SAURABH AGROTECH (P) LTD., Alwar V. ACIT, Alwar

ITA 779/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9706 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 29-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 779/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 SAURABH AGROTECH (P) LTD. C/O M/S K.L. DATTA & CO., CA. VASHITHA PLAZA,2, MANU MAR, ALWAR CUKE VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCS 4522 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 855/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, ALWAR CUKE VS. SAURABH AGROTECH (P) LTD. C/O M/S K.L. DATTA & CO., CA. VASHITHA PLAZA,2, MANU MAR, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCS 4522 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09.03.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/03/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE AGAINST THE ORDER OF LD. CIT(A), ALWAR DATED 11.07. 2016 FOR ASSESSMENT YEAR 2012-13. THE GROUNDS OF APPEAL ARE AS FOLLOWS: ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 2 IN ITA NO. 779/JP/16 (ASSESSEE): (1) THAT THE LD. AO HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING A DISALLOWANCE OF RS. 28,34,0 71 BY APPLYING THE PROVISION OF SECTION 14A AND RULE 8D OF THE INCOME TAX RULES, 1962. IN ITA NO. 855/JP/16 (REVENUE): (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 26,29,074 MADE BY THE AO AFTER DISALLOWING DEDUCTION U/S 80-IA ON WIND MILL. (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.20,41,040/ - MADE BY THE AO AFTER DISALLOWING INTEREST EXPENSES ON INTEREST FREE ADVANCES PROVIDED TO DHRUV ENCLAVE. 2. REGARDING THE DISALLOWANCE OF RS. 28,34,071/- U/ S 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES, 1962, THE LD. AR SUB MITTED THAT THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT R.W.R. 8D OF THE IT RULES CAME UP BEFORE THE HONBLE ITAT, JAIPUR BENCH IN ASSESSEES OWN CASE F OR A.Y. 2009-10 TO 2011-12. WHEREIN THE HONBLE ITAT VIDE ORDER DATED 18.10.201 6 HAS HELD AS UNDER: IN LIGHT OF PROVISIONS OF SECTION 14A AND THE ABOV E PROPOSITION IN LAW, IN THE INSTANCE CASE, THE ASSESSEE HAS CLAIMED THAT IT HAS NOT INCURRED ANY EXPENDITURE BY WAY OF PAYMENT OF INTEREST FOR MAKIN G INVESTMENT IN THE SHARES. IT WAS SUBMITTED THAT THE PAID-UP CAPITAL AND RESER VE AND SURPLUS FAR EXCEED THE INVESTMENT IN SHARES. IN FACT, THE INVESTMENT I N SHARES WERE MADE IN VARIOUS YEARS AND IN EACH OF THOSE YEARS, THE INTEREST-FREE FUND AVAILABLE IS MUCH MORE THAN THE INVESTMENT IN SHARES. AS ON 31.03.2009, TH E INTEREST-FREE FUND AVAILABLE WITH THE ASSESSEE IS AROUND 2.5 TIMES OF THE INVESTMENT MADE IN SHARES. IT WAS SUBMITTED THAT IT CANNOT BE PRESUMED THAT BORROWED FUNDS HAS BEEN UTILIZED FOR MAKING INVESTMENT IN SHARES AND I N THE ABSENCE OF ANY ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 3 PROXIMATE RELATION OF BORROWED FUNDS WITH INVESTMEN T IN SHARES, NO PART OF THE INTEREST EXPENDITURE CAN BE DISALLOWED U/S 14A R.W. R. 8D(2)(II). HOWEVER, THE AO HAS NOT RETURN A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE SAID CLAIM OF THE ASSESEE IN RESPECT OF EXPENDITURE NOT HAVING BEEN INCURRED IN RELATION TO THE EXEMPT INCOME. IN ABSENCE OF AO RE CORDING HIS SATISFACTION WITH CORRECTNESS OF THE CLAIM OF THE ASSESSEE, WE ARE OF THE VIEW THAT INVOCATION OF RULE 8D SIMPLICATOR WOULD NOT BE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH IN THE EARLIER YEARS. IN LIGHT OF THE THESE DISCUSSIONS AN D FOLLOWING THE EARLIER YEAR DECISIONS OF THE COORDINATE BENCH, WE SET-ASIDE AND THE RESTORE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE MATTER A FRESH AN D AFTER RECORDING HIS SATISFACTION VIS-A-VIS THE CLAIM OF THE ASSESSEE, R ECOMPUTE THE DISALLOWANCE, IF ANY, IN ACCORDANCE WITH LAW. THE ASSESSEES GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 3. THE LD AR FURTHER SUBMITTED THAT FROM THE ABOVE DECISION OF THE HONBLE ITAT, IT CAN BE NOTED THAT THE HONBLE ITAT HAS SET ASIDE THE MATTER TO THE FILE OF THE AO TO RECOMPUTE THE DISALLOWANCE, IF ANY, AF TER RECORDING HIS SATISFACTION VIS-A-VIS THE CLAIM OF THE ASSESSEE. IT WAS SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION NO FRESH INVESTMENT IN THE SHARES HAS BEEN MADE BY THE ASSESSEE. THE INVESTMENT IN THE SHARES WERE M ADE IN EARLIER YEARS AND IN THOSE YEARS, THE INTEREST FREE FUND AVAILABLE WAS M UCH MORE THAN THE INVESTMENT IN SHARES. AS ON 31.03.2012, THE INTERE ST FREE FUND AVAILABLE WITH THE ASSESSEE IS RS. 14.36 CRORES WHEREAS INVESTMENT IN SHARES IS RS. 5.44 CRORES WHICH IS AROUND 2.64 TIMES OF THE INVESTMENT MADE I N SHARES. THUS, NO BORROWED FUNDS HAVE BEEN UTILIZED FOR MAKING INVEST MENT IN SHARES. THE ASESSEE HAS ALSO NOT RECEIVED ANY DIVIDEND INCOME AND THUS NO DISALLOWANCE ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 4 U/S 14A CAN BE MADE IN VIEW OF THE DECISION OF DELH I HIGH COURT IN CASE OF CHEMINVEST LTD. VS. ITO 378 ITR 0033 ORDER DATED 02 .09.2015. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD CIT(A) HAS RELIED ON HIS PREDECESSOR S ORDER FOR AY 2010-11 AND AY 2011-12 AND HAS UPHELD THE DISALLOWANCE UNDER SE CTION 14A. FOR AY 2011- 12 AND OTHER YEARS, THIS BENCH IN ITS DECISION DATE D 18.10.2016 HAS SET-ASIDE THE MATTER TO THE FILE OF THE AO. FOR THE SUBJECT YEAR, THERE IS AGAIN A LACK OF FINDING ON THE PART OF AO IN TERMS OF THE REASONS A ND HIS NON-SATISFACTION FOR ACCEPTING THE CLAIM OF THE ASSESSEE THAT NO EXPENDI TURE HAS BEEN INCURRED DURING THE YEAR, THERE IS THUS NO SUFFICIENT MATERI AL WHICH IS AVAILABLE ON RECORD TO DISPOSE OF THE ISSUE ON MERIT. THEREFORE, FOLLOW ING OUR EARLIER DECISION, THE SUBJECT MATTER IS ALSO SET-ASIDE TO THE FILE OF THE AO WITH THE SAME FINDINGS AND DIRECTIONS AS CONTAINED IN OUR DECISION DATED 18.10 .2016 REFERRED SUPRA. THE ASSESSEES GROUND IS THUS ALLOWED FOR STATISTICAL P URPOSES. 5. NOW COMING TO THE REVENUES APPEAL. THE REVENUE HAS CHALLENGED THE ACTION OF THE LD CIT(A) IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IA FOR RS 26,29,074/-IN RESPECT OF WINDMI LL. THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE ITAT JAIPUR BENCH IN ASSESSEES OWN CASE FOR A.Y. 2009-10 TO A.Y. 2011-12 ORDER DATED 18.10.2016 WHICH READS AS UNDER: (4.1) AT THE OUTSET, IT WAS SUBMITTED BY THE LD AR THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE ITAT ORDER DATED. 18.10.201 2 IN ASSESSEES OWN CASE FOR A.Y. 07-08 AND AY 08-09. THE LD DR RELIED ON THE O RDER OF AO. ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 5 (4.2) THE RELEVANT FINDINGS OF THE ITAT ORDER DATE D. 18.10.2012 ARE REPRODUCED AS UNDER: (34) AFTER CONSIDERING THE ORDER OF ASSESSING OFFI CER AND LD. CIT(A), WE FIND THAT LD. CIT(A) HAS DISCUSSED THE ISSUE IN DET AIL. THE LD. CIT(A) HAS NOTED THE AO HAS PLACED RELIANCE ON THE ORDER IN C ASE OF GOLD MINES CASE WHICH HAS BEEN CONSIDERED BY THE HONBLE MADRA S HIGH COURT ON SUBSEQUENT DECISION OF SAME HIGH COURT IN CASE OF V ELAYUTHASWAMY SPINNING MILLS PVT. LTD. 231 CTR 368 (MAD.) BY WHIC H THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IT IS FURTHER S EEN THAT PROVISIONS OF SECTION 80IA BECAME APPLICABLE FOR ASSESSMENT YEAR 2007-08 AND ASSESSEE HAS OPTED TO CLAIM DEDUCTION U/S 80IA WITH EFFECT FROM 2007-08 THROUGH THE PRODUCTION WAS COMMENCED FROM ASSESSMEN T YEAR 2003-04. IT HAS BEEN PROVIDED THAT UNDER THE PROVISIONS OF S ECTION 80IA, THE ASSESSEE IS ELIGIBLE TO CLAIM IT IN 10 YEARS OUT OF 15 YEARS OF ITS CHOICE. THE INITIAL ASSESSMENT HAS BEEN TAKEN AS 2007-08 AN D FROM ASSESSMENT YEAR THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTI ON U/S 80IA FOR 10 YEARS. THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CAS E OF MEWAR OIL & GENERAL MILLS LTD. 271 ITR 311 (RAJ.) WAS ALSO TAKE N INTO CONSIDERATION AND IN VIEW OF THESE FACTS, THE LD. CIT(A) HELD THA T ASSESSEE WAS CORRECT IN CLAIMING THE DEDUCTION U/S 80IA FROM ASSESSMENT YEA R 2007-08. FINDING OF CIT(A) HAS BEEN REPRODUCED SOMEWHERE ABOVE IN TH IS ORDER WHICH IS SELF EXPLANATORY. THEREFORE, WE SEE NO REASON TO I NTERFERE WITH THE FINDING OF LD. CIT(A). ACCORDINGLY WE CONFIRM THE ORDER OF LD. CIT(A) IN THIS REGARD ALSO. ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 6 6. IN VIEW OF ABOVE, RESPECTFULLY FOLLOWING THE COO RDINATE BENCH DECISION REFERRED SUPRA, WE CONFIRM THE ORDER OF THE LD CIT( A). THE REVENUES GROUND NO 1 IS THUS DISMISSED. 7. IN GROUND NO.2 OF REVENUES APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF LD CIT(A) REGARDING THE DELETION OF ADDI TION OF RS. 20,41,000/- MADE BY THE AO AFTER DISALLOWING INTEREST EXPENSES ON INTEREST FREE ADVANCES PROVIDED TO DHRUV ENCLAVE. THE LD. AR SUBMITTED T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE I TAT JAIPUR BENCH IN ASSESSEES OWN CASE FOR A.Y. 2009-10 TO A.Y. 2011- 12 ORDER DATED 18.10.2016 WHEREIN THE RELEVANT FINDINGS ARE AS UNDER: (5.1) THE RELEVANT FINDINGS OF THE ITAT ORDER DATE D. 18.10.2012 ARE REPRODUCED AS UNDER: (5.3) AFTER CONSIDERING THE ORDERS OF AO AND LD. C IT(A) WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT(A). THE LD. CIT(A) HAS CONS IDERED THE ISSUE BY TAKING INTO CONSIDERATION THE DETAILS OF BORROWED FUNDS AND DET AILS OF ADVANCES ON WHICH NO INTEREST WAS PAID OR CHARGED. IT HAS BEEN OBSER VED BY THE LD. CIT(A) THAT ASSESSEE WAS HAVING BOTH KINDS OF FUNDS I.E. INTERE ST BEARING AS WELL AS NON- INTEREST BEARING FUNDS AND THEY ARE POOLED TOGETHER . THE LD. CIT(A) HAS ALSO NOTED THAT ASSESSEE IS HAVING THE NON-INTEREST BEAR ING FUNDS SUFFICIENT ENOUGH TO COVER UP THE LOAN AND ADVANCES GIVEN TO M/S DHRU V ENCLAVE PVT. LTD. RELIANCE HAS BEEN PLACED ON THE DECISION OF RELIANC E UTILITIES & POWER LIMITED, 178 TAXMAN 135 (BOM.) WHEREIN IT IS HELD THAT THERE ARE FUNDS AVAILABLE BOTH INTEREST FREE AND OVER DRAFT AND/OR LOANS ARE TAKEN , THEN A PRESUMPTION WOULD RISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS ARE SU FFICIENT TO MEET THE INVESTMENT, THEN NO DISALLOWANCE COULD BE MADE. SI MILAR VIEW HAS BEEN EXPRESSED IN CASE OF CIT VS. HOTEL SAVERA, 239 ITR 795 (MAD.) AND IN CASE OR VISEN INDUSTRIES LTD. 136 ITD 309 (MUM.)(TM). FOLL OWING THESE DECISIONS AND IN VIEW OF THE REASONING GIVEN BY LD. CIT(A) WHICH IS REPRODUCED SOMEWHERE ABOVE IN THIS ORDER, WE SEE NO REASON TO INTERFERE WITH T HE FINDING OF LD. CIT()A). IT IS ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 7 ALSO A MATTER OF FACT THAT THE FINDING OF LD. CIT(A ) REMAINED UNCONTROVERTED. ACCORDINGLY, WE CONFIRM THE FINDING OF LD. CIT(A) O N THIS ISSUE ALSO. 8. IN VIEW OF ABOVE, RESPECTFULLY FOLLOWING THE COO RDINATE BENCH DECISION REFERRED SUPRA, WE CONFIRM THE ORDER OF THE LD CIT( A). THE REVENUES GROUND NO. 2 IS DISMISSED. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/03 /2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 10/03/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SOURABH AGROTECH (P) LTD., ALWA R 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-1, ALWAR 3. VK;DJ VK;QDR@ CIT ALWAR 4. VK;DJ VK;QDRVIHY@ THE CIT(A) ALWAR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 779/JP/2016 & 855/JP/16) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR. ITA NO. 779/JP/16 M/S SAURABH AGROTECH (P) LTD, ALW AR VS. THE ACIT, CIRCLE-1, ALWAR 8