Pioneer Distilleries Limited, Hyderabad V. Joint CIT, Range-3, Nanded

ITA 660/PUN/2013

• Counselvise Citation: 66024514 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Principle of natural justice; Earning of tax free income
• Section: 143(3); 234B; 14A; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.660/PN/2013 (ASSESSMENT YEAR : 2009-10) PIONEER DISTILLERIES LIMITED, UB HOUSE, PLOT NO.36, STREET NO.4, SRINAGAR COLONY, HYDERABAD 500 073 (AP). PAN : AABCP9376J . APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-3, NANDED. . RESPONDENT ASSESSEE BY : NONE DEPARTMENT BY : MR. P. S. NAIK DATE OF HEARING : 15-09-2014 DATE OF PRONOUNCEMENT : 16-09-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANGABA D DATED 10.01.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 27.1 2.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE APPELLANT ASSESSEE INSPITE OF THE FACT THAT ON THE EARLIER DA TE OF HEARING, REPRESENTATIVE OF THE ASSESSEE HAD DULY NOTED THE DATA OF HEARING. IN THE ABSENCE OF ANY APPEARANCE PUT IN ON BEHALF OF THE ASSESSEE, THE AP PEAL IS BEING DISPOSED OF EX-PARTE QUA THE APPELLANT AFTER HEARING THE RESPON DENT REVENUE ON MERITS. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: ITA NO.660/PN/2013 A. Y. : 2009-10 1. THAT THE ABOVE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE ASSESSEE IS AGAINST THE LAW, FACTS, CIRCUMSTANC ES, NATURAL JUSTICE, EQUITY, AND ALL OTHER KNOWN PRINCIPLES OF LAW. 2. THAT THE TOTAL INCOME COMPUTED AND THE TOTAL TAX COMPUTED IS HEREBY DISPUTED. 3. THE THAT LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.11,71,066/-U/S 14A R .W.R 8D OF THE ACT, AS AGAINST DIVIDEND INCOME EARNED AMOUNTING T O RS.2,83,328/- 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.11,71,066/- TAKING TH E ENTIRE AMOUNT OF INTEREST PAID THOUGH THE INTEREST IS PAID MAINLY FOR AVAILING THE WORKING CAPITAL OF THE COMPANY. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF RS.12,55,000/- U/S 80G OF THE ACT, EVEN THOUGH THE DONATION WAS MADE TO REPUTED CHARIT ABLE TRUST , VIZ THIRUMALA THIRPUPATHI. 6. THE APPELLANT DENIES THE LIABILITY FOR INTEREST U/S.234B, AND 234 C THE ACT AND NO OPPORTUNITY HAS BEEN GIVEN BEFORE LEVY O F INTEREST U/S 234 B, C OF THE ACT. 7. THE ASSESSING OFFICER OUGHT TO HAVE GIVEN AN OPP ORTUNITY OF HEARING BEFORE LEVY OF INTEREST AS HELD BY THE HON'BLE ITAT , SPECIAL BENCH, DELHI IN THE CASE OF MOTOROLA INC. VS. DCIT - 95 IT D 269 (DEL)(SB). 8. WITHOUT PREJUDICE TO THE APPELLANTS RIGHT OF SEEKI NG WAIVER BEFORE APPROPRIATE AUTHORITY THE APPELLANT BEGS FOR CONSEQ UENTIAL RELIEF IN THE LEVY OF INTEREST U/S 234 B AND 234C OF THE ACT. 4. THE APPELLANT IS A COMPANY INCORPORATED UNDER TH E PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER-ALIA, ENGAGED IN T HE BUSINESS OF MANUFACTURING AND SALE OF RECTIFIED SPIRIT, EXTRA N EUTRAL ALCOHOL AND RESULTANT BY-PRODUCTS. FOR THE ASSESSMENT YEAR 2009-10, IT F ILED A RETURN OF INCOME DECLARING TOTAL INCOME AT RS.8,24,97,060/- WHICH WA S SUBJECT TO A SCRUTINY ASSESSMENT. IN THE ASSESSMENT FINALIZED U/S 143(3) OF THE ACT, DATED 27.12.2011 THE TOTAL INCOME HAS BEEN ASSESSED AT RS .8,60,66,583/- AFTER MAKING CERTAIN ADDITIONS / DISALLOWANCES. THE APPE AL FILED BY THE ASSESSEE BEFORE THE CIT(A) CHALLENGING THE ADDITIONS HAS SIN CE BEEN DISMISSED. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSES SEE IS IN APPEAL BEFORE US. ITA NO.660/PN/2013 A. Y. : 2009-10 5. THE FIRST ISSUE RELATES TO A DISALLOWANCE OF RS. 11,71,066/- MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASSESSEE EARNED D IVIDEND INCOME OF RS.2,83,328/- WHICH WAS EXEMPT FROM TAX AND THEREFO RE, THE ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 14A OF THE ACT TO DIS ALLOW EXPENDITURE RELATABLE TO THE EARNING OF SUCH EXEMPT INCOME. THE ASSESSIN G OFFICER COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT AMOUNTING TO RS.11, 71,066/- BY APPLICATION OF RULE 8D OF THE INCOME TAX RULE, 1962 (IN SHORT RULE S). THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE DISALLOWANCE W AS UNJUSTIFIED IN AS MUCH AS THERE WAS NO INTEREST EXPENDITURE INCURRED IN RE LATION TO THE INVESTMENTS WHICH HAVE YIELDED THE EXEMPT DIVIDEND INCOME. THE CIT(A) HOWEVER, SUSTAINED THE DISALLOWANCE AS COMPUTED BY THE ASSES SING OFFICER. AS PER THE CIT(A), THE ASSESSING OFFICER WAS JUSTIFIED IN COMP UTING THE DISALLOWANCE BY APPLYING RULE 8D OF THE RULES. THE FOLLOWING DISCU SSION IN THE ORDER OF THE CIT(A) IS RELEVANT IN THIS CONTEXT:- FROM THE ABOVE RULE-8D, IT CAN BE NOTED THAT WHERE THE A.O. HAVING REGARDS TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATI SFIED WITH THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN I NCURRED IN RELATION TO EXEMPT INCOME, THEN HE SHALL DETERMINE THE AMOUN T OF EXPENDITURE RELATED TO EXEMPT INCOME IN ACCORDANCE WITH PROVISI ONS OF SUB-RULE-2 OF RULE-8D. IN PARA-6 OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE A.O. IS SATISFIED THAT THE APPELLANT HAS CLAIMED IN TEREST EXPENDITURE OF RS.2,12,55,945/- AND HAS MADE AVERAGE INVESTMENT IN SHARES TO THE EXTENT OF RS.5,30,55,574/- WHICH HAS NOT BEEN PROVE D BY THE APPELLANT TO BE NOT OUT OF BORROWED FUNDS. THEREFORE, IN THE CASE OF THE APPELLANT, THE INTEREST IS NOT DIRECTLY ATTRIBUTABLE TO ANY PA RTICULAR INCOME AND HENCE THE DISALLOWANCE IS TO BE COMPUTED AS PER CLA USE-(II) & (III) OF RULE-8D(2). THE APPELLANT DURING THE APPELLANT PROC EEDINGS HAS WORKED OUT THE SAID DISALLOWANCE ACCORDINGLY AND SUBMITTED THE SAME TO THE A.O. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, THE CONTENTION OF THE APPELLANT THAT DISALLOWANCE U/S 14A R.W.RULE-8D/THE DISALLOWANCE SHOULD BE RESTRICTED TO THE AMOUNT OF DIVIDEND WHIC H HAS BEEN CLAIMED AS EXEMPT IS REJECTED. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS SUPPORTED THE ORDERS OF AUTHORITIES BELOW BY POINTING OUT THAT TH E ASSESSING OFFICER WAS DULY SATISFIED THAT THE CLAIM MADE BY THE ASSESSEE TO TH E EFFECT THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO EXEMPT INCOME, WAS INCORRECT. THEREFORE, THE ITA NO.660/PN/2013 A. Y. : 2009-10 DISALLOWANCE COMPUTED BY APPLICATION OF THE RULE 8D OF THE RULES WAS JUSTIFIED. 7. WE HAVE PERUSED THE RESPECTIVE ORDERS OF THE AUT HORITIES BELOW AND ALSO THE SUBMISSIONS PUT-FORTH BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE BEFORE US. IN OUR CONSIDERED OPINION, HAVING REGAR D TO THE DISCUSSION MADE BY THE CIT(A), THERE ARE NO REASONS TO INTERFERE WITH THE AMOUNT OF RS.11,75,066/- DISALLOWED IN TERMS OF SECTION 14A OF THE ACT. IN THE ABSENCE OF ANY COGENT REASONING EMERGING FROM RECORD, WE HEREBY AFFIRM TH E ORDER OF THE CIT(A) UPHOLDING THE DISALLOWANCE OF RS.11,75,066/- U/S 14 A OF THE ACT. THUS, ON THIS GROUND, ASSESSEE FAILS. 8. THE SECOND ISSUE IN APPEAL RELATES TO A DISALLOW ANCE OF DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF DONATIONS PAI D AMOUNTING TO RS.11,55,000/-. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH THE RECO GNITION GRANTED TO THE PAYEES U/S 80G OF THE ACT FOR THE RELEVANT PERIOD. THE CIT(A) HAS ALSO AFFIRMED THE DISALLOWANCE ON THE GROUND THAT DONATI ONS GIVEN TO THE TRUSTS CANNOT BE ALLOWED DEDUCTION U/S.80G OF THE ACT UNLE SS THE REQUISITE RECOGNITION GRANTED TO SUCH TRUSTS U/S 80G OF THE A CT IS FURNISHED. EVEN BEFORE US, THERE IS NO MATERIAL TO DISTRACT FROM TH E AFORESAID FINDINGS OF THE LOWER AUTHORITIES. THEREFORE, WE AFFIRM THE ORDERS OF THE AUTHORITIES BELOW ON THIS ASPECT. 9. THE LAST ISSUE IN THIS APPEAL RELATES TO CHARGIN G OF INTEREST U/S 234B AND 234C OF THE ACT. THE ONLY PLEA OF THE ASSESSEE, AS MANIFESTED FROM THE GROUNDS OF APPEAL, IS TO THE FACT THAT NO OPPORTUNI TY HAS BEEN GIVEN BEFORE LEVY OF INTEREST. IN OUR CONSIDERED OPINION, THE L EVY OF INTEREST IS MANDATORY AND, IN ANY CASE, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT IN THE PRESEN T CASE IS FACTUALLY NOT ITA NO.660/PN/2013 A. Y. : 2009-10 JUSTIFIED. THEREFORE, WE FIND NO MERIT IN THE GROU ND OF APPEAL RAISED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 16 TH SEPTEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), AURANGABAD; 4) THE CIT, AURANGABAD; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE