The DCIT, Circle-8, Ahmedabad V. Shanti Exports Pvt.Ltd., Ahmedabad

ITA 772/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9374 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G M THAKAR
• Keywords: Audit objection; Earning of tax free income; Tax effect
• Section: 14A; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.772/AHD/2014 & CO NO.111/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE-8, AHMEDABAD. / VS. SHANTI EXPORTS PVT. LTD. 2 ND FLOOR, CHIRIPAL HOUSE, SATELLITE ROAD, AHMEDABAD-380015 ./ ./ PAN/GIR NO. : AAFCS 0472 C ( / APPELLANT ) .. ( / RESPONDENT ) & CROSS OBJECTOR / APPELLANT BY : SHRI ALOK KUMAR, SR. D.R. / RESPONDENT BY : SHRI G.M. THAKAR, A.R. / DATE OF HEARING 19/01/2017 / DATE OF PRONOUNCEMENT 20/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AND THE CROSS- OBJECTION THEREOF FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, AHMEDABAD, DATED 16/12/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11 AND FOLLOWING GROUND HAS BEEN TAKEN: THE LD. CIT(A)-I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.21,87,821/- MADE U/S. 14A OF THE ACT, R.W.R. 8D, WHEN ASSESSEE HAS FAILD TO PROVE NEXUS BETWEEN THE NON-INTEREST BEARING FUNDS & INVESTMENTS MADE TO EARN EXEMPT INCOME. ITA NO.772/AHD/2014 & CO NO.111/AHD/2014 SHANTI EXPORTS PVT. LTD. VS. DCIT ASST.YEAR 2010-11 - 2 - 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS MADE INVESTMENTS OF RS.2,50,71,220/- IN SHARES OF GSL NOVA PETROCHEMICALS LTD., CIL NOVA PETROCHEMICAL, CHIRIPAL INDUSTRIES LTD., DINDAYAL PROCESSORS PVT. LTD., HEXA INTERNATIONAL PVT. LTD. AND SPARROW EXPORTS PVT. LTD. AS ON 31/03/2010. THE INVESTMENTS MADE BY THE ASSESSEE AS ON 01/04/2009 WAS RS.2,47,31,220/-. THE ASSESSEE HAS CLAIMED FINANCIAL EXPENSES OF RS.3,60,14,100/- ON THE SECURED AND UNSECURED LOANS TAKEN BY IT. DURING THE COURSE OF SCRUTINY, THE ISSUE OF DISALLOWANCES OF EXPENDITURE U/S.14A OF THE INCOME TAX ACT, 1961, (HERE IN AFTER REFERRED TO THE ACT) WAS DISCUSSED WITH THE A.R. OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S. 14A READ WITH RULE 8D OF THE INCOME- TAX RULES, 1962 NOT BE MADE AS THERE ARE INVESTMENTS FROM WHICH EXEMPT INCOME IS EARNED. 3. IN RESPONSE TO THAT, ASSESSEE FILED SUBMISSION AND RELEVANT PARA OF THE SAID SUBMISSION IS REPRODUCED AS UNDER: AS REGARDS TO THE DISALLOWANCE U/S. 14A, IT IS STATED THAT NO DISALLOWANCE SHOULD BE MADE AS THERE IS NO NEXUS BETWEEN THE INVESTMENTS MADE AND THE LOAN TAKEN. FURTHER THE INVESTMENTS HAVE BEEN MADE FROM THE OWNED FUNDS AND NO LOAN HAS BEEN TAKEN FOR THE PURPOSE OF MAKING INVESTMENTS. WE THEREFORE STATE THAT NO DISALLOWANCE SHOULD BE MADE. 4. THE SUBMISSION OF THE ASSESSEE WAS DULY CONSIDERED. HOWEVER, THE SAME WAS NOT FOUND ACCEPTED AND THEREFORE, DISALLOWANCE OF RS. 21,87,337/- WAS MADE U/S.14A R.W.R. 8D BY THE ASSESSING OFFICER. ITA NO.772/AHD/2014 & CO NO.111/AHD/2014 SHANTI EXPORTS PVT. LTD. VS. DCIT ASST.YEAR 2010-11 - 3 - 5. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A), WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. WE HAVE GONE THROUGH THE IMPUGNED ORDER AND DISALLOWANCE OF EXPENSES U/S.14A R.W.R. 8D WAS RS.21,87,821/-. THEREFORE, TAX ON DISPUTED ADDITIONS IS RS.6,76,037/-. 7. TAX IS LESS THAN 10 LACS, SO SAME IS COVERED BY THE CBDT CIRCULAR NO.21 OF 2015 DATED 10.12.2015. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT THE TAX EFFECT IS LESS THAN THE LIMIT PRESCRIBED BY THE AFORESAID CBDT CIRCULAR. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT PRIMA-FACIE THIS APPEAL OF THE REVENUE IS NOT MAINTAINABLE IN VIEW OF CBDT CIRCULAR NO. 21/2015 IN F.NO.279/MISC. 142/2007-ITJ (PT) DATED 10TH DECEMBER 2015, VIDE WHICH IT HAS BEEN PROVIDED THAT IF THE TAX EFFECT BY VIRTUE OF THE COMMISSIONER OF INCOME-TAX (APPEALS)S ORDER IS BELOW RS. 10 LACS, THEN THAT ORDER WOULD NOT BE CHALLENGED BEFORE THE TRIBUNAL IN FURTHER APPEAL. THE BOARD HAS PROVIDED EXEMPTIONS AT CLAUSE (8) OF THE INSTRUCTIONS WHEREIN IT HAS BEEN PROVIDED THAT THESE INSTRUCTIONS WILL NOT BE APPLICABLE, IF VIRES OF ANY PROVISIONS HAS BEEN QUASHED BY IMPUGNED ORDER OR ADDITION WAS MADE ON SOME AUDIT OBJECTIONS OR THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/BANK ACCOUNTS, ETC. WE ITA NO.772/AHD/2014 & CO NO.111/AHD/2014 SHANTI EXPORTS PVT. LTD. VS. DCIT ASST.YEAR 2010-11 - 4 - FIND THAT THE PRESENT CASE DOES NOT FALL WITHIN THE EXEMPTION CLAUSE AND THE TAX IS LESS THAN RS.10 LACS. THEREFORE, THE PRESENT APPEAL IS NOT MAINTAINABLE AND HENCE DISMISSED. 9. CO NO.111/AHD/2014 FOR THE A.Y.2010-11(IN ITA NO.772/AHD/2014 FOR THE A.Y. 2010-11). WE HAVE HEARD THE LD. A.R. AND WE HAVE ALREADY ALLOWED THE CONNECTED REVENUES APPEAL 772/AHD/2014 ON ACCOUNT OF TAX EFFECT. THEREFORE, LD. A.R. DOES NOT WANT TO PRESS THE ASSESSEES CO. AND THEREFORE, CO IS DISMISSED HAS NOT PRESSED. 10. IN THE RESULT, REVENUES APPEAL AND CO FILED BY THE ASSESSEE BOTH ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20/01/2017 IKZHFR ;KNO] O-FU-L-@ PRITI YADAV, SR.PS