M/S APM INDUSTRIES LTD., Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, Alwar

ITA 833/JPR/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8983 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 22-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAN SINGH ADD
• Assessee Lawyers: S L PODDAR
• 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 FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 833/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15 M/S APM INDUSTRIES LTD. SP-147, RIICO, INDUSTRIAL AREA, BHIWADI, ALWAR. CUKE VS. THE ACIT, CIRCLE-2, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA 5114 G VIHYKFKHZ@ APPELLAN T IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.L. PODDAR (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAN SINGH (ADD. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 10/10/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 15/10/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) ALWAR DATED 08.05.2018 FOR THE ASSESSMENT YE AR 2014-15 WHEREIN THE SOLE GROUND OF APPEAL RELATES TO CONFI RMATION OF ADDITION OF RS. 12,24,717/- UNDER SECTION 14A OF THE ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 1,98,605/- WHICH HA S BEEN CLAIMED AS ITA NO. 833 /JP/2018 M/S APM INDUSTRIES LTD. VS. ACIT 2 EXEMPT INCOME. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO JUSTIFY WHETHER THE AMOUNT DISALLOWED B Y THE ASSESSEE AMOUNTING TO RS. 5,51,643/- IS AS PER SECTION 14A O F THE ACT R.W. RULE 8D. THEREAFTER, CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE VALUE OF THE INVESTMENT REFLECTED IN THE BALANCE SH EET, THE AO RECOMPUTED THE DISALLOWANCE AS PER RULE 8D WHICH CO MES TO RS. 17,76,360/- AND THE DIFFERENCE AMOUNT OF RS. 12 ,24,717/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SUSTAINED THE SAID DISALLOWA NCE. 4. DURING THE COURSE OF HEARING, THE LD. AR HAS SUB MITTED THAT OUT OF TOTAL INVESTMENT OF RS. 12,57,74,026/- AS ON 31.03. 2014, THE INVESTMENT IN M/S V.S. LIGNITE POWER PVT. LTD. AMOU NTING TO RS. 2,37,02,610/- HAS NOT YIELD DIVIDEND INCOME DUR ING THE YEAR. FURTHER, IN RESPECT OF INVESTMENT IN IIFLME NFO & R ELIANCE MONEY MANAGER AMOUNTING TO RS. 4,00,00,000/-, THE INCOME THEREON IS TAXABLE IN THE HANDS OF THE ASSESSEE AND THE SAME HAS NOT B EEN CLAIMED AS EXEMPT. IT WAS ACCORDINGLY SUBMITTED THAT THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE SAME AND WHILE WORKING OUT THE DISALLOWANCE, THEY HAVE NOT EXCLUDED THESE INVESTMENTS FOR THE PU RPOSE OF COMPUTING THE DISALLOWANCE UNDER RULE 8D OF THE ACT. 5. IT WAS FURTHER SUBMITTED THAT A SIMILAR ISSUE WA S INVOLVED IN ASSESSEES OWN APPEAL IN ITA NO. 239/JP/2017 DATED 02.05.2018 FOR THE ITA NO. 833 /JP/2018 M/S APM INDUSTRIES LTD. VS. ACIT 3 A.Y. 2011-12 WHEREIN THE COORDINATE BENCH IN PARA 8 HAS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. IT IS NOT DISPUTED THAT OUT OF THE TOTAL INVESTMENT OF RS. 1,75,97,416/-, A MAJOR PART OF THE INVESTMENT T O THE EXTENT OF RS. 1,11,42,220/- IS IN THE REDEEMABLE PREFERENCE SHARE S OF V.S. LIGNITE POWER PVT. LTD. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS PURCHASING THE POWER FROM THE SAID COMPANY AT A LOWER RATE TAR IFF IN COMPARISON TO THE JVVNL. HOWEVER, IN VIEW OF THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (SUPRA), THE DOMINANT PURPOSE OF SHARES HELD BY THE ASSESSEE ARE NOT RELEVANT FOR THE PURPOSE OF SECTION 14A OF THE IT ACT. THE ASSE SSEE HAS FURTHER POINTED OUT THAT THERE IS NO FRESH INVESTMENT FOR T HE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS NOT EARNED ANY D IVIDEND ON THE INVESTMENT MADE IN THE SHARES OF V.S. LIGNITE POWER PVT. LTD. ACCORDINGLY, TO THE EXTENT OF INVESTMENT MADE IN TH E SAID COMPANY THE DISALLOWANCE UNDER SECTION 14A IS NOT CALLED FOR AS THE ASSESSEE HAS NOT EARNED OR RECEIVED ANY DIVIDEND INCOME. AS REGA RDS THE REMAINING INVESTMENT, SINCE THE ASSESSEE HAS CONSIDERED THE P ROPORTIONATE DISALLOWANCE ON THE OTHER INVESTMENT, THEREFORE, TH E MATTER IS SET ASIDE TO THE RECORD OF THE AO FOR RE-COMPUTATION OF THE D ISALLOWANCE UNDER SECTION 14A BY EXCLUDING THE INVESTMENT IN THE SHAR ES OF V.S. LIGNITE POWER PVT. LTD. AS THE ASSESSEE HAS NOT RECEIVED AN Y DIVIDEND INCOME ON THE SAID INVESTMENT. FURTHER, THE AO HAS ALSO N OT MADE ANY DISALLOWANCE UNDER SECTION 14A IN RESPECT OF THE SA ID INVESTMENT FOR THE ASSESSMENT YEAR 2010-11 WHILE PASSING THE ORDER IN THE SET ASIDE PROCEEDINGS. ACCORDINGLY, THE ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR LIMITED PURPOSE OF RE-COMPUTING DISALLOWANCE. ITA NO. 833 /JP/2018 M/S APM INDUSTRIES LTD. VS. ACIT 4 6. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDIN GS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE ASSESS MENT ORDER, IT IS NOTED THAT THE ASSESSING OFFICER HAS CONSIDERED THE INVESTMENT ON 31.03.2013 AMOUNTING TO RS. 8,07,74,026/- AND INVES TMENT ON 31.03.2014 AMOUNTING TO RS. 12,57,74,026/- AND HAS COMPUTED THE DISALLOWANCE UNDER RULE 8D AMOUNTING TO RS. 17,76,3 60/-. THE INVESTMENT AS ON 31.03.2014 AMOUNTING TO RS. 12,57, 74,026/- COMPRISES OF INVESTMENT IN GOVERNMENT SECURITIES, S HARES IN M/S V.S. LIGNITE POWER PVT. LTD, INVESTMENT IN EQUITY SHARES , INVESTMENT IN IIFLME NFO & RELIANCE MONEY MANAGER AND INVESTMENT IN IIFCL TAX FREE BOND & HUDCO TAX FREE BOND, THE DETAILS THEREO F ARE APPEARING AT PAGE 5 OF THE LD. CIT(A) ORDER. THE LD. AR HAS CONT ENDED THAT THE INVESTMENT IN M/S V.S. LIGNITE POWER PVT. LTD. HAS NOT YIELDED ANY DIVIDEND INCOME DURING THE YEAR. FURTHER, INCOME ON INVESTMENT IN IIFLME NFO & RELIANCE MONEY MANAGER IS FULLY TAXABL E. IN OUR VIEW, THE DISALLOWANCE U/S 14A OF THE ACT IS THEREFORE NOT CA LLED FOR IN RESPECT OF THESE INVESTMENTS AS THE ASSESSEE HAS NOT EARNED OR RECEIVED ANY DIVIDEND INCOME ON INVESTMENT IN V.S. LIGNITE POWER PVT. LTD. AND AS FAR AS INVESTMENT IN IIFLME NFO & RELIANCE MONEY MANAGE R IS CONCERNED, THE SAME WILL NOT BE SUBJECT TO ANY DISALLOWANCE UN DER SECTION 14A AS INCOME THEREOF HAS BEEN CLAIMED AS TAXABLE IN THE H ANDS OF THE ASSESSEE. IT HAS BEEN FURTHER CONTENDED THAT WHERE THE AFORESAID TWO INVESTMENTS ARE EXCLUDED, THE DISALLOWANCE UNDER SE CTION 14A WOULD BE RS 551,643 AS DISALLOWED BY THE ASSESSEE IN ITS RET URN OF INCOME. ITA NO. 833 /JP/2018 M/S APM INDUSTRIES LTD. VS. ACIT 5 ACCORDINGLY, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THESE FACTS AS CONTENDED BY THE LD. AR AN D RECOMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISPOS ED OFF IN LIGHT OF ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 15/10/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15/10/2018. * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S APM INDISTRIES LTD., ALWAR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-2, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 833/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR