JCIT, Bangalore V. Priyaraj Electronics Ltd., Bangalore

ITA 867/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7384 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 27-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JOINT
• Assessee Lawyers: S GANESH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, B E NGAL U R U BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 867 / BANG/20 16 (ASSESSMENT YEAR: 20 09 - 10) JOINT COMMISSIONER OF INCOME - TAX (OSD), CIRCLE 5(1)(2), BENGALURU. VS. APPELLANT M/S.PRIYARAJ ELECTRONICS LTD., 18A/19, DODDANEKKUNDI INDUSTRIAL AREA, MAHADEVAPURA, BENGALURU - 560008. PAN: AABCP 3244 P RESPONDENT APPELLANT BY : SHRI B.R.RAMESH, JOINT CIT(DR) RESPONDENT BY : SHRI S.GANESH, ADVOCATE. DATE OF HEARING : 24/08/2017 DATE OF PRONOUNCEMENT : 27 /10/2017 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (AP PEALS) - 12, BENGALURU, DATED 12/02/2016 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 867 /BANG/201 6 PAGE 2 OF 4 2. BRIEFLY FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT - ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIONS O F THE COMPANIES ACT, 1956. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 WAS FILED ON 24/09/2009. SUBSEQUENTLY THIS RETURN OF INCOME WAS REVISED ON 24/11/2010 DECLARING LOSS OF RS .17,72,377/ - . AFTER PROCESSING THE SAID RETURN OF INCOME UNDER THE PRO VISIONS OF SECTION 143(1) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 15/12/2001 AT TOTAL INCOME OF RS.75,75,611/ - . WHILE DOING SO , THE ASSESSING OFFICER (AO) DISALLOWED A SUM OF RS.51,31,970/ - ON THE GROUND THAT BORROWED FUNDS WERE NOT USED FOR BUSINESS PURPOSE AND THIS DISALLOWANCE WAS AGREED TO BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ASSESSMENT ORDER, AN APPEAL WAS PREFER RED BEFORE THE CIT(A) CHALLENGING ADDITION U/S 14A ON THE GROUND THAT THE AO SHOULD NOT RESORT TO DISALLOWANCE U/S 14A WITHOUT GIVING A FINDING AS TO CORRECTNESS OR OTHERWISE OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOM E. IT WAS FURTHER CONTENDED THAT IN ITA NO . 867 /BANG/201 6 PAGE 3 OF 4 ANY EVENT, AMOUNT OF DISALLOWANCE SHOULD NOT EXCEED EXEMPT INCOME AS IN THE CURRENT YEAR, EXEMPT INCOME IS ONLY RS.3,380/ - AND DISALLOWANCE SHOULD BE LI MITED TO ONLY EXEMPT INCOME. THE CIT(A), AFTER CONSIDERING THE SUB MISSIONS OF THE RESPONDENT - ASSESSEE HELD AS FOLLOWS: 4. BEING AGGRIEVED BY THE ORDER OF THE CIT(A) RESTRICTING THE DISALLOWANCE U/S 14A TO THE EXTENT OF EXEMPT INCOME EARNED OF RS.3,380/ - THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN RESTRICTING DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME SHOWN. 5. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. NOW LAW IS SETTLED THAT, DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT INCOME. SINCE THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH S ETTLED ITA NO . 867 /BANG/201 6 PAGE 4 OF 4 PROPOSITION OF LAW , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER , 201 7 S D/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : B EN GAL URU D ATE : 27 / 1 0/2017 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE