Champalal Surendra Sarda (HUF), CHENNAI V. ACIT, CHENNAI

ITA 782/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4392 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 31-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR IRS
• Assessee Lawyers: D ANAND
• Section: 14A

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC D BENCH, CHENNAI . , ! BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.782MDS/2017 ( / ASSESSMENT YEAR: 2012-13) M/S. CHAMPALAL SURENDRA SARDA (HUF), NO.7A, GODOWN STREET, CHENNAI 600 001 VS THE ACIT, NON-CORPORATE CIRCLE-11, CHENNAI 600 006. PAN: AAAHC5921J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI D. ANAND, ADVOCATE /RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, IRS /DATE OF HEARING : 06.06.2017 ! /DATE OF PRONOUNCEMENT : 07.06.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-13, CHENNAI DATED 25.01.2017 IN ITA NO.23/CIT(A)-13/201 2-13 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S.143 (3) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT HAS ERRED IN SUSTAINING THE 2 ITA N O.782/MDS/2017 ADDITION MADE BY THE LD.AO FOR RS.11,64,278/- INVOK ING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A HUF CARRYING ON THE BUSINESS OF WHOLESALE TRADING IN TE XTILES. INITIALLY THE RETURN WAS PROCESSION U/S.143(1) OF THE ACT AND SUB SEQUENTLY THE CASE WAS SELECTED UNDER CASS AND ASSESSMENT WAS FIN ALLY FRAMED U/S.143(3) OF THE ACT ON 26.03.2015, WHEREIN THE LD .AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND DISALLOWED THE INTEREST EXPENDITURE AMOUNTING TO RS.11,64,278/-, OUT OF THE AGGREGATE CLAIM OF RS.36,32,296/- AS INTEREST EXPENDITURE DURING TH E RELEVANT ASSESSMENT YEAR. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY RELYING ON VARIOUS DECISIONS. 4. AT THE OUTSET THE LD.AR SUBMITTED BEFORE US THAT THE ASSESSEES CAPITAL WAS RS.3.89 CRORES OUT OF WHICH INVESTMENT OF RS.2.26 CRORES WAS MADE FOR EARNING TAX FREE INCOME. IT WAS THERE FORE ARGUED THAT THE INTEREST EXPENSE INCURRED BY THE ASSESSEE CANNO T BE ATTRIBUTED TOWARDS THE INVESTMENT MADE FOR RS.2.26 CRORES BECA USE THE ENTIRE AMOUNT OF INVESTMENT OF RS.2.26 CRORES FLOWED FROM THE CAPITAL OF THE ASSESSEE WHICH IS INTEREST FREE FUND. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE REVENUE AUTHORITIE S. 3 ITA N O.782/MDS/2017 5. HAVING HEARD BOTH THE PARTIES, WE FIND MERIT IN THE SUBMISSION OF THE LD.AR. WHEN THE ASSESSEE HAD MADE INVESTMENT O F RS.2.26 CRORES OUT OF ITS INTEREST FREE FUNDS IE., FROM THE ASSESSEES OWN CAPITAL OF RS.3.89 CRORES, NO INTEREST EXPENSES CAN BE ATTRIBUTABLE TOWARDS SUCH INVESTMENTS. THE ASSESSEE IS AT LIBERT Y TO DEAL WITH ITS INTEREST FREE FUNDS IN WHATSOEVER MANNER IT DECIDES AND DEPLOY ITS INTEREST BEARING FUNDS FOR BUSINESS PURPOSES. THE I NTEREST EXPENSES ARISING OUT OF BORROWED FUNDS WHICH IS ASSIGNED IN THE BUSINESS OF THE ASSESSEE IS ALLOWABLE AS DEDUCTION AS PER THE P ROVISIONS OF THE ACT. FURTHER THE FACT THAT THE ASSESSEES CAPITAL OF RS.3.89 CRORES AND THE INVESTMENT OF RS.2.26 CRORES IS NOT IN DISP UTE. THEREFORE IN THE CASE OF THE ASSESSEE PROVISIONS OF SECTION 14A WILL NOT BE APPLICABLE BECAUSE THE INVESTMENTS ARE MADE FROM NO N-INTEREST BEARING FUND AND NO EXPENSE CAN BE ATTRIBUTABLE FOR MAKING SUCH INVESTMENT. FURTHER THE LD.A.O HAS NOT POINTED OUT ANY OTHER EXPENSE TOWARDS THE INVESTMENT MADE BY THE ASSESSEE FOR RS.2,26 CRORES. THEREFORE, WE ARE OF THE VIEW THAT IN THE C ASE OF THE ASSESSEE PROVISIONS OF SECTION 14A OF THE ACT WILL NOT BE APPLICABLE. ACCORDINGLY WE HEREBY DIRECT THE LD.AO TO DELETE TH E ADDITION MADE FOR RS.11,64,278/- INVOKING THE PROVISIONS OF SECTI ON 14A OF THE ACT. 4 ITA N O.782/MDS/2017 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 07 TH JUNE, 2017. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER '# /CHENNAI, $% /DATED 07 TH JUNE, 2017 JR % '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF