M/s. Persang Alloy Industries Pvt.Ltd., Baroda V. Income Tax Officer, Ward-2(1)(1), Baroda

ITA 935/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6088 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT ZAVERI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 935/AHD/2016 (ASSESSMENT YEAR: 2012-13) M/S. PERSANG ALLOY INDUSTRIES PVT. LTD. 188/7, GIDC ESTATE, WAGHODIA, BARODA, GUJARAT V/S INCOME TAX OFFICER, WARD- 2 (1)(1), VADODARA (APPELLANT) (RESPONDENT) PAN: AAECP1424A APPELLANT BY : NONE RESPONDENT BY : SHRI JAYANT ZAVERI, SR. D.R. ( )/ ORDER DATE OF HEARING : 15 -02-201 8 DATE OF PRONOUNCEMENT : 20 -02-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-2, VADODARA DATED 29.01.2016 PERTAINING TO A.Y. 2012-1 3. AN APPLICATION FOR THE ITA NO. 935/ AHD/2016 . A.Y. 2012-13 2 ADJOURNMENT OF THE APPEAL WAS FILED WHICH HAS DULY CONSIDERED AND REJECTED. WE DECIDED TO PROCEED EX-PARTE. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT AMOUNTING TO RS. 9,48,098/- . 3. FACTS AS EMANATING FROM THE ASSESSMENT ORDER SHOW THAT DURING THE YEAR, THERE IS NO REFERENCE TO ANY EXEMPT INCOME EARNED BY THE ASSESSEE. SINCE, THERE IS NO EXEMPT INCOME; NO DISALLOWANCE IS TO BE MADE U/S. 1 4A OF THE ACT READ WITH RULE 8D. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CORRTECH ENERGY PVT. LTD. 372 ITR 97. GROUND NO. 1 IS ALLOWED. 4. GRIEVANCE RAISED VIDE GROUND NO. 2 RELATES TO THE C APITALIZATION OF INTEREST EXPENDITURE ON INVESTMENTS IN SHARES OF ASSOCIATE C OMPANY. 5. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THE ASSESSEE HAS GIVEN BORROWED FUNDS WHICH HAVE BEEN U TILIZED FOR THE PURPOSES OF INVESTMENT IN SHARES OF SISTER CONCERN. SINCE TH E INVESTMENT IN THE SHARES WERE NOT BUSINESS OF THE ASSESSEE, THEREFORE, INTER EST EXPENDITURE INCURRED ON BORROWED FUNDS WAS DISALLOWED U/S. 36(1)(III) OF TH E ACT. 6. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE INTEREST ON BORROWED FUNDS INVESTED IN SHARES C AN ONLY BE CAPITALIZED WITH THE COST OF SHARES BECAUSE THE SHARES ARE THE CAPIT AL ASSETS. SUPPORT WAS DRAWN FROM THE DECISION OF THE HONBLE HIGH COURT OF DELH I IN THE CASE OF J.K. SYNTHETICS LTD. 200 TAXMANN.COM101. ITA NO. 935/ AHD/2016 . A.Y. 2012-13 3 7. WE HAVE CAREFULLY CONSIDERED THE ISSUE. THERE IS N O DENYING THAT THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSES OF INVESTMENT IN SHARES OF SISTER CONCERN. SINCE THERE IS A DIRECT NEXUS OF BORROWING AND INVE STMENT, THE FIRST APPELLATE AUTHORITY HAS RIGHTLY DIRECTED THE INTEREST TO BE C APITALIZED WITH THE COST OF SHARES. THEREFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO. 2 IS DISMISSED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20- 02- 20 18 SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNT ANT MEMBER AHMEDABAD: DATED 20 /02/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD