Kunvarji Finance Pvt. Ltd., Ahmedabad V. The ACIT, OSD-I, Circle-4, Ahmedabad

ITA 7/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6257 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 01-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA NO. 07/AHD/2014 KUNVARJI FINANCE PVT LTD VS. ACIT ASSESSMENT YEAR : 2009-10 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 07/AHD/2014 ASSESSMENT YEAR: 2009-10 KUNVARJI FINANCE PVT LTD .... .........APPELLANT 111, SHYAMAK COMPLEX, AMBAWADI, AHMEDABAD - 380015 [PAN : AAACK 8759 R] VS. THE ASSTT. COMMISSIONER OF INCOME-TAX .......................RESPONDENT OSD-1, AHMEDABAD APPEARANCES BY: PM MEHTA & IRA KAPOOR FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 11.01.2018 DATE OF PRONOUNCING THE ORDER : 11.01.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 18 TH SEPTEMBER 2013 PASSED BY THE BY THE CIT(A)-VIII, A HMEDABAD, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. THE GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOL LOWS:- 1. LD.CIT (A) HAS ERRED IN LAW AND ON FACTS IN ENH ANCING THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX AC T, 1961 TO THE TUNE OF RS.16,37,628/. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN MAKING ADDITION OF RS.16,37,628/- WHICH IS MORE THAN THE EXEMPT INCOME CLAIMED. THERE CANNOT BE ANY DISALLOW ANCE UNDER SECTION 14A OF THE ACT EXCEEDING THE TAX FREE INCOM E CLAIMED. 3. EVEN, THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS, BY NOT APPRECIATING THAT THE INVESTMENTS WERE MADE BY THE APPELLANT FRO M THE OWN FUNDS NOT BEARING INTEREST I.E. PAID UP CAPITAL AND FREE RESE RVES. ITA NO. 07/AHD/2014 KUNVARJI FINANCE PVT LTD VS. ACIT ASSESSMENT YEAR : 2009-10 PAGE 2 OF 3 4. FURTHER, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE INVESTMENTS FOR DISALLOWANCE U/S 14A OF THE INC OME TAX ACT FROM WHICH NO EXEMPT INCOME IS EARNED. 5. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE LEVY OF INTEREST UNDER SECTION 234A, 234B, 234C & 234D OF T HE ACT. 2. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, TH E LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT, IN THE PRESENT CASE, THE RE IS NO TAX EXEMPT INCOME INASMUCH AS THE DIVIDENDS EARNED ON THE SHARES HAVE BEEN OFFERED TO TAX AND ACCEPTED AS BUSINESS INCOME FOR THE REASONS THAT TH E RELATED SHARES, ON WHICH THESE DIVIDENDS WERE EARNED, WERE HELD AS STOCK IN TRADE. THE ASSESSING OFFICER HAS, HOWEVER, MADE THE IMPUGNED DISALLOWANCE UNDER SECTI ON 14A IN RESPECT OF THE EXPENSES ALLEGEDLY ATTRIBUTABLE TO EARNING OF DIVID END INCOME. LEARNED COUNSEL SUBMITS THAT THE ISSUE AS TO WHETHER A DISALLOWANCE UNDER SECTION 14A CAN BE MADE EVEN IN THE ABSENCE OF TAX EXEMPT INCOME HAS BEEN S ETTLED IN FAVOUR OF THE ASSESSEE BY A SERIES OF ORDERS OF THIS TRIBUNAL, AS ALSO OF HONBLE JURISDICTIONAL HIGH COURT; IN PARTICULAR, HE INVITES OUR ATTENTION TO T HE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CO RRTECH ENERGY (P.) LTD, [2014] 45 TAXMANN.COM 116 (GUJARAT) AND PR. CIT VS. AMBALAL S ARABHAI ENTERPRISES LTD, [2017 (3) TMI 1526. ON THE STRENGTH OF THESE ARGUMENTS, LEARNED COUNSEL FOR THE ASSESSEE URGED US TO DELETE THE IMPUGNED DISALLOWAN CE OF RS.16,37,626/- UNDER SECTION 14A OF THE ACT. 3. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DIS PUTE THE FACTUAL AND LEGAL CONTENTIONS SO RAISED BY THE LEARNED COUNSEL FOR TH E ASSESSEE, BUT RELIED ON THE ORDERS OF THE AUTHORITIES BELOW NEVERTHELESS. 4. THE PLEA INDEED IS WELL TAKEN. THE LEGAL POSITIO N IS FAIRLY WELL SETTLED THAT IN THE ABSENCE OF ANY TAX EXEMPT INCOME, DISALLOWANCE UNDE R SECTION 14A CANNOT BE MADE. HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CORRTECH ENERGY (P.) LTD. (SUPRA) HAS UPHELD THIS APPROACH. IN THE CASE OF A MBALAL SARABHAI ENTERPRISES LTD (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS ONCE AGAIN UPHELD THIS PROPOSITION AND OBSERVED THAT IT CANNOT BE SAID THAT THE LEARNED TRIBUNAL HAS COM MITTED ANY ERROR IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER ON DISALLOWANCE UNDER SECTION 14A OF THE ACT , IN A SITUATION IN WHICH THE ASSESSEE DID NOT HAV E ANY TAX EXEMPT INCOME. IN VIEW OF THESE DISCUSSIONS, AS AL SO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND D IRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS.16,37,628/- UNDER SECTION 14A OF THE ACT. 5. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS IN DICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 11 TH DAY OF JANUARY, 2018. SD/- SD/- S S GODARA PRAMOD K UMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 11 TH DAY OF JANUARY, 2018 ITA NO. 07/AHD/2014 KUNVARJI FINANCE PVT LTD VS. ACIT ASSESSMENT YEAR : 2009-10 PAGE 3 OF 3 *BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ..2 PAGES DICTATION PAD, AS DICTATED BY HONBLE AM, IS ATTACHED..11.01.2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 11.01.2018...... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: ... 11.01.2018..... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: . 11.01.2018.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 11.01.2018.................. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 8. DATE OF DESPATCH OF THE ORDER: ......