VIJAY INDUSTRIES, Alwar V. DEPUTY COMMISSIONER OF INCOME TAX, Alwar

ITA 998/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2035 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Keywords: Rule of consistency; Earning of tax free income; Onus to prove
• 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; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 998/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. M/S. VIJAY INDUSTRIES CINEMA ROAD, KHAIRTHAL, DISTT. ALWAR. CUKE VS. THE DCIT, CIRCLE - 1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFV 7282 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PC PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.03.2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 08/03.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 6 TH OCTOBER, 2017 OF LD. CIT (A), ALWAR FOR THE ASSESSMENT YEA R 2008-09. THE ASSESSEE HAS RAISED THE SOLITARY GROUND IN THIS APPEAL AS UNDER :- THAT THE LD. ASSESSING OFFICER HAS ERRED IN LAW A S WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE DASE IN NOT ALLOWING THE D EDUCTION OF RS. 253417.00 IN SET ASIDE ASSESSMENT PROCEEDINGS AND D ISALLOWED THE SAME BY INVOKING THE PROVISIONS OF SECTION 14A OF T HE I.TAX ACT 1961 AND LD. CIT (A) HAS ERRED IN SUSTAINING THE SAME. 2. THE ISSUE RAISED IN THIS APPEAL OF THE ASSESSEE IS REGARDING DISALLOWANCE MADE BY THE AO UNDER SECTION 14A OF THE IT ACT IN RESPEC T OF THE INVESTMENT IN SHARES OF RS. 18,77,160/-. THIS IS SECOND ROUND OF APPEAL AS IN THE FIRST ROUND THIS TRIBUNAL 2 ITA NO. 998/JP/2017 M/S. VIJAY INDUSTRIES, ALWAR. VIDE ITS ORDER DATED 4 TH DECEMBER, 2014 IN ITA NO. 825/JP/2011 REMITTED THE MATTER TO THE RECORD OF THE AO WITH THE DIRECTION AS CONTA INED IN PARA 10.1 AS UNDER :- 10.1. HOWEVER, WITH RESPECT TO THE INVESTMENT I N SHARES OF INDIAN COMPANIES (GROUP COMPANIES) OF RS. 18,77,160/-, WE FIND THAT THE ITAT HAS GIVEN A DIRECTION TO THE AO TO INVOKE THE PROVISIONS OF SECTION 14A ONLY IF THE RELATION OF EXPENSES OF EXEMPT INCO ME IS ESTABLISHED. AFTER CONSIDERING PLEADINGS OF BOTH THE SIDES AND C ASE LAWS, WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO DECIDE AFRESH A S PER LAW. THUS THE TRIBUNAL SET ASIDE THE ISSUE TO THE RECORD OF THE AO TO DECIDE THE SAME AFRESH BY CONSIDERING THE RELATION OF EXPENSES INCU RRED FOR EARNING THE EXEMPT INCOME. IN THE SET ASIDE PROCEEDINGS, THE AO HAS R EPEATED THE DISALLOWANCE UNDER SECTION 14A AND CONSEQUENTLY THE ASSESSEE CHALLENGE D THE ACTION OF THE AO BEFORE THE LD. CIT (A). THE LD. CIT (A) DELETED THE ADDIT ION/DISALLOWANCE MADE BY THE AO ON THIS ACCOUNT BY CONSIDERING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07. 3. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. D/R HAS SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT IN THE ABSENCE OF COMPLETE DETAILS FILED BEFOR E THE AO, THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THAT THE INVESTMENT IN SHARES WAS MADE OUT OF INTEREST FREE FUNDS AND NOT THE INTEREST BEARING FU NDS. THUS HE HAS SUBMITTED THAT THE ASSESSEE HAS NOT COMPLIED WITH THE DIRECTIONS O F THE TRIBUNAL IN SET ASIDE PROCEEDINGS. 3 ITA NO. 998/JP/2017 M/S. VIJAY INDUSTRIES, ALWAR. 3.1. ON THE OTHER HAND, THE LD. A/R HAS SUBMITTED T HAT THE ASSESSEE FILED COMPLETE DETAILS BEFORE THE AO AND THE DIRECTION OF THE TRIB UNAL WAS TO ESTABLISH THE NEXUS BETWEEN THE BORROWED FUND AND THE INVESTMENT AS REQ UIRED BY THE AO AND NOT BY THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE IN VESTMENT IN QUESTION IS OLD INVESTMENT MADE BETWEEN THE ASSESSMENT YEARS 1992-9 3 TO 2001-02. THERE IS NO FRESH ASSESSMENT DURING THE YEAR AND, THEREFORE, TH IS IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 17.06.2016 IN ITA NO. 673/JP/2015. HENCE THE LD. A/R HAS SUBMITTED THAT THE MATTER IS COVERED BY THE DECISIO N OF THIS TRIBUNAL IN ASSESSEES OWN CASE. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET WE NOTE THAT THE INVESTMENT I N SHARES OF RS. 18,77,160/- IS OLD INVESTMENT MADE DURING THE ASSESSMENT YEARS 1992-93 TO 2001-02. THEREFORE, THERE IS NO DISPUTE THAT THERE IS NO FRESH INVESTME NT DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNT OF INVESTMENT REMAINS SAME AS IT WAS FOR THE ASSESSMENT YEAR 2006-07. IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. THESE TWO FACTS REMAINED CONSTANT AND UNDISPUTED. THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE HAS HELD IN PARA 6 AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AS PE R COORDINATE BENCHS DECISION DATED 23/09/2011 PASSED IN ITA NO. 902/JP/2010 AND 4 ITA NO. 998/JP/2017 M/S. VIJAY INDUSTRIES, ALWAR. 952/JP/2010 IN ASSESSEES OWN CASE, THE ISSUE HAS B EEN SET ASIDE IN FOLLOWING TERMS THE A.O. SHOULD ESTABLISH THE NEX US BETWEEN THE BORROWED FUND AND INVESTMENT IN SHARES AND WILL ACC ORDINGLY DISALLOWED THE INTEREST. AT THE TIME OF SET ASIDE PROCEEDINGS BEFORE THE LD ASSESSING OFFICER, THE ASSESSEE HAS SUBMITTE D FUND FLOW STATEMENT AS ON 31.2.2005 AND 31.3.2006. THE ASSESS EE HAS BORROWED FUND AT RS. 6.58 CRORES, WHICH HAS BEEN UTILIZED IN STOCK IN TRADE, DEBTORS, CASH AND BANK AND LOAN ADVANCES TO THE TUN E OF RS. 7.83 CRORES AS ON 31.3.2006. THE LD. ASSESSING OFFICER H AS NOT ESTABLISHED ANY NEXUS BETWEEN THE INTEREST BEARING BORROWED FUN D AND INVESTMENT MADE ON THE BASIS OF FUND POSITION SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. HE ASKED THE ASSESSEE T O FILE THE DETAILS ON THE BASIS OF DAY TO DAY BASIS OF INVESTMENT MADE IN SHARES AND ON PARTICULAR DATE, CASH AVAILABLE WITH THE ASSESSEE. IT IS UNDISPUTED FACT THAT THIS INVESTMENT IN SHARES AT RS. 18,77,160/- H AS BEEN MADE IN A.Y. 1992-93 TO 2001-02. THESE FACTS HAVE NOT BEEN CONTR OVERTED BY THE LOWER AUTHORITIES AS WELL AS DR DURING THE COURSE O F HEARING. DURING THE YEAR THE ASSESSEE DOES NOT HAVE DIVIDEND INCOME AND NO INVESTMENT HAS BEEN MADE DURING THE YEAR IN SHARES BUT ALL THE INVESTMENTS ARE CARRY FORWARDED FROM A.Y. 1992-93.T HE LD. CIT (A) RELIED ON THE DECISION OF ITAT DELHI (SPECIAL BENCH ) IN THE CASE OF CHEMINVEST LTD. VS. ITO (SUPRA) WHEREIN IT HAS BEEN HELD BY THE COORDINATE BENCH OF DELHI ITAT THAT IN POSITION OF NO DIVIDEND INCOME, DISALLOWANCE CAN BE MADE BY THE ASSESSING OFFICER U /S 14A, WHICH HAS BEEN OVERRULED BY THE HONBLE DELHI HIGH COURT VIDE ORDER DATED 2.9.2015 AND HELD THAT THERE SHOULD BE ACTUAL RECEI PT OF INCOME FOR DISALLOWANCE U/S 14A OF THE ACT. THE OTHER ARGUMEN TS OF THE ASSESSEE ALSO SUPPORT THAT THE ASSESSEE HAS EXEMPT FUND PART ICULARLY RESERVE AND SURPLUS TO MAKE INVESTMENT IN THE SHARES. THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIE S & POWER LTD. (SUPRA) IS SQUARELY APPLICABLE. IN ABSENCE OF DIRECT NEXUS BETWEEN THE INTEREST 5 ITA NO. 998/JP/2017 M/S. VIJAY INDUSTRIES, ALWAR. BEARING FUND AND INVESTMENT IN SHARES, NO DISALLOWA NCE CAN BE MADE BY THE ASSESSING OFFICER U/S 14A. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD. CIT (A) AND ALLOW THE ASSESSEES APPEAL. ACCORDINGLY, WHEN THE FACTS REMAIN UNCHANGED FOR TH E YEAR UNDER CONSIDERATION AND THE TRIBUNAL HAS GIVEN A FINDING BASED ON THE SAME FACTS THEN TO MAINTAIN THE RULE OF CONSISTENCY, WE DECIDE THIS ISSUE AGAINST THE REVEN UE AND IN FAVOUR OF THE ASSESSEE. HENCE WE REVERSE THE ORDER OF LD. CIT (A). 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 08/03/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO ( VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 08/03/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. VIJAY INDUSTRIES, ALWAR. 2. THE RESPONDENT THE DCIT CIRCLE-1, ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 998/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 6 ITA NO. 998/JP/2017 M/S. VIJAY INDUSTRIES, ALWAR.