Luminous Impex Pvt. Ltd., Ludhiana V. ACIT, C-7, Ludhiana

ITA 689/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2368 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 14-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: NAVNEET SHARMA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH A, CHANDIGARH , . '.., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NOS. 689 & 690/CHD/2018 ASSESSMENT YEARS : 2013-14 & 2014-15 LUMINOUS IMPEX PVT. LTD. B-XIX, 554/2, FF-2 CEMETERY ROAD, CIVIL LINES LUDHIANA THE ACIT C-7, AAYKAR BHAWAN LUDHIANA, PUNJAB PAN NO: AABCL4015A APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. NAVNEET SHARMA #!' REVENUE BY : SMT. CHANDRAKANTA $ %! & DATE OF HEARING : 12/09/2018 '()*! & DATE OF PRONOUNCEMENT : 31/10/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST THE SEPARATE ORDER OF THE LD. CIT(A)-3, LUDHIANA. 2. ASSESEE HAS RAISED FOLLOWING GROUNDS IN ITA NO. 689/CHD/2018: 1. A) THAT THE WORTHY CIT(A)-3, LUDHIANA ERRED IN L AW AND ON FACTS IN SUSTAINING THE DISALLOWANCE MADE BY LD ASSESSING OF FICER ,U/S 14A R.W. RULE 8D AT RS. 14,93,495/-.INSPITE OF THE FACT THAT THE APPELL ANT COMPANY HAD NOT CLAIMED ANY DIVIDEND INCOME EXEMPT U/S 10(34) OF THE IT ACT AND FURTHER TAX HAS BEEN PAID ON DIVIDEND INCOME AND THE SAME HAS BEEN ACCEP TED BY THE LD AO IN ITS ORDER. THE EXPENSES ON EARNING AGRICULTURE INCOME H AS ALREADY BEEN REDUCED FROM THE EXEMPTED AGRICULTURE INCOME BY THE APPELLA NT. DIRECTIONS BE GIVEN NOT TO DISALLOW ANY EXPENSES U/ S 14A R.W.RULE 8D.. 2. WITHOUT PREJUDICE, THE WORTHY CIT(A)-3, LUDHIANA FURTHER ERRED IN LAW BY UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OF FICER I) BY CONSIDERING THE AMOUNT OF INTEREST OF RS 7,00 ,000/- ON LOAN FOR BUSINESS PURPOSES, WHILE COMPUTING DISALLOWANCE U/S 14A READ WITH RULE 8D. DIRECTIONS BE GIVEN TO EXCLUDE THE AMOUNT OF INTERE ST PAID ON LOANS WHILE COMPUTING DISALLOWANCE U/S 14A BY APPLYING RULE 8D. II) BY CONSIDERING TOTAL AVERAGE INVESTMENTS OF THE APPELLANT COMPANY AT RS.7,38,36,408/- INSTEAD OF AVERAGE TOTAL INVESTMEN TS OF RS.31,44,729/- ON 2 WHICH THE EXEMPT DIVIDEND INCOME RECEIVED, FOR COMP UTING DISALLOWANCE U/S 14AREAD WITH RULE 8-D. DIRECTIONS BE GIVEN TO CONSIDER ONLY THOSE INVESTME NTS ON WHICH EXEMPT DIVIDEND INCOME AROSE DURING THE YEAR AND NOT THE TOTAL INVE STMENTS OF THE APPELLANT COMPANY, AS HELD BY HON'BLE ITAT IN THE CASE OF RAM TECH SOFTWARE SOLUTIONS AND HON'BLE ITAT SPECIAL BENCH IN THE CASE OF VIREET IN VESTMENT (P) LTD. III) BY NOT RESTRICTING THE AMOUNT OF DISALLOWANCE U/S 14ATO THE EXTENT OF EXEMPT DIVIDEND INCOME OF RS. 40,675/-. DIRECTIONS BE GIVEN TO RESTRICT THE DISALLOWANCE U/ S 14ATO THE EXTENT OF EXEMPT DIVIDEND INCOME AS HELD BY THE APPELLATE COURTS IN THE CASE OF CIT VS. M/S MASCOT FOOTCARE IN ITA NO. 67 OF 2009 (P&H, HIGH CO URT).AND THIS HON'BLE BENCH IN THE CASE OF AARTI STEELS LTD (ITAT CHD) 2.1 ASSESEE HAS RAISED FOLLOWING GROUNDS IN ITA NO. 690/CHD/2018: 1 THAT THE WORTHY CIT(A)-3 LUDHIANA, ERRED IN LAW A ND ON FACTS IN NOT RESTRICTING THE DISALLOWANCE AT RS 51,521 MADE U/S 14A R.W.RULE 8D BY THE APPELLANT IN ITS RETURN AND FURTHER, ERRED IN LAW IN NOT DELETING TH E DISALLOWANCE OF RS . 20,53,762/- MADE BY LD ASSESSING OFFICER U/S 14A R.W. RULE 8D, I)BY CONSIDERING TOTAL AVERAGE INVESTMENTS IN SHARE S & SECURITIES, MADE BY THE APPELLANT COMPANY AT RS. 10,36,44,729/- INSTEAD OF AVERAGE TOTAL INVESTMENTS OF RS.31,44,729/- ON WHICH THE EXEMPT DIVIDEND INCOME RECEIVED, FOR COMPUTING DISALLOWANCE U/S 14A READ WITH RULE 8-D. DIRECTIONS BE GIVEN TO CONSIDER ONLY THOSE INVESTME NTS ON WHICH EXEMPT DIVIDEND INCOME AROSE DURING THE YEAR AND NOT THE TOTAL INVE STMENTS OF THE APPELLANT COMPANY, AS HELD BY HON'BLE ITAT IN THE CASE OF RAM TECH SOFTWARE SOLUTIONS AND HON'BLE ITAT SPECIAL BENCH IN THE CASE OF VIREET IN VESTMENT (P) LTD I) BY CONSIDERING AMOUNT OF INVESTMENT OF RS 5,08,9 4,798/- MADE IN AGRICULTURE LAND, INSPITE OF THE FACT THAT NO AGRICULTURE INCOM E WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION. DIRECTIONS BE GIVEN NOT TO CONSIDER RS 5,08,94,978/ - I.E INVESTMENT IN AGRICULTURE LAND FROM WHICH NO EXEMPT AGRICULTURE INCOME WAS RE CEIVED BY THE APPELLANT COMPANY, AS HELD BY APPELLATE AUTHORITIES AS MENTIO NED ABOVE. II) BY NOT RESTRICTING THE AMOUNT OF DISALLOWANCE U /S 14ATO THE EXTENT OF EXEMPT INCOME OF RS. 32450/- BEING DIVIDEND INCOME. DIRECTIONS BE GIVEN TO RESTRICT THE DISALLOWANCE U/ S 14ATO THE EXTENT OF EXEMPT DIVIDEND INCOME AS HELD BY THE APPELLATE COURTS IN THE CASE OF CIT VS. M7S MASCOT FOOTCARE IN ITA NO. 67 OF 2009 (P&H, HIGH CO URT). & AARTI STEELS LTD V/S DCIT IN ITA NO. 268/CHD/2015 DATED 30.11.2015 ( CHD ITAT) DIRECTIONS MAY BE GIVEN TO DELETE THE DISALLOWANCE MADE U/S 14A W.R T RULE 8D OR IN ALTERNATIVE BE RESTRICTED TO DIVIDEND INCOME OF RS 32,450/- ONLY. 3. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS SIMILAR THEREFORE THEY ARE BEING DISPOSED BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S MADE TOTAL INVESTMENTS OF RS. 10.36 CRORES DURING THE YEAR UNDER CONSIDERATIO N AS WELL AS IN EARLIER YEARS OUT OF ITS OWN FUNDS. NO BORROWED AMOUNTS WERE UTIL IZED ON THE SAID INVESTMENTS. 4.1 THE ASSESSEE COMPANY RECEIVED DIVIDEND INCOME O F RS. 40,675/- ON SOME OF THE INVESTMENTS, WHICH WAS NOT CLAIMED EXEMPT UN DER SECTION 10(34) OF THE IT ACT AND THE AMOUNT WAS NOT REDUCED WHILE COMPUTING TAXABLE INCOME OF THE ASSESSEE COMPANY AND ACCORDINGLY TAX ON THE SAID AM OUNT WAS PAID. 5. HOWEVER THE ASSESSING OFFICER DISALLOWED AN AMOU NT OF RS. 6,04,578/- UNDER SECTION 14A OF THE INCOME TAX ACT,1961. 6. THE LD. CIT(A) CONFIRMED THE ADDITION. 7. WE FIND THAT THE ASSESSEE HAS EARNED DIVIDEND O F RS. 40,675/- WHICH IS THE INCOME EXEMPT AS PER THE PROVISIONS OF INCOME TAX A CT,1961. THE ISSUE OF DISALLOWANCE UNDER SECTION 14A HAS BEEN DEALT IN A NUMBER OF CASES BY THIS TRIBUNAL WHEREIN AFTER GOING THROUGH THE JUDICIAL P RONOUNCEMENTS OF VARIOUS COURTS THE DISALLOWANCE CANNOT EXCEED THE EXEMPT IN COME. HERO MANAGEMENT SERVICES LTD (2014) 360 ITR 68 (DEL HI HC). CIT VS. HERO CYCLES LTD (2010) 323 ITR 518 (P & H H C) ACIT VS. IQBAL M. CHAGLA (MUMBAI TRIBUNAL). CIT VS. WINSOME TEXTILE INDUSTRIES LTD. (2009) (P & H) (HC) CIT VS. LAKHANI MARKETING (P & H) (HC), CIT VS. COR RTECH ENERGY PVT. LTD (2014) 45 TAXMAN 116 (GUJRAT) (HC), CIT VS. SHIVAM MOTORS (AL LAHABAD) (HC). DAGA GLOBAL CHEMICALS P VT. LTD. VS. ACIT (ITAT MUM BAI) ITA NO. 5592/MUM/2012 DATED 01.01.2015. JOINT INVESTMENT PVT. LTD. VS. CIT (DELHI HC) AND C IT VS. TAIKISHA ENGINEERING INDIA LTD. (DELHI HC) AND ACIT VS. IQBAL M. CHAGLA (MUMBA I TRIBUNAL). AND ALSO THE APEX COURT JUDGMENT IN THE CASE OF MAXOPP INVESTMENT LTD VS. CIT (SUPREME COURT) IN CIVIL APPEAL NOS. 104-109 OF 2015 , THE PRINCIPLE HAS BEEN LAID DOWN THAT IN ANY CASE THE DISALLOWANCE CANNOT INCR EASE THE EXEMPT INCOME. 4 8. ACCORDINGLY IT IS HEREBY DIRECTED THAT THE DISAL LOWANCE BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE OF RS. 40, 675/- FOR THE A.Y. 2013-14 AND TO RS. 51,521/- FOR THE A.Y. 2014-15. 9. AS A RESULT, BOTH THE ABOVE APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . '.., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE