(1)(1), MUMBAI VS. M/S. ANIL PRINTERS LTD., 2, KAKAD INDUSTRIAL ESTATE, L.J. CROSS ROAD NO. 3, MATUNGA (W), MUMBAI [PAN : AACCA 6914 G] ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI SA TISHCHANDRA RAJORE, D R RESPONDENT BY : SHRI MAYUR KISNADWALA , A R DATE OF HEARING : 2 8 - 11 - 201 8 DATE OF PRONOUNCEMENT : 30 - 11 - 201 8 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-12 , MUMBAI, DATED 11-11-2016 IN APPEAL NO. CIT(A)-12/DCIT-6(1)( 1)/92/15- 16. THE ASSESSMENT WAS FRAMED BY THE DY. COMMISSIO NER OF INCOME TAX, CIRCLE-6(1)(1), MUMBAI U/S. 143(3) OF T HE INCOME ITA NO. 645/MUM/2017 2 TAX ACT, 1961 [HEREIN AFTER REFERRED TO AS ACT]FO R THE AY 2012- 13, VIDE HIS ORDER DATED 23-03-2015. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A), DELETING THE DISALLOWANCE MADE BY THE AO OF EXPENSES RELABLE TO EXEMPT INCOME BY INVOKING THE P ROVIIOSN OF SECTION 14A OF THE ACT R.W. RULE 8D OF INCOME TAX R ULES, 1962 (HEREIN AFTER THE RULES). FOR THIS ISSUE, THE REVE NUE HAS RAISED THE FOLLOWING GROUND NO. 1: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE WITHOU T APPRECIATING THAT PROVISION OF SUB-SECTION (3) OF THE SECTION 14A STA TES THAT SUBSECTION (2) OF THE SECTION 14A, SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 2.1. THE AO DURING THE COURSE OF ASSESSMENT PROCEED INGS NOTED THAT THERE ARE INVESTMENTS TO THE EXTENT OF 33,08,85,101/- AND INTEREST COST INCURRED BY ASSESSEE IS AT 5,54,45,145/-. AO SIMPLY APPLYING RULE 8D OF THE RULES, WORKED OUT TH E DISALLOWANCE AT 1,85,11,457/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE CL AIM OF ASSESSEE THAT THE DISALLOWANCE IS MADE WITHOUT RECORDING ANY SATISFACTION BY THE AO AS MANDATED IN SECTION 14A OF THE ACT AND RULE 8D OF ITA NO. 645/MUM/2017 3 THE RULES. FURTHER, THE CIT(A) ALSO NOTED THAT ALL THESE INVESTMENTS HAVE BEEN MADE FROM ASSESSEES OWN FUND S. AGGRIEVED, NOW REVENUE IS IN SECOND APPEAL BEFORE T HE TRIBUNAL. 2.2. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE CONSIDERED THE CASE RECORDS AND THE PAPER BOOK FILED BY LD. COUNSEL FOR THE ASSESSEE CONSISTING OF PG NOS. 1 TO 52. WE HAVE GONE THROUGH THE ASSESSEES BALANCE SHEET AND PROFIT AND LOSS A/C AN D NOTED THAT AS ON 31-03-2012, THE INVESTMENTS REFLECTED ARE AT 6,600/-. THE BRAKE-UP OF THESE INVESTMENTS IS GIVEN IN SCHED ULE-11 OF THE BALANCE SHEET WHICH INDICATES THAT THE ASSESSEE WAS HAVING INVESTMENT IN GOVT. SECURITIES BEING NSCS AMOUNTING TO 2,500/-, SHARES OF PEOPLESCO-OPERATIVE BANK LTD., 500/- AND SHARES OF VISHWAS CO-OPERATIVE BANK LTD., 3,600/-. IN THE IMMEDIATE PRECEDING YEARS, I.E., AS ON 31-03-2011, SUCH INVESTMENTS REFLECTED IN THE BALANCE SHEET WAS AT 4,500/-. THE ASSESSEE BEFORE AO AS WELL AS CIT(A) AND EVEN NOW B EFORE US CONTENDED THAT THE ASSESSEE HAS NO INVESTMENT CAPAB LE OF EARNING EXEMPT INCOME. ITA NO. 645/MUM/2017 4 2.3. IN VIEW OF THE ABOVE FACTS, WE HAVE GONE THROU GH THE ASSESSMENT ORDER AND NOTICED THAT THE AO HA SIMPLY AND MECHANICALLY APPLIED THE PROVISIONS OF RULE 8D OF R ULES AND MADE DISALLOWANCE. THERE IS NO SATISFACTION RECORD ED BY THE AO OR THERE IS NO FINDING QUA SATISFACTION THAT THERE IS ANY EXPENDITURE RELATABLE TO EXEMPT INCOME. ONCE THERE IS NO SATISFACTION, WE ARE OF THE VIEW THAT THE CIT(A) HA S RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 3. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A), DELETING THE ADDITION MADE BY THE AO OF INTEREST EXPENSES U/S. 36(1)(III) OF THE ACT. FOR THIS REVE NUE HAS RAISED THE FOLLOWING GROUND NO. 2: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION U/S. 36(1) (III) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS GIVEN R EASONABLE OPPORTUNITY TO FILE DETAILS AND MAKE SUBMISSION DUR ING THE COURSE SCRUTINY PROCEEDINGS. 3.1. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS MADE CAPITAL ADVANCE OF 34,64,502/- AND ADVANCES FOR ACQUIRING OF ASSETS AMOUNTING TO 95,11,190/-. THE ASSESSEE HAS MADE TOTAL ADVANCES AGGREGATING TO 1,29,75,692/-. ACCORDING TO AO, ONCE ITA NO. 645/MUM/2017 5 THERE IS NO RESPONSE FROM THE ASSESSEE, IT IS INFER RED THAT ASSESSEE HAS NO OBJECTION FOR DISALLOWANCE OF INTER EST CALCULATING @ 15% OF TOTAL ADVANCES OF 1,29,75,692/-. ACCORDINGLY, HE MADE DISALLOWANCE OF 19,59,675/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO DELETED THE DISALLOWA NCE BY OBSERVING THAT SUCH ADVANCES HAVE BEEN MADE IN ITS ORDINARY COURSE OF BUSINESS AND FURTHER, RELYING ON THE DECI SION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES& POWER LTD., [313 ITR 340] (BOM). AGGRIEVED, NOW RE VENUE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3.2. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSE ES OWN FUND I.E., SHARE CAPITAL AND RESERVES AND SURPLUSES AGGR EGATING TO 24,33,77,718/- ARE AVAILABLE WITH ASSESSEE. THE AD VANCES MADE ARE TO THE TUNE OF 1,29,75,692/-, WHICH IS VERY SMALL AMOUNT IN COMPARISON TO INTEREST-FREE FUNDS AVAILAB LE WITH ASSESSEE. THE AO HAS NOT GONE THROUGH THE NEXUS OF THE INTEREST BEARING FUNDS, USED FOR LOANS GIVEN OR INVESTMENT M ADE ON CAPITAL SIDE. HENCE, THE PRESUMPTION IS THAT ASSES SEE HAS MADE INVESTMENTS FROM HIS OWN FUNDS. HENCE, WE ARE OF T HE VIEW THAT THE CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF HON 'BLE BOMBAY ITA NO. 645/MUM/2017 6 HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWE R LTD.(SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONF IRM THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 4. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A), DELETING THE DISALLOWANCE OF CONTR IBUTION TO ESI AND PF, FUNDS BEING EMPLOYEES AND EMPLOYERS CONTRI BUTION U/S. 43BOF THE ACT. FOR THIS REVENUE HAS RAISED THE FOLL OWING GROUND NO. 3: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U /S. 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT WITHOUT APPRECIATING THE LEGAL POSITION AND INTENT OF SECTION 36(1)(VA) AS CLARIFIED BY THE CBDT CIRCULAR NO. 22/2015 DATED 17-12-2015. 4.1. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ENT IRE DETAILS ARE AVAILABLE IN AUDIT REPORT SCHEDULE-16, WHEREIN THE ENTIRE PAYMENT OF EMPLOYEES CONTRIBUTION U/S. 36(1)(VA) OF THE ACT, THE CONTRIBUTIONS ARE WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT. THESE PAYMENTS ARE MAINLY MADE WITHIN THE RELEVANT FINANCIAL YEAR OR IN THE MONTH OF APRI L OF THE NEXT FINANCIAL YEAR. IT MEANS THAT THESE PAYMENTS ARE W ITHIN THE DUE ITA NO. 645/MUM/2017 7 DATE OF FILING OF RETURN OF INCOME AND HENCE THE CI T(A) HAS RIGHTLY DELETED THE DISALLOWANCE AND WE CONFIRM THE SAME. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER, 2018 SD/- SD/- (MANOJ KUMAR AGGARWAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI; DATED: 30 TH NOVEMBER, 2018 TNMM ITA NO. 645/MUM/2017 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A),MUMBAI 4. THE CIT 5. DR, A BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI