Gujarat Nippon Enterprises Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(1), Ahmedabad

ITA 940/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6065 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.940/AHD/2011 A.Y. 2005-06 GUJARAT NIPPON ENTERPRISES PVT. LTD. (FORMERLY KNOWN AS GUJARAT NIPPON BIMETALS PVT. LTD.), 404, SOHAM-2, NR. NAVRANG SCHOOL SIX ROADS, NAVRANGPURA, AHMEDABAD. PAN: AABCG 3516H VS INCOME TAX OFFICER, WARD 4(1), AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : MISS SURABHI SHARMA, SR.D.R., ASSESSEE(S) BY : SHRI M.J. SHAH, A.R. / DATE OF HEARING : 19/06/2014 / DATE OF PRONOUNCEMENT: 27/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-XX, AHMEDABAD, DATED 16.11.2010. AT THE OUTSET, LEARNED AR HAS STATED THAT ALTHOUGH IN THE GROUNDS OF APPEAL THE ADDITION OF RS.11,10,427/- WAS CHALLENGED BEING MADE U/S.36( I)(III) OF IT ACT BUT THE MAIN GRIEVANCE OF THE ASSESSEE IS NON CONSIDERA TION OF HIS STATEMENT AS RAISED THROUGH GROUND NO.3, REPRODUCED BELOW: THE CIT(A) HAS RELIED ON CERTAIN CASE LAWS IN THE APPELLATE ORDER WITHOUT THEY BEING PUT TO THE ASSESSEE OR ITS COUNS EL, WHEREIN ASSISTANCE ITA NO.940/AHD/2011 GUJARAT NIPPON ENTERPRISES PVT. LTD. VS. ITO, WARD 4(1) AHMEDABAD. A.Y. 2005-06. - 2 - COULD HAVE BEEN PROVIDED OR THEY COULD HAVE BEEN DE ALT WITH APPROPRIATELY BY THE ASSESSEE. 2. THE ASSESSEE-COMPANY IS A TRADING AND INDENTING AGENT. IT WAS NOTED BY THE AO AS PER THE ORDER PASSED U/S.143(3) DATED 20 TH OF DECEMBER, 2007 THAT ON ONE HAND THE ASSESSEE HAD PA ID INTEREST OF RS.14,57,944/-, BUT ON THE OTHER HAND LOANS WERE GI VEN TO THE PARTIES WITHOUT CHARGING ANY INTEREST. AFTER DETAILED DISCU SSION, THE AO HAS COMPUTED THE INTEREST DISALLOWANCE AT RS.11,10,427/ - AND TAXED IN THE HANDS OF THE ASSESSEE. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, A WRITTEN SUBMISSION WAS FILED AND THE LEARNED CIT( A) HAS REPRODUCED THE PORTION FROM THE ASSESSMENT ORDER AND THEREAFTE R HELD AS UNDER: 3.3 I HAVE GONE THROUGH THE CONTENTIONS AND SUBMIS SIONS OF THE AR CAREFULLY. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAD INT ERESTED BORROWED FUNDS FOR PURCHASE OF SHARES OF SEVERAL COMPANIES. THE IN TEREST EXPENSES INCURRED ON THESE BORROWED FUNDS USED FOR PURCHASE OF SHARES OF THE COMPANIES WAS TO THE EXTENT OF RS.11,10,427/-. THE INVESTMENTS IN THE SHARES OF THE COMPANIES HAVE NOT BEEN SHOWN BY THE APPELLANT AS STOCK IN TRADE BUT HAVE BEEN SHOWN AS INVESTMENTS. INVEST MENT IN SHARES OF THE COMPANY DOES NOT YIELD ANY TAXABLE INCOME TO THE AP PELLANT. THE INVESTMENT IN SHARES OF A COMPANY CAN ONLY YIELD DI VIDEND WHICH IS EXEMPT FROM TAXATION UNDER SECTION 10(33) OF THE IN COME TAX ACT 1961. THE SALE OF SHARES OF THE COMPANIES, BEING CAPITAL GAINS, WHICH WERE NOT TAXABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 3.3(I) IN VIEW OF THE FACT THAT MONEY WAS BORROWED ON INTEREST FOR INVESTMENT IN SHARES OF SEVERAL DIFFERENT COMPANIES IS UNDISPU TED. IT HAS BEEN HELD IN SEVERAL CASES THAT THE INTEREST PAID FOR ACQUISITIO N OF SHARES HELD AS INVESTMENT IS NOT ALLOWABLE UNDER S.36(L)(III) RATH ER DISALLOWANCE U/S 14A READ WITH S.36(L)(III) CAN BE MADE IN RESPECT OF TH E CLAIM OF INTEREST ON BORROWED CAPITAL INTERESTED IN PURCHASE OF SHARES O F DIFFERENT COMPANIES. ITA NO.940/AHD/2011 GUJARAT NIPPON ENTERPRISES PVT. LTD. VS. ITO, WARD 4(1) AHMEDABAD. A.Y. 2005-06. - 3 - 4. THE MAIN GRIEVANCE OF LEARNED AR, MR. M.J. SHAH BEFORE US IS THAT THE LEARNED CIT(A) HAD NOT DEALT WITH THE ARGUMENTS RAISED AND ALSO IGNORED THE WRITTEN SUBMISSIONS FILED. THROUGH THE WRITTEN SUBMISSION, IT WAS CLAIMED BY THE ASSESSEE THAT THE MONEY BORROWED ON INTEREST WAS USED FOR THE PURPOSE OF THE BUSINESS; HENCE, INTERE ST EXPENDITURE WAS ALLOWABLE AS PER THE PROVISIONS OF IT ACT. THE LEAR NED CIT(A) HAS NOT APPRECIATED CERTAIN FACTS THAT THE INVESTMENT IN CE RTAIN COMPANIES WAS FOR THE PURPOSE OF ACQUIRING CONTROLLING STAKE AND NOT FOR MERELY EARNING THE DIVIDEND INCOME. THROUGH THE SAID WRITTEN SUBMISSIO N, THE PATTERN OF THE SHARE HOLDING WAS ALSO DEMONSTRATED. THE ASSESSEE H AS ALSO CITED FEW DECISIONS PERTAINED TO THE SAID ISSUE BUT THAT TOO WAS NOT CONSIDERED BY THE LEARNED CIT(A). LEARNED AR HAS THEREFORE PLEADE D THAT IN THE FITNESS OF CIRCUMSTANCES THE MATTER SHOULD GO BACK TO CIT(A ) SO THAT THE SUBMISSIONS MADE CAN BE EXAMINED. 5. FROM THE SIDE OF THE REVENUE, LEARNED DR, MISS S URABHI SHARMA APPEARED AND SUPPORTED THE ORDER OF THE AO. 6. AFTER CONSIDERING THE TOTALITY OF THE CIRCUMSTAN CES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE DESER VES RECONSIDERATION AT THE STAGE OF LEARNED CIT(A). BEFORE US, LEARNED AR, MR. M.J. SHAH HAS PLACED ON RECORD THE SAID SUBMISSION WITH AN UNDERT AKING THAT THOSE WERE FILED BY LEARNED CIT(A), HOWEVER NOT CONSIDERED. IN THE LIGHT OF THIS ASSERTION AS WELL AS ON PERUSING THE ORDER OF LEARN ED CIT(A), WE DEEM IT PROPER TO RESTORE THIS ISSUE FOR DENOVO CONSIDERATI ON BY LEARNED CIT(A) AS PER LAW, NEEDLESS TO SAY, AFTER PROVIDING AN ADE QUATE OPPORTUNITY OF HEARING TO THE APPELLANT. THE APPELLANT IS ALSO DIR ECTED TO FULLY CO-OPERATE ITA NO.940/AHD/2011 GUJARAT NIPPON ENTERPRISES PVT. LTD. VS. ITO, WARD 4(1) AHMEDABAD. A.Y. 2005-06. - 4 - WITH THE PROCEEDING; HENCE SHALL APPEAR BEFORE LEAR NED CIT(A) ON ITS OWN WITHOUT WAITING FOR ANY FORMAL NOTICE OF HEARING WI THIN 15 DAYS ON RECEIPT OF THIS ORDER SO THAT THIS TRIFLE ISSUE CAN BE DECIDED QUICKLY. RESULTANTLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE ONLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 27/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD