Swami Automobiles Pvt. Ltd., Chandigarh V. JCIT, Chandigarh

ITA 74/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8490 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.74/CHD/2015 (ASSESSMENT YEAR : 2010-11) SWAMII AUTOMOBILES PVT. LTD., VS. THE J.C.I.T., PLOT NO.33, INDUSTRIAL AREA, RANGE II, CHANDIGARH. CHANDIGARH. PAN: AAGCS6805C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 09.02.2016 DATE OF PRONOUNCEMENT : 10.02.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX (APPEALS)-1, CHANDIGARH DATED 16.12.2014 FOR ASSESS MENT YEAR 2010-11. THE APPEAL BEFORE THE CIT (APPEALS) WAS AGAINST THE ORDER OF THE ASSESSING OFFICER MADE UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD MADE CERTAIN INVESTMENTS IN SHARES OF SOME 2 GROUP COMPANIES AND HAD DEBITED EXPENDITURE OF RS.2,77,43,665/- ON ACCOUNT OF FINANCIAL EXPENSES/INTEREST. AFTER INVOKING THE PROVISIONS O F SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INC OME TAX RULES, A DISALLOWANCE OF RS.23,12,772/- WAS MAD E BY THE ASSESSING OFFICER. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT HE HAS NOT CLAIMED ANY EXEMPT INCOME IN HIS PROFIT & LOSS ACCOUNT OR IN THE RETURN OF INCOM E, THEREFORE, THE DISALLOWANCE UNDER SECTION 14A OF TH E ACT CANNOT BE MADE IN VIEW OF THE JUDGMENT OF THE HON'B LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI MARKETING LTD. VIDE ORDER DATED 2..4.2014 IN ITA NO .970 OF 2008. AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, THE LEARNED CIT (APPEALS) DISMISSED THE APPEAL OF T HE ASSESSEE. AS PER THE LEARNED CIT (APPEALS), RULE 8 D OF THE INCOME TAX RULES IS MANDATORY TO BE APPLIED BY THE ASSESSING OFFICER AND THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI MARKETIN G LTD. (SUPRA) IS RELATED TO ASSESSMENT YEAR 2001-02 WHEN RULE 8D WAS NOT ON STATUTE, THEREFORE, THE RATIO OF THIS JUDGMENT CANNOT BE RELIED UPON. HE PLACED RELIANCE ON THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S AVON CYCLES LTD. IN ITA NO.277 OF 2013 AND I.T.A.T., CHANDIGARH BENCH IN THE CASE OF M/S CHADHA 3 SUPER CARS (P) LTD. IN ITA NO.1241/CHD/2011 & ITA NO.36/CHD/2012. 4. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE WORTHY CIT(A) IN APPEAL NO. 6-13-14 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION250(6)OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING AN ADDITION OF RS. 23,12,772/- U/S 14A R.W.R. 8D OF THE INCOME TAX RULES, 1962 EVEN WHEN NO EXEMPT INCOME WAS EARNED OR CLAIMED BY THE APPELLANT AND THE INVESTMENT IN RELEVANT SHARES WAS MADE IN PRIVATE LIMITED COMPANIES WHICH WERE SISTER CONCERNS AND WERE IN SAME NATURE OF BUSINESS AS OF THE APPELLANT. 3. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION, DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT SINCE NO TAX-FREE INCOME HAS BEEN EA RNED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR , NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MA DE. RELIANCE WAS PLACED ON THE JUDGMENT OF PUNJAB & HAR YANA HIGH COURT IN THE CASE OF LAKHANI MARKETING LTD. ( SUPRA), 4 DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM IND IA PVT. LTD. (2014) ITA NO.486 OF 2014 AND A COPY OF LATEST ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF M /S BCL INDUSTRIES & INFRASTRUCTURES LTD. IN ITA NO.1002/CHD/2013 DATED 13.1.2016 WAS ALSO FILED IN THIS REGARD. 6. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES AND FURTHER PLACED RELIANCE ON VARIOUS JUDGMENTS INCLUDING THAT OF I.T.A.T., CHANDIGARH BE NCH IN THE CASE OF M/S CHADHA SUPER CARS (P) LTD. (SUPRA) AND HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALFO RT SHARE & STOCK PVT. LTD. (2010) 326 ITR 1 (SC). 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSES SEE HAS NOT RECEIVED ANY TAX-FREE INCOME DURING THE YEAR. NEITHER THE LEARNED CIT (APPEALS) NOR THE LEARNED D.R. DURI NG THE COURSE OF HEARING BEFORE US HAS CONTROVERTED THIS F ACT. IN THIS FACTUAL SITUATION, THE I.T.A.T., CHANDIGARH BE NCH IN M/S BCL INDUSTRIES & INFRASTRUCTURES LTD. (SUPRA) H ELD AS UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED 5 THE MATERIAL AVAILABLE ON RECORD. THE CLAIM OF THE ASSESSEE IS THAT IT HAS NOT EARNED ANY TAX FREE INCOME DURING THE YEAR. IN THE EVENT OF NO TAX FREE INCOME, DISALLOWANCE OF EXPENSES ATTRIBUTABLE TO ANY SUCH INCOME ANTICIPATED TO ARISE IN FUTURE CANNOT BE MADE. FOR THIS, WE ARE GUIDED BY THE JUDGMENT OF HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI MARKETING INCL (SUPRA), WHEREBY IT HAS BEEN HELD THAT IN CASE THERE IS NO EXEMPT INCOME, NO DISALLOWANCE SHOULD BE MADE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. (2014) ITA NO.486 OF 2014 AND ITA NO.299 OF 2014 DATED 5.9.2014 HAS ALSO HELD THE SAME. THOUGH THE JUDGMENTS ARE FOR ASSESSMENT YEAR PRIOR TO THE ASSESSMENT YEAR 2008-09, I.E. THE YEAR IN WHICH RULE 8D OF THE INCOME TAX RULES WAS BROUGHT IN THE INCOME TAX RULES. BUT THE PROPOSITION LAID DOWN BY THE HON'BLE HIGH COURT IS WITH REGARD TO SECTION 14A OF THE INCOME TAX ACT, WHICH IS TO BE APPLIED EVEN AFTER THE INSERTION OF RULE 8D OF THE INCOME TAX RULES. IT IS A TRITE LAW THAT THE PROVISIONS OF ACT PREVAIL OVER THE RULES. ONCE THE TAXABILITY OF AN AMOUNT IS DECIDED AS PER THE PROVISIONS OF THE ACT, ONLY THEN A RULE CAN BE INVOKED. RULE 8D OF THE INCOME TAX RULES IS JUST A MACHINERY OR A METHOD PROVIDES TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, IF ANY. THEREFORE, IN THE PRESENT CASE, WE ARE BOUND BY THESE JUDGMENTS OF THE HIGH COURT. NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE IF THERE IS NO TAXABLE INCOME EARNED DURING THE YEAR. 5. SINCE THE ISSUE IS SAME AND NO DISTINGUISHING FEATURES WERE BROUGHT TO OUR NOTICE, RESPECTFULLY F OLLOWING 6 ABOVE FINDINGS GIVEN BY THE I.T.A.T. BENCH, WE ALLO W THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF FEBRUARY, 2016. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH