M/s Hanuman Roller Flour Mills Ltd., Sangrur V. Pr. CIT (Central), Ludhiana

ITA 834/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5306 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAJ
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.834/CHD/2017 ASSESSMENT YEAR: 2012-13 M/S HANUMAN ROLLER FLOUR MILLS LTD. VS. PR. CIT(C ENTRAL) JHAKHAL ROAD LUDHIANA SUNAM DISTT. SANGRUR PAN NO. AABCH0031N (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. JASPAL SHARMA REVENUE BY : SH. GULSHAN RAJ DATE OF HEARING : 31/10/2017 DATE OF PRONOUNCEMENT : 18/01/2018 ORDER PER DR. B.R.R. KUMAR A.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER U/S 263 OF THE LD. PR. CIT(CENTRAL), LUDHIANA DT. 15/03 /2017. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE IMPUGNED ORDER IS AGAINST FACTS AND ERRONEOUS I N LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. PR. CIT ERRED IN HAVING SET ASIDE THE ASSESSMENT ORDER DT. 20/02/2015 WHILE HOLDING THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. PR. CIT ERRED IN HAVING HELD THAT PROPORTIONATE DISALLOWANCE WAS CALLED FOR UNDER SECTION 14A OF THE INCOME TAX ACT. 4. THE LD. PR. CIT HAS ERRED IN HAVING HELD THAT PROVI SIONS OF SECTION 14A ARE APPLICABLE EVEN IF THERE IS NO EXEMPT INCOME DURING THE YEAR. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. PR. CIT ERRED IN HAVING DIRECTED THE AO TO WORK OUT THE DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. 6. THE LD. PR. CIT HAS ERRED IN HAVING HELD THAT SOME INTEREST BEARING FUNDS HAD GOT INTO INVESTMENTS IN M/S AVANI TEXTILES LTD. MERELY ON PRESUMPTIONS. 2 3. THE EFFECTIVE GROUND PERTAINS TO NON DISALLOWANC E OF INTEREST UNDER SECTION 14A OF THE INCOME TAX ACT IN THE ASSESSMEN T ORDER PASSED BY THE DCIT, CENTRAL CIRCLE PATIALA. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT ORDER WAS PASSED BY THE DCIT, CENTRAL CIRCLE LUDHIANA 20/02/2015 UNDER SECT ION 143(3) BY DISALLOWING EXPENSES CLAIMED UNDER THE HEAD VEHICLE EXPENSES, P ETTY EXPENSES TO THE TUNE OF RS. 80,000/-. 5. LATER LD. PCIT, CENTRAL LUDHIANA HAS EXAMINED TH E ASSESSMENT ORDER WITH REFERENCE TO SECTION 263. THE LD. PCIT HAS PASSED A N ORDER DT. 15/03/2017 DIRECTING THE ASSESSING OFFICER TO WORK OUT THE DIS ALLOWANCE UNDER SECTION 14A AS THE INVESTMENT MADE BY THE ASSESSEE IN M/S AVANI TEXTILES LTD. ARE BEING BROUGHT FORWARD SINCE FINANCIAL YEAR 2006-07 WHEN T HE INVESTMENTS WERE MORE THAN THE NET OWNED FUNDS. THE LD. PCIT HELD THAT SO ME AMOUNTS OF INTEREST BEARING FUNDS HAVE GOT INTO THE INVESTMENTS IN M/S AVANI TEXTILES LTD. AND HENCE PROPORTIONATE DISALLOWANCE IS THEREFORE CALLED FOR UNDER SECTION 14A. 6. AGGRIEVED WITH THE ORDER UNDER SECTION 263 OF TH E LD. PCIT, THE ASSESSEE FILED APPEAL BEFORE US. 7. DURING THE COURSE OF HEARING THE LD. AR SUBMITTE D THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE YEAR AND ALSO THE SHARE CAPITAL AND THE RESERVES AND SURPLUS OF THE COMPANY TOGETHE R STANDS AT RS. 146.28 LACS FOR THE YEAR ENDING 2010 AND RS. 153.05 LACS FOR TH E YEAR ENDING 2012 WHICH ARE MORE THAN THE INVESTMENTS MADE IN M/S AVANI TEXTILE S LTD. OF RS. 15900000/-. HE FURTHER ARGUED THAT SINCE NO EXEMPT INCOME HAS BEEN RECEIVED NO DISALLOWANCE IS CALLED FOR. 8. LD. DR STRONGLY RELIED ON THE ORDER OF THE LD. P CIT AND ARGUED THAT AS PER CIRCULAR NO. 5 OF 2014 OF CBDT THE DISALLOWANCE OU GHT TO HAVE BEEN MADE BY THE ASSESSING OFFICER AND TO THAT EXTENT THE ASSESS MENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. WE HAVE GONE THROUGH THE MATERIAL BEFORE US AND FIND THAT THE ASSESSEE HAS GOT SUFFICIENT OWN FUNDS REQUIRED FOR THE INVES TMENTS MADE IN M/S AVANI TEXTILES LTD. AND IN THE INSTANT CASE THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME, HENCE THE ISSUE STANDS COVERED BY THE JUDG EMENT OF JURISDICTIONAL 3 HIGH COURT IN THE CASE OF M/S LAKHANI MARKETING INC . (226 TAXMAN 45) WHEREIN IT WAS HELD THAT NO DISALLOWANCES ARISES IN THE ABSEN CE OF EARNING OF EXEMPT INCOME. SIMILAR VIEW HAS BEEN HELD BY THE HONBLE C OURT IN THE CASE OF CIT VS. HERO CYCLES LTD. [2010] 323 ITR 518/189 TAXMAN 50 A ND CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2019] 319 ITR 204. 10. SINCE THE FACTS AVAILABLE ON RECORD ARE DIRECT AND BASED ON THE JUDICIAL PRONOUNCEMENTS ON THE ISSUE OF DISALLOWANCE UNDER S ECTION 14A, THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. SINCE WE FIND THAT THE ORDER P ASSED BY THE LD. PCIT UNDER SECTION 263 IS PRIMAFACIE NOT JUSTIFIABLE AND WE SET ASIDE THE ORDER. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R.K UMAR) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED : 18/01/2018 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR