Sh. Naresh Malhotra, Ludhiana V. ACIT,

ITA 846/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80934 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 14-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 846/CHD/2013 ASSESSMENT YEAR: 2009-10 SHRI NARESH MALHOTRA, VS THE ACIT-V, LUDHIANA LUDHIANA PAN NO. AFFPM4448M (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI. J.S. NAGAR DATE OF HEARING : 08/10/2014 DATE OF PRONOUNCEMENT : 17/10/2014 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DT 6.6.2103 OF CIT(A)-II, LUDHIANA . 2. IN THIS CASE NONE APPEARED DESPITE SERVICE OF NO TICE. HOWEVER, ON PERUSAL OF RECORDS IT WAS NOTICED THAT ISSUE CAN BE DECIDED ON EX.PARTE BASIS ,, THEREFORE, WE HAVE DECIDED THIS APPEAL ON EX.PARTE BASIS. 3. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A)II LUDHIANA IS AGAINST LAW A ND FACTS ON THE FILE IN AS MUCH AS THE LD. CIT(A) WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD DISALLOWANCE OF RS. 2,49,652/- OUT OF A TOTAL DISALLOWANCE OF RS. 5,46, 600/- MADE U/S 14A. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAD MADE INVESTMENT OF RS. 10,94,89,566/-. INCOME FROM SUC H INVESTMENT COULD 2 NOT FORM PART OF THE TOTAL INCOME, THEREFORE, THE A SSESSING OFFICER ISSUED A SHOW CAUSE NOTICE THAT WHY DISALLOWANCE U/S 14A S HOULD NOT BE MADE. IN RESPONSE IT WAS STATED AS UNDER:- I) THE ASSESSEE CONCER5N IS A CASH RICH CONCERN AND HA S EARNED SUBSTANTIAL PROFITS OVER THE YEARS. THE SURPLUS FUN DS RETAINED IN THE BUSINESS OPERATIONS HAS BEEN INVESTED IN EQUITY/PRE FERENCE SHARES. FURTHER ALL THE INVESTMENTS ARE MADE BY THE ASSESSE E FROM ITS OWN FUNDS/INTEREST FREE FUNDS. II) THE ASSESSEE CONCERN HAS NOT INCURRED ANY FINANCIAL COST ON ACCOUNT OF BORROWED FUNDS AND OWN FUNDS/INTEREST FREE FUNDS WERE USED FOR MAKING INVESTMENTS IN THE EQUITY SHARES SO THE PROV ISIONS OF SECTION 14 A DOES NOT APPLY TO THE ASSESSEE CONCERN FOR THE YE AR UNDER CONSIDERATION. III) THE ASSESSEE CONCERN HAS NOT DERIVED ANY INCOME ON THE INVESTMENTS HELD THEREFORE THE CLAUSE 8D(1)(I) RELATING TO THE AMOUNT OF THE EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM THE PART OF TOTAL INCOME IS NOT APPLICABLE FOR THE YEAR UNDER C ONSIDERATION. IV) THE ASSESSEE-COMPANY HAS NOT INCURRED ANY FINANCIAL COST DURING THE YEAR UNDER CONSIDERATION THEREFORE CLAUSE 8D(2)(II) IS ALSO NOT APPLICABLE. FURTHER THE RELIANCE IN THIS REGARD MAY BE PLACED O N THE BELOW MENTIONED JUDGMENTS OF JURISDICTIONAL PUNJAB & HARYANA HIGH C OURT:- A) COMMISSIONER OF INCOME TAX V/S HERO CYCLES LIMIT ED WHERE IN IT WAS HELD THAT DEDUCTION DISALLOWANCE OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME- DIVIDEND INCOME- DISALLOWANCE NOT PERMISSIBLE WHERE NO NEXUS BETWEEN EXPENDITURE INCU RRED AND INCOME GENERATED- INCOME TAX ACT, 1961, SECTION 14A. B) COMMISSIONER OF INCOME TAX V/S WINSOME TEXTILE I NDUSTRIES LIMITED WHEREIN IT WAS HELD DEDUCTION DISALLOWANCE OF E XPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ACQUISITION OF SHARES USING ASSESSEES OWN FUNDS- NO INTEREST EXPENDITURE INCURRED NO CLAIM MADE FOR EXEMPTION NO DISALLOWANCE WARRANTED UNDER SEC TION 14 A INCOME TAX ACT 1961, SECTION 14 A. 3 THEREAFTER, THE ASSESSING OFFICER DISCUSSED THE PR OVISIONS OF SECTION 14A IN DETAIL AND COMPUTED THE DISALLOWANCE UNDER RULE 8-D(2)( 3) AMOUNTING TO RS. 5,46,400/-. 5. ON APPEAL IT WAS MAINLY STATED THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THEREFORE, SECTION 14A WAS NOT APPLI CABLE. FURTHER, THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WAS RS. 2,49,652/-, THEREFORE, DISALLOWANCE CANNOT BE MADE FOR RS. 5,46,400/- THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY IF ACTUAL EXPENSES INCURRED ARE LESS THAN RS. 5,46,400/- THEN TO LIMIT THE DISALLOWANCE ONLY UP TO THIS AMOUNT. 6. BEFORE US LD. DR SUBMITTED THAT ASSESSEE HAD MAD E INVESTMENT IN THE ASSETS, INCOME FROM WHICH IS EXEMPT AND SINCE A SSESSMENT YEAR INVOLVED IS 2009-10, THEREFORE, RULE 8-D IS APPLIC ABLE. 7. AFTER CONSIDERING THE SUBMISSIONS OF LD. DR WE FIND THAT HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V LA KHANI MARKETING LTD ITA NO. 970 OF 2008 HAS CLEARLY HELD THAT IF THERE IS NO EXEMPT INCOME THEN SECTION 14A IS NOT ATTRACTED. SINCE ASSESSEE HAS PLEADED BEFORE ASSESSING OFFICER AS WELL AS CIT(A) THAT THERE WAS NO EXEMPT INCOME, THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT AND RE MIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO VERIFY THAT IF THERE IS NO EXEMPT INCOME DURING THE YEAR THEN NO DISALLOWANCE SHOULD BE MADE OTHERWISE THE ISSUE CAN BE DECIDED IN ACCORDANCE WI TH THE DIRECTION OF LD. CIT(A). 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.10.2014. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH OCTOBER, 2014 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR 4