SURINDRA ENGG CO. LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 7433/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3194 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 28-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SUNIL A DESAI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI . . , . , , . . , BEFORE SHRI N K BILLAIYA, AM & SHRI SANJAY GARG, JM ./ ITA NO.7433/MUM/2012 / ASSESSMENT YEAR 2009-10 SURINDRA ENGG CO. LTD. SAFAIDPOOL, M V ROAD, ANDHERI (EAST) MUMBAI- 400 072 PAN AAACM4004F VS. THE ITO 8(3)(2) MUMBAI ( ! /APPELLANT) ( '# ! /RESPONDENT) APPELLANT BY : SHRI SUNIL A DESAI RESPONDENT BY : SHRI PREMANAND J $ %& / DATE OF HEARING :28.09.2015. $ %& / DATE OF PRONOUNCEMENT : 28.09.2015 O R D E R PER N K BILLAIYA, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)-18, MUMBAI, DATED 12.10.2012, FOR A.Y. 2009-10. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO T HE DISALLOWANCE OF RS.11,73,666/- MADE U/S. 14A READ WITH RULE 8D. TH E ASSESSEE IS A MANUFACTURER OF M S PIPES AND READYMADE GARMENTS. WHILE SCRUTIN IZING THE RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE HAS NOT DISALLOWED ANY EXPENSES U/S. 14A READ WITH RULE 8D FOR EARNING EXEMPT INCOME. THE ASSESSEE WA S ASKED TO JUSTIFY ITS CLAIM. VIDE LETTER DATED 22.12.2011, THE ASSESSEE REPLIED THAT SECTION 14A CAN BE INVOKED ITA 7433/MUM/2012 SURINDRA ENGG. CO. LTD. 2 ONLY WHEN THE AO IS NOT SATISFIED WITH THE CORRECTN ESS OF THE CLAIM OF THE ASSESSEE AND, SECONDLY, THE ASSESSEE HAS NOT EARNED ANY INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME. THEREFORE, NO DISALLOWANCE U/S. 14A IS WARRANTED. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO, W HO PROCEEDED BY COMPUTING THE DISALLOWANCE U/S. 14A READ WITH RULE 8D. THE DISAL LOWANCE SO COMPUTED WAS AT RS.11,73,666/-. AGGRIEVED BY THIS THE ASSESSEE CAR RIED MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER CONTRA, D R STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 4. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS AN ADMITTED FACT THAT DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAS NOT EARNED ANY INCOME, WHICH IS EXEMPT FROM TAX. IN A RECENT DECISION HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (IT APPEAL NO. 749/2014 DATED 02.09.2015 ARISING OUT OF THE ORDER OF THE DELHI BENCHES OF TH E TRIBUNAL IN ITA NO.87/DEL/2008), IT HAS HELD THAT NO DISALLOWANCE U /S. 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF DELHI, WE DIRECT THE AO TO DELETE THE ADDITION OF RS.11,73,666/-. GROUN D NO.1 IS ACCORDINGLY ALLOWED. 5. GROUND NO.2 RELATES TO DISALLOWANCE OF RS.31,92, 089/- MADE U/S. 41(1) OF THE ACT. DURING THE COURSE OF SCRUTINY ASSESSMENT PROC EEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF SUNDRY CREDITORS. THE AS SESSEE FILED THE REQUISITE DETAILS. ON PERUSING THE DETAILS FURNISHED THE AO FOUND THAT THE FOLLOWING CREDITORS WERE OUTSTANDING:- ITA 7433/MUM/2012 SURINDRA ENGG. CO. LTD. 3 I) ACQUATECH PROFLOW PIPE LINING PVT. LTD. 19,84,90 8 II)SHETH & SURA ENGINEERS LTD 49,520 III) SHETTY & ASSOCIATES, MUMBAI 1,500 IV) SHIPYARD CO. 1,47,520 THE AO FURTHER NOTICED THAT IN RESPECT OF AHMEDABAD UNIT, CREDITOR TOLANI FABRICATORS WAS OUTSTANDING AT RS.10,08,641/-. THE AO MADE THE ADDITION U/S. 41(1) OF THE ACT AT RS.31,92,089/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE COUNSEL FOR THE ASSESSEE POINTED OUT THE FACTUAL ERRORS IN THE FINDINGS OF THE AO. IT IS THE SAY OF THE COUNSEL T HAT THE AMOUNT TAKEN FOR ACQUATECH PROFLOW PIPE LINING PVT. LTD. AT RS.19,84,908/- IS INCORRECT AS THAT FIGURE BELONGS TO M/S. AJMERA ENGINEERING WORKS AND AMOUNT OUTSTANDIN G IN THE NAME OF ACQUATECH PROFLOW PIPE LINING PVT. LTD IS ONLY RS.9,67,180/-. THE COUNSEL FURTHER POINTED OUT THAT IN THE CASE OF TOLANI FABRICATORS, THE SAID PA RTY IS A DEBTOR AND NOT A CREDITOR. IN RESPECT OF OTHER AMOUNTS IT IS THE SAY OF THE COUNSEL THAT THEY HAVE BEEN WRITTEN BACK IN THE SUBSEQUENT YEARS AND, THEREFORE , IF THE SAME IS ADDED BACK IN THE YEAR UNDER CONSIDERATION IT WOULD AMOUNT TO DOU BLE TAXATION. PER CONTRA, THE DR COULD NOT ADD ANYTHING NEW TO WHAT HAD ALREADY B EEN MENTIONED BY THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND HAVE ALSO GONE THROUGH ANNEXURE XIII OF THE STATEMENT OF ACCO UNT, WHICH IS DETAILS OF SUNDRY CREDITORS UNMOVED. WE FIND FORCE IN THE CONTENTI ON OF THE LEARNED COUNSEL. THE BALANCE OUTSTANDING IN THE NAME OF ACQUATECH PROFLO W PIPE LINING PVT. LTD, IS NOT RS.19,84,908/- BUT RS.9,67,180/- AND AS PER THE LI ST OF SUNDRY DEBTORS, TOLANI FABRICATORS IS DEBTOR AND NOT CREDITOR. THEREFORE, ATLEAST TO THIS EXTENT I.E. BALANCE OF TOLANI FABRICATORS CANNOT BE ADDED U/S. 41(1) OF THE ACT. WE ACCORDINGLY, DIRECT ITA 7433/MUM/2012 SURINDRA ENGG. CO. LTD. 4 THE AO TO DELETE THE ADDITION OF RS.10,08,641/-. IN SO FAR AS THE BALANCES OF OTHER CREDITORS ARE CONCERNED, IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE NEEDS TO BE VERIFIED AT THE ASSESSMENT STAGE. WE, THEREF ORE, RESTORE THE ISSUE TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO DEMONSTRATE THAT THE IMPUGNED CREDITORS HAVE BEEN WRITTEN BACK IN THE SUBSEQUENT YEARS TO T HE SATISFACTION OF THE AO AND THE AO IS DIRECTED TO VERIFY THE SAME AND IF THE CL AIM OF THE ASSESSEE IS FOUND CORRECT THE ADDITIONS SHOULD NOT BE MADE. IF THE A SSESSEE FAILS TO DEMONSTRATE THEN THE AO IS FREE TO DECIDE THE ISSUE AFRESH AS PER TH E PROVISIONS OF LAW. GROUND NO.2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 8 TH SEPTEMBER 2015. SD/- SD/- (SANJAY GARG) (N K BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEM BER MUMBAI; )* DATED : 28 TH SEPTEMBER, 2015. SA * $ '%,- .-% /COPY OF THE ORDER FORWARDED TO : 1. ! /THE APPELLANT. 2. '# ! / THE RESPONDENT. 3. /% ( ) / THE CIT(A), MUMBAI. 4. /% / CIT 5. -01 '% , , / DR, G BENCH, ITAT, MUMBAI * / BY ORDER, #-% '% //TRUE COPY// (ASSTT. REGISTRAR) , / ITAT, MUMBAI