Assistant Commissioner of Income Tax, Circle-3(1), Vijayawada V. Radhakrishna Automobiles Pvt.Ltd., Vijayawada

MA 1/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9828 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Earning of tax free income; Tax effect; Commercial expediency; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER M A NO. 0 1 / VIZ /201 9 (ARISING OUT OF ITA NO.511/VIZ/2017) (ASST. YEAR : 20 13 - 14 ) DCIT, CIRCLE - 2(1), VIJAYAWADA. V S . M/S. RADHAKRISHNA AUTOMOBILES PVT. LTD., D.NO. 27 - 33 - 46, GUDAVALLIVARI STREET, GOVERNORPET, VIJAYAWADA. PAN NO. AADCR 2845 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.P. RAMA SWAMY ADV . DEPARTMENT BY : SMT. SUMAN MALIK SR. DR DATE OF HEARING : 22 / 0 3 /201 9 . DATE OF PRONOUNCEMENT : 03 / 0 4 /201 9 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER BY FILING THIS MISC. APPLICATION , REVENUE SEEKS FOR RECALLING OF THE ORDER PASSED BY T H IS TRIBUNAL IN ITA NO. 511/VIZ/2017 BY ORDER DATED 22/11/2017 . 2. FACTS OF THE CASE IN BRIEF ARE THAT T HE DEPARTMENT ORIGINALLY FILED AN APPEAL BY RAISING THE FOLLOWING GROUNDS: - 1. THE LD.CIT (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LD.CIT (APPEALS) ERRED IN HOLDING THAT NO DISALLOWANCE 2 M A NO. 01/VIZ/2019 ( M/S. RADHA KRISHNA AUTOMOBILES PVT. LTD. ) U/S. 14A R.W. RULE 8D IS WARRANTED SINCE THERE IS NO EXEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. 3. THE LD.CIT (APPEALS) HAS DELETED THE ADDITION MADE TOWARDS DISALLOWANCE OF EXPENDITURE OF 7,37,080/ - U/S.14A IGNORING THE FACT THAT THE ASSESSING OFFICER HAS FOLLOWED THE CLARIFICATIO N GIVEN BY THE CBDT VIDE CIRCULAR NO.5/201 4, DATED 11 - 2 - 2014, THAT RULE - 8 D OF THE I.T.RULES R.W.S. 14A OF THE I.T.ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE THE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 4. THE LD.CIT (APPEALS) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF INTEREST TO 7,93,334/ - AS AGAINST 40,56,620/ - MADE BY THE AO TAKING INTO ACCOUNT ONLY THE AMOUNT LENT DURIN G THE YEAR WHICH IS RS. 66,11,114/ - IGNORING THE OPENING BALANCE. 5. THE LD.CIT (APPEALS) HAS ERRED IN ACCEPTING THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF S.A.BUILDERS 288 ITR 1 (SC) WHICH WAS RENDERED IN THE CONTEXT OF COMMERCIAL EXPEDIENCY WHEREAS IN THE PRESENT CASE THE ASSESSEE HAS NOT BROUGHT O UT ANY EVIDENCE ON RECORD TO SHOW THAT THERE EXISTED A COMMERCIAL EXPEDIENCY IN LENDING THE FUNDS INCLUDING THAT OF THE OPENING BALANCE OF THE YEAR. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING. 3 . THE APPEAL FILED BY THE DEPARTMENT WAS HEARD ON 30/10/2017 AND ORDER PRONOUNCED ON 22/11/2017. SUBSEQUENTLY, THE DEPARTMENT HAS FILED M . P . NO. 19/VIZ/2018 AND RAISED A GROUND THAT GROUND NO. 4 HAS NOT BEEN ADJUDICATED BY THE TRIBUNAL AND REQUESTED FOR ADJ U DI CATION OF THE SAME. THE TRIBUNAL BY ORDER DATED 09/05/2018 RECALLED THE ORDER ONLY TO ADJUDICATE THE GROUND NO.4. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. 3 M A NO. 01/VIZ/2019 ( M/S. RADHA KRISHNA AUTOMOBILES PVT. LTD. ) 3. WE HAVE HEARD THE LD. D.R. WE FIND THAT THE TRIBUNAL WHILE PASSING THE ORDER IN ITA NO.511/VIZAG/2017 DATED 22.11.2017 FAILED TO ADJUDICATE THE FOLLOWING GROUND: 4. THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF INTEREST TO ` 7,93,334/ - AS AGAINST RS. 40,56,620/ - MADE BY T HE A.O. TAKING INTO ACCOUNT ONLY THE AMOUNT LENT DURING THE YEAR WHICH IS RS. 66,11,114/ - IGNORING THE OPENING BALANCE. 4. WE FIND THAT THERE IS A MISTAKE APPARENT ON RECORD IN THE ORDER PASSED BY THE TRIBUNAL FOR NOT ADJUDICATING THE GROUND NO.4, THEREFOR E, IT HAS TO BE RECALLED. ACCORDINGLY, THE ORDER PASSED VIDE ITA NO.511/VIZAG/2017 IS RECALLED ONLY TO LIMITED EXTENT I.E. TO ADJUDICATE GROUND NO.4 AND FIX THE HEARING ON 27.07.2018 . REGISTRY IS DIRECTED TO ISSUE NOTICE ACCORDINGLY. 5. IN THE RESUL T, THE MISCELLANEOUS PETITION FILED BY THE REVENUE IS ALLOWED. 4 . ACCORDINGLY, THE APPEAL WAS HEARD ON 17/09/2018 AND ORDER WAS PRONOUNCED ON THE SAME DAY BY DISMISS ING THE APPEAL OF THE REVENUE ON THE GROUND THAT THE TAX EFFECT INVOLVED IN THIS APPEAL IS BELOW RS. 20.00 LAKHS AND AS PER CBDT NO 03/2018 DATED 11/07/2018 , THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE . AGAINST THE SAME, THE DEPARTMENT HAS FILED M.A.NO. 01/VIZ/2019 AND SUBMITTED THAT CBDT CIRCULAR NO . 03/2018 HAS NO APPLICATION AND THEREFORE, SAME MAY BE RECALLED. WHEN WE SPECIFICALLY POINTED OUT WHY CBDT CIRCULAR IS NOT APPLICABLE IN THIS CASE , LD.DR SIMPLY SUBMITT ED THAT ONCE CASE IS RECALLED, C IRCULAR HAS NO APPLICATION. SH E IS NOT ABLE TO POIN T OUT ANYTHI NG FROM THE CIRCULAR. 4 M A NO. 01/VIZ/2019 ( M/S. RADHA KRISHNA AUTOMOBILES PVT. LTD. ) 5. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE TAX EFFECT INVOLVED IN TH E APPEAL INCLUDING THE GROUND WHICH IS DISPOSED OF BY THE TRIBUNAL IN EARLIER IS BELOW RS.20.00 LAKHS, THEREFORE, THE APPEA L IS NOT MAINTAINABLE AND PRESENT MISC. APPLICATION CANNOT SURVIVE. 6 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. 7 . THE DEPARTMENT HAS ORIGINALLY FILED AN APPEAL AND RAISED TWO GROUNDS AGAINST THE ORDER OF THE LD. CIT(A). THE TAX EFFECT IN BOTH THE GROUNDS IS BELOW RS. 20.00 LAKHS. INADVERTENTLY THE TRIBUNAL HAS ONLY CONSIDERED GROUND NO.3 RAISED BY THE DEPARTMENT AND NOT GROUND NO.4. THE GROUND NO.4 SUBSEQUENTLY AD JUDICATED ON THE GROUND THAT TAX EFFECT IS BELOW RS. 20.00 LAKHS. WE FIND THAT THE TAX EFFECT INVOLVED IN RESPECT OF GROUND NO.4 RAISED BY THE DEPARTMENT IS ALSO BELOW RS. 20.00 LAKHS, EVEN OTHERWISE THE ENTIRE TAX EFFECT INVOLVED IN BOTH THE GROUNDS I . E. GROUND NOS. 3 & 4 IS BELOW RS. 20.00 LAKHS. THEREFORE, CBDT CIRCULAR NO. 03/2018 DATED 11/07/2018 IS RETROSPECTIVE IN NATURE AND THEREFORE , SQUARELY APPLI CABLE TO THE REVENUES APPEAL, HENCE , THIS MISC. APPLICATION FILED BY THE DEPARTMENT DESERVES TO BE DISMISSED. ACCORDINGLY, DISMISSED. 5 M A NO. 01/VIZ/2019 ( M/S. RADHA KRISHNA AUTOMOBILES PVT. LTD. ) 8 . IN THE RESULT, MISC. APPLICATION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 0 3 R D DAY OF APRIL , 201 9 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 3 R D APRIL , 201 9 . VR/ - COPY TO: 1. THE ASSESSEE M/S. RADHAKRISHNA AUTOMOBILES PVT. L TD., D.NO. 27 - 33 - 46, GUDAVALLIVARI STREET, GOVERNORPET, VIJAYAWADA. 2. THE REVENUE DCIT, CIRCLE - 2(1), VIJAYAWADA. 3. THE PR. CIT , VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.