ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, Kota V. SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE, Kota

ITA 836/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2226 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 10-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHARA
• Keywords: Business expenditure; 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; IKWY 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. 836/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 ASSTT. COMMISSIONER OF INCOME- TAX CIRCLE-1, KOTA CUKE VS. M/S SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE PVT. LTD., 11-A, TALWANDI KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGCS222IN VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHARA (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/01/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 04/01/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 11.08.2017 FOR ASSESSMENT YEAR 2 013-14 WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEA L:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8,00,328/ - MADE BY THE AO U/S 14A OF THE I.T. ACT, 1961 R.W.R 8D OF THE I. T.RULES, 1962 AS AMENDED BY THE INCOME-TAX (13 TH AMENDMENT) RULES 2016 AND IN VIEW OF CBDT CIRCULAR NO. 05/2014. ITA NO. 836/JP/2017 ASSTT. COMMISSIONER OF INCOME-TAX, KOTA VS. MS SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE PVT. L TD., KOTA 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS MADE INVESTMENT OF RS. 1,60,78,414/- I N SHARES OF M/S SURYA BHUMI ESTATES PVT. LTD. AND INCOME FROM S UCH INVESTMENT IS NOT INCLUDIBLE WHILE COMPUTING THE TOTAL INCOME AND THE ASSESSEE HAS NOT DISALLOWED ANY EXPENSES U/S 14A OF THE ACT. IN RESPONSE TO THE SHOW CAUSE ISSUED BY THE ASSESSING OFFICER, THE ASS ESSEE SUBMITTED THAT M/S SURYA BHUMI ESTATES PVT. LTD., OWNED A LAN D & BUILDING SITUATED AT 10-A, TALWANDI, KOTA WHICH IS JUST ADJA CENT TO THE ASSESSEES HOSPITAL BUILDING AND THE INTENTION/PURPOSE BEHIND ACQUISITION OF 50% SHARE IN THE SAID COMPANY IS TO USE THEIR BUILDING FOR ITS HOSPITAL PURPOSE AND NOT FOR EARNING ANY TAX FREE INCOME. IT WAS FURTHER SUBMITTED THAT SPECIFIC INTEREST EXPENDITURE INCURR ED OF RS. 14,78,562/- INCURRED TOWARDS SAID INVESTMENT HAS NOT BEEN CLAIM ED IN THE PROFIT AND LOSS ACCOUNT BUT THE SAME HAS BEEN CLUBBED IN THE S HARE INVESTMENT ACCOUNT. IT WAS ACCORDINGLY SUBMITTED THAT NO DISAL LOWANCE IS MADE IN TERMS OF SECTION 14A OF THE ACT. THE SUBMISSION OF THE ASSESSEE WAS CONSIDERED BUT WAS NOT FOUND ACCEPTABLE BY THE ASSE SSING OFFICER AS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SCHE ME OF PROVISIONS OF SECTION 14A ARE VERY CLEAR AND THE PURPOSE/REASON F OR THE INVESTMENT HAVE NO BEARING WHILE DETERMINING THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT DO NOT FO RM PART OF THE TOTAL INCOME AS PER RULE 8D AND IT DOES NOT GIVE ANY IMMU NITY TO THE ASSESSEE FROM THE APPLICABILITY OF PROVISIONS OF SE CTION 14A. ACCORDINGLY, THE AO RECORDED HIS SATISFACTION TO TH E EFFECT THAT THE ASSESSEES CLAIMED WAS NOT FOUND ACCEPTABLE AND DI SALLOWANCE U/S 14A AND RULE 8D WAS COMPUTED AT RS. 8,00,328/- ITA NO. 836/JP/2017 ASSTT. COMMISSIONER OF INCOME-TAX, KOTA VS. MS SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE PVT. L TD., KOTA 3 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE COMP ANY WAS HAVING ITS OWN NON-INTEREST BEARING FUNDS TO THE EXTENT OF RS. 5,99,57,340/- AS AGAINST INVESTMENT OF RS. 1,60,78,414/- IN SHARES O F M/S SURYA BHUMI ESTATES PVT. LTD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAS NOT EARNED ANY INCOME FROM THE INVESTMENT IN SH ARES DURING THE YEAR UNDER APPEAL WHICH IS NOT INCLUDIBLE IN TOTAL INCOME. IT WAS FURTHER SUBMITTED THAT THE INTEREST EXPENDITURE OF RS. 14,7 8,562/- IN RELATION TO THE SAID INVESTMENT IN SHARES HAS NOT BEEN CLAIMED AS BUSINESS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT RATHER SAM E HAS BEEN CLUBBED IN SHARE INVESTMENT ACCOUNT. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE LD. CIT(A) ALLOWED THE NECESSARY R ELIEF TO THE ASSESSEE. IT WAS HELD BY THE LD. CIT(A) THAT THERE IS NO MENT ION IN THE ASSESSMENT ORDER OF ASSESSEE HAVING EARNED ANY EXEMPT INCOME O N HIS INVESTMENTS, MAJORITY OF WHICH WERE MADE IN THE EAR LIER YEARS. IT WAS FURTHER HELD THAT EVEN THOUGH THE AO HAS REFERRED T O THE CLARIFICATORY CIRCULAR ISSUED BY THE CBDT BUT HE HAS NOT IDENTIFI ED NECESSARY NEXUS BETWEEN INTEREST FREE FUNDS AND INTEREST BEARING FU ND BEING UTILIZED FOR THE PURPOSE OF MAKING THE SUBJECT INVESTMENT. FURTH ER, THE LD. CIT(A) REFERRED TO THE DECISION OF HONBLE DELHI HIGH COUR T IN CASE OF CHEMINVEST LTD. VS. CIT (2015) 61 TAXMAN.COM 118, W HEREIN IT WAS HELD THAT THE EXPRESSION DOES NOT FORM PART OF TOT AL INCOME IN SECTION 14A ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIP T OF INCOME WHICH IS INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME ITA NO. 836/JP/2017 ASSTT. COMMISSIONER OF INCOME-TAX, KOTA VS. MS SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE PVT. L TD., KOTA 4 IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVI OUS YEAR. THE LD. CIT(A) FURTHER REFERRED TO THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN CASE OF ACIT VS. VIREET INVESTMENT IN ITS ORDER DAT ED 22.06.2017 WHEREIN THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CHEMINVEST HAS BEEN FOLLOWED AND IT WAS HELD THAT ONLY THOSE I NVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING THE AVERAGE VALUE INVESTME NT WHICH YIELDED EXEMPT INCOME DURING THE YEAR. THE LD. CIT(A) ACCO RDINGLY HELD THAT SINCE NO EXEMPT INCOME HAS BEEN EARNED BY THE APPEL LANT DURING THE PREVIOUS YEAR, NO DISALLOWANCE IS WARRANTED AS PER THE PROVISIONS LAID DOWN U/S 14A R/W RULE 8D. IT WAS FURTHER HELD THAT THE AO HAD NOT BROUGHT OUT ANY NEXUS BETWEEN INTEREST BEARING FUND HAVING BEEN DIVERTED TOWARDS SUCH INVESTMENT OF RS. 1,60,78,414 /-. THE ADDITION OF RS. 800,328/- WAS ACCORDINGLY DELETED. NOW THE REVE NUE IS IN APPEAL BEFORE US AGAINST THE SAID FINDING OF LD. CIT(A). 4. THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF ASSESSING OFFICER. 5. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFOR E THE LD. CIT(A) AS WE HAVE NOTED ABOVE AND SUBMITTED THAT IN ASSESS EES OWN CASE FOR A.Y 2014-15 IN ITA NO. 671/JP/2017 DATED 09.10.2017 UNDER SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE CO-ORDINAT E BENCH OF THIS TRIBUNAL HAS DECIDED THE MATTER IN FAVOUR OF THE AS SESSEE COMPANY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS NOT EARNED ANY INCOME DURING THE YEAR IN RESPECT OF THE INVESTMENT IN SHARES OF M/S ITA NO. 836/JP/2017 ASSTT. COMMISSIONER OF INCOME-TAX, KOTA VS. MS SUDHA HOSPITAL & MEDICAL RESEARCH CENTRE PVT. L TD., KOTA 5 SURYA BHUMI ESTATES PVT. LTD. WHICH HAS BEEN CLAIME D AS EXEMPT IN THE YEAR UNDER CONSIDERATION AND NOT INCLUDIBLE IN THE TOTAL INCOME. IN VIEW OF THE SAME, FOLLOWING THE DECISION OF DELHI HIGH C OURT IN CASE OF CHEMINVEST LTD.(SUPRA), NO DISALLOWANCE IS WARRANTE D IN TERMS OF SECTION 14A READ WITH RULE 8D. SIMILAR VIEW HAS BE EN TAKEN BY THE COORDINATE BENCH FOR AY 2014-15. IN VIEW OF THE SA ME, WE ARE NOT INCLINED TO EXAMINE OTHER CONTENTIONS SO RAISED BY THE EITHER PARTIES. THE ORDER OF THE LD CIT(A) IS ACCORDINGLY CONFIRMED WHO HAS RIGHTLY DELETED THE DISALLOWANCE OF RS 8,00,328 MADE U/S 14 A OF THE ACT. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/01/2018. SD/- SD/- FOT; IKWY 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:- 04/01/2018 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S SUDHA HOSPITAL & MEDICAL RESEAR CH CENTRE PVT. LTD, KOTA 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. 836/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR