DCIT, Bangalore V. M/s Ranka N Ranka Infrastructure Pvt. Ltd., Bangalore

ITA 71/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9361 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SUNDAR RAJAN
• Assessee Lawyers: H N KHINCHA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NOS.70 & 71(BANG) 2014 (ASSESSMENT YEARS : 2011-12 & 2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(1) 2 ND FLOOR, BMTC COMPLEX, 80 FT. KORAMANGALA, BANGALORE -560 095 APPELLA NT VS M/S RANKA N RANKA INFRASTRUCTURE PVT. LTD., NO.31, 3 RD FLOOR, RANKA CHAMBERS, CUNNINGHAM ROAD, BANGALORE-570 002 PAN NO.AADCR9181M RESPONDENT REVENUE BY : SHRI S. SUNDAR RAJAN, JCIT ASSESSEE BY : SHRI H.N.KHINCHA, CA DATE OF HEARING : 08-09-2016 DATE OF PRONOUNCEMENT : -09-2016 O R D E R PER SHRI A.K.GARODIA, AM BOTH THESE APPEALS ARE FILED BY THE REVENUE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-5, BA NGALORE BOTH DATED 12-10-2015 BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. 2. THE GROUNDS RAISED BY REVENUE IN ITA NO.70(B)/20 16 FOR AY: 2011-12 ARE AS UNDER; ITA NOS.70 & 71(BANG)2016 2 1. THE ORDER OF THE LD. CIT(A)-5 IS OPPOSED TO LA W AND NOT ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAS MADE INVESTMENTS IN SHARES AND NSC. IF NOT FINANCIAL EXPENSES, THE ASSESSEE WOULD HAVE USED INFRASTRUCTURAL MACHINERY FOR THE PURPOSE OF INVESTMENT AND MANAGEMENT OF SUCH INVESTMENTS. FURTHER AS PER SUB-SECTION(3) OF SEC. 14A THE PROVISION OF SUB-SECTION(2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE THE ASSESSEE CLAIMS THAT N O EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UPON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESSMENT ORDER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF TH E APPEAL. 4. THE GROUNDS RAISED BY THE REVENUE IN ITA NO.71( B)/2016 ARE AS UNDER: 1. THE ORDER OF THE LD. CIT(A)-5 IS OPPOSED TO LAW AND NOT ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAS MADE INVESTMENTS IN SHARES AND NSC. IF NOT FINANCIAL EXPENSES, THE ASSESSEE WOULD HAVE USED INFRASTRUCTURAL MACHINERY FOR THE ITA NOS.70 & 71(BANG)2016 3 PURPOSE OF INVESTMENT AND MANAGEMENT OF SUCH INVESTMENTS. FURTHER AS PER SUB-SECTION(3) OF SEC. 14A THE PROVISION OF SUB-SECTION(2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE THE ASSESSEE CLAIMS THAT N O EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UPON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESSMENT ORDER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF TH E APPEAL. 5. THE LD. DR OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER WHEREAS THE LD. AR OF THE ASSESSEE SUPPORTED THE OR DER OF LD.CIT (A). HE ALSO SUBMITTED THAT A COPY OF THE P&L ACCOUNT OF TH E ASSESSEE COMPANY FOR THE YEAR ENDING 31-03-2012 ALONG WITH THE FIGUR ES OF PREVIOUS YEAR IS AVAILABLE AT PAGE NO.46 OF THE PAPER BOOK AND THE D ETAILS OF THE OTHER INCOME IS AVAILABLE ON PAGE NO.54 OF THE PAPER BOOK AND IT CAN BE SEEN THAT THERE IS NO TAX FREE INCOME EARNED BY THE ASSE SSEE IN ANY OF THESE YEARS. THEREAFTER, HE SUBMITTED THAT AS PER JUDGMEN T OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF M/S CHEMINVEST L TD., VS CIT 378 ITR 33, SEC.14A WILL NOT APPLY, WHERE NO EXEMPT INC OME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. HE S UBMITTED THAT UNDER THESE FACTS AND IN VIEW OF THIS JUDGMENT, SEC.14A O F THE IT ACT IS NOT APPLICABLE. ITA NOS.70 & 71(BANG)2016 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND FORCE IN THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE TH AT SECTION 14A IS NOT APPLICABLE BECAUSE WE FIND THAT IN NONE OF THESE TW O YEARS, THE ASSESSEE HAS EARNED ANY TAX FREE INCOME AND AS PER THE JUDGM ENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF M/S CHEMIN VEST LTD. VS CIT (SUPRA), IT WAS HELD THAT SEC.14A OF THE IT ACT WIL L NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. WE ALSO FIND THAT IN THIS JUDGMENT, HONBLE DELHI HIGH COURT HAS ALSO HAD CONSIDERED THE JUDGMENT OF THE HONBLE APE X COURT RENDERED IN THE CASE OF CIT VS RAJENDRA PRASAD MOODY REPORTED I N 115 ITR 519(SC). RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE DELHI HIGH COURT CITED SUPRA, WE HOLD THAT SECTION 14A IS NOT APPLIC ABLE IN THE FACTS OF THE PRESENT CASE. BUT WE ALSO FEEL THAT WHEN THE INVESTMENT IN SHARES IS NOT FOR STOCK IN TRADE, IF ANY BORROWED FUND IS USED FOR SUCH INVEST MENT THEN DEDUCTION ON ACCOUNT OF INTEREST ON SUCH BORROWED FUND IS NOT ALLOWABLE UNDER ANY SECTION OF I. T. ACT BEING SECTION 36 (1) (III) OR SECTION 57 (III) BECAUSE SUCH INTEREST EXPENDITURE IS NEITHER FOR ANY BUSINE SS PURPOSE NOR FOR EARNING ANY INCOME TAXABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES AND THEREFORE, DEDUCTION ON ACCOUNT OF INTEREST UND ER THESE FACTS IS NOT ALLOWABLE AND THERE IS NO REQUIREMENT TO INVOKE SEC TION 14A FOR DISALLOWANCE OF INTEREST. HENCE, WE FEEL THAT THE A .O. SHOULD EXAMINE THIS ASPECT AS TO WHETHER INTEREST EXPENSES IN THE PRESENT CASE IS ALLOWABLE UNDER ANY SECTION I.E. 36 (1) (III) OR 57 (III) AND IF ALLOWABLE THEN ITA NOS.70 & 71(BANG)2016 5 ALLOWABLE TO WHAT EXTENT AND FOR THIS, THE MATTER S HOULD GO BACK TO THE FILE OF THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDE R OF CIT (A) IN BOTH YEARS AND RESTORE THE MATTER BACK TO THE FILE OF TH E A.O. WITH THE DIRECTION THAT ALTHOUGH NO DISALLOWANCE CAN BE MADE U/S 14A IN THE FACTS OF THE PRESENT CASE IN VIEW OF THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF M/S CHEMINVEST LTD., VS CIT (SUPRA)BUT HE SHOULD EXAMINE THE ALLOWABILITY OF INTEREST EXPE NDITURE U/S 36 (1) (III) AND 57 (III) AFTER AFFORDING ADEQUATE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. HE SHOULD ALSO KEEP IN MIND THE ABOVE DIS CUSSION. 7. IN THE RESULT, BOTH THESE APPEALS OF THE REVENU E ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. (VIJAY PAL RAO) (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : .09.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE ITA NOS.70 & 71(BANG)2016 6 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .