M/s Orbit Resorts (P) Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 75/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9108 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER (ITA NO. 75/CHD/2016 (ASSESSMENT YEAR : 2011-12) M/S ORBIT RESORTS(P) LTD., VS. THE ADDL.CIT, # 256, SECTOR 9C, RANGE-I, CHANDIGARH. CHANDIGARH. PAN: AAACO4024H (APPELLANT) (RESPONDENT APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI RAVI SARANGAL, CIT DR DATE OF HEARING : 15.09.2016 DATE OF PRONOUNCEMENT : 16.09.2016 O R D E R PER DIVA SINGH, J.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE CORRECTNESS OF THE ORDER DATED 22.12. 2015 PERTAINING TO 2011-12 ASSESSMENT YEAR OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, CHANDIGARH ON THE GROUNDS OF WRONGLY SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE I NCOME TAX ACT, 1961. 2. THE RELEVANT FACTS OF THE CASE ARE THAT IN THE SCRUTINY ASSESSMENT THE ASSESSING OFFICER REQUIRED THE ASSES SEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A SHOULD N OT BE MADE IN VIEW OF THE FACT THAT THE ASSESSEE HAD MADE INVE STMENTS IN EQUITY SHARES AMOUNTING TO RS.21.60 CRORES ODD. TH E ASSESSEE IN REPLY ON FACTS SUBMITTED THAT NO INTEREST BEARIN G LOAN HAS BEEN USED FOR INVESTMENT IN THE FUNDS. VARIO US 2 DECISIONS WERE RELIED UPON. HOWEVER, NOT CONVINCED WITH THE EXPLANATION THE ASSESSING OFFICER PROCEEDED TO MAKE THE DISALLOWANCE UNDER CHALLENGE. 3. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER W ERE REITERATED. ON FACTS IT WAS ARGUED THAT THE ASSES SEE HAD SUFFICIENT OWN FUNDS AVAILABLE AS SHARE CAPITAL OF RS.10.60 CRORES AND RESERVE AND SURPLUS OF RS.765.79 CRORES. FURTHER, NO INTEREST BEARING LOANS IT WAS PLEADED H AD BEEN USED FOR THE INVESTMENT. RELIANCE WAS PLACED UPON CIT VS. HERO CYCLES, 323 ITR 518 (P&H); CIT VS. TAIKISH A ENGINEERING INDIA LTD. AND CIT VS. M/S WALFORT SHAR E & STOCK BROKERS (P) LIMITED, 326 ITR 1(SC). IT WAS A LSO SUBMITTED THAT NO INCOME HAS BEEN EARNED FROM THE INVESTMENT IN THE YEAR UNDER CONSIDERATION. NOT CON VINCED WITH THE EXPLANATION OFFERED THE DISALLOWANCE MADE WAS CONFIRMED. AS A RESULT THEREOF THE ASSESSEE IS IN APPEAL BEFORE THE I.T.A.T. 4. BOTH THE PARTIES HAVE BEEN HEARD WHO REITERATED THEIR RESPECTIVE STANDS. THE LEARNED CIT DR WAS RE QUIRED TO ADDRESS THE FACTUAL POSITION CONSISTENTLY CLAIME D THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THE SAID CLAIM IT IS FOUN D HAS NOT BEEN DISPUTED BY THE REVENUE. CONSIDERING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CHEMINV EST LTD. VS. CIT, 378 ITR 33 (DEL) THE LEARNED CIT DR W AS REQUIRED TO ADDRESS THE ISSUE. NO CONTRARY DECISIO N WAS 3 CITED BY THE REVENUE. NOR ANY DISTINCTION ON FACTS WAS ARGUED. WE FIND THAT THE DELHI HIGH COURT IN THE AFORESAID DECISION HAD HELD THAT : '.... THE EXPRESSION 'DOES NOT FORM PART OF THE TOT AL INCOME' IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDI BLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FO R THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR .' (EMPHASIS PROVIDED) 4.1. WE FURTHER FIND THAT THE JURISDICTIONAL HIGH COURT IN CIT VS. KAPSONS ASSOCIATES, 381 ITR 204 (P &H) RELYING ON ORDER AND JUDGMENT DATED JULY 16, 2015 I N I. T. A. NO. 413 OF 2014, GURDAS GARG V. CIT (APPEALS) [2 016] 6 ITR-OL 101 (P&H) ALSO HAS HELD AS UNDER : 'IT IS A LITTLE DIFFICULT TO UNDERSTAND THESE OBSERVA TIONS. IT HAS NOT BEEN DENIED THAT INTEREST-FREE FUNDS WERE AVAIL ABLE. NOR HAS IT BEEN DENIED THAT INTEREST-FREE ADVANCES WERE MADE BY THE APPELLANT. IN FACT, THE LATTER HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE CONTENTION THAT THE APPELLANT HAS NOT ESTABLISHED THAT IT WAS THE INTEREST-FREE FUNDS THAT WERE ACTUALLY ADVANCED AS INTEREST-FREE ADVANCES IS WITHOUT SUBSTANCE. MONEY HAS NO IDENTITY. SO LONG IT IS ESTABL ISHED THAT THE INTEREST-FREE ADVANCES ARE MADE BY AN ASSE SSEE WHO HAS ADEQUATE FREE RESERVES, IT IS SUFFICIENT TO ESTA BLISH THAT THE AMOUNTS ADVANCED INTEREST-FREE CANNOT BE ADDED TO T HE ASSESSEE'S INCOME. IT WAS NOT CONTENDED THAT THE INT EREST-FREE ADVANCES EXCEEDED THE INTEREST-FREE FUNDS AVAILABLE WITH THE APPELLANT. NOR WAS IT ESTABLISHED THAT A PARTICULAR A DVANCE RECEIVED WAS IN TURN ADVANCED BY THE ASSESSEE INTEREST-FR EE.' 4.2 FOR THE SAKE OF COMPLETENESS WE FIND THAT THE LEARNED A.R. IN THE FACTS OF THE PRESENT CASE HAS P LACED RELIANCE UPON THE ORDERS OF THE COORDINATE BENCHES IN THE CASE OF WIND WORLD WIND FARMS (INDIA) LTD. VS. DCI T IN ITA NO.2712/MUM/2014 DATED 8.2.2016 AND SWAMI AUTOMOBILES PVT. LTD. VS. JCIT IN ITA NO.74/CHD/201 5 DATED 10.2.2016 TO CANVASS THAT THE ISSUE IS COVERE D IN ITS FAVOUR. IN THE ABSENCE OF ANY DISTINCTION ON FACTS AND 4 LAW, RESPECTFULLY FOLLOWING THE DECISIONS OF THE HO N'BLE COURTS AND THE ORDERS OF THE CO-ORDINATE BENCHES TH E ADDITION MADE BY WAY OF A DISALLOWANCE IS DELETED. THE SAID ORDER WAS PRONOUNCED ON THE DATE OF HEARING IN THE PRESENCE OF PARTIES ITSELF. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (OM PRAKASH KANT) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16 TH SEPTEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH