M/s Avon Cycles Ltd., Ludhiana V. ACIT, Ludhiana

MA 75/CHANDI/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 1253 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER M.A. NO.75 /CHD/2013 (IN ITA NO.1143 /CHD/2011 & C.O.NO.1/CHD/2012) (ASSESSMENT YEAR: 2008-09) AVON CYCLES LTD., VS. THE A.C.I.T., G.T.ROAD, CIRCLE V, LUDHIANA. LUDHIANA. PAN: AABCA4140R (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 06.12.2013 DATE OF PRONOUNCEMENT : 23.12.2013 O R D E R PER SUSHMA CHOWLA, JM: THE APPLICANT HAS FILED THIS MISCELLANEOUS APPLICAT ION FOR RECALLING THE ORDER DATED 17.01.2013 IN ITA NO.1143 /CHD/2011 & C.O.NO.1/CHD/2012 RELATING TO THE ASSESSMENT YEAR 2 008-09. 2. THE APPLICANT IS AGGRIEVED AND HAS FILED THIS MI SCELLANEOUS APPLICATION ALLEGING AS UNDER: 3. ONE OF THE SUBMISSIONS MADE WAS THAT NO DISALL OWANCE U/S 14A R.W.R 8D(II) IS CALLED FOR AS THE ASSESSEE HAS NOT PAID ANY INTEREST WHICH CALLS FOR ANY DISALLOWANCE. THE INTEREST PAID BY THE ASSESSEE WAS A SUM OF RS. 2,91 ,79,406/- AND THE INTEREST RECEIVED WAS RS. 3,95,64,326/-, THE APPELLANT HAD ALSO RELIE D ON THE JUDGMENT OF THE KOLKATA TRIBUNAL IN THE CASE OF DCIT VS. TRADE APARTMENT LT D DATED 30.03.2012 A COPY OF WHICH HAD BEEN FILED BEFORE THE HON'BLE BENCH. THOUGH THE RE IS A REFERENCE TO THIS JUDGMENT IN PARA 17 OF THE ORDER BUT THERE IS NO FINDING ON THE SAME. THERE ARE HOST OF JUDGMENTS ON THIS ISSUE WHICH LAY DOWN THAT IF AFTER NETTING THERE IS NO ELEMENT OF PAYMENT OF 2 INTEREST NO DISALLOWANCE U/S 14A R.W.R. 8D IS CALLE D FOR. SOME OF THE OTHER JUDGMENTS WHICH ARE OF BINDING NATURE ARE AS UNDER:- 1. ACG ASSOCIATED CAPSULES P LTD VS. CIT (2012) 343 IT R 89 (SC) 2. CIT (CENTRAL) VS. PALIWAL OVERSEAS LTD. ITA NO.479/ 2005 DATED 10.10.2012 (P&H) THE RESPONDENT HUMBLY SUBMITS THAT NON-CONSIDERATIO N OF A JUDGMENT CITIED AND ALSO NON CONSIDERATION OF BINDING JUDGMENTS CONSTITUTES A MI STAKE APPARENT FROM THERECORD AND THE SAME NEED RECTIFICATION. THUS IT IS HUMBLY PRAYED THAT THE ADDITION SUSTAINED DESERVES TO BE DELETED AS THERE WAS NO ELEMENT OF INTEREST PAID AFTER NETT ING OF INTEREST WHICH REQUIRED ANY DISALLOWANCE UNDER RULE 8D(II) OF THE INCOME TAX RU LES. ANOTHER MISTAKE IS REGARDING THE ISSUE OF DISALLOWA NCE OF RS. 9.34,266/- MADE BY THE AO UNDER RULE 8D(III) OF THE INCOME TAX RULES. THERE WAS A CONSOLIDATED APPEAL BY THE REVENUE AGAINST THE DISA LLOWANCE OF RS. 42,68,522/- AND THE LD C1T(A) HAD ONLY CONFIRMED A DISALLOWANCE OF RS. 5 LACS. THERE WAS NO FINDING BY CIT(A) REGARDING DISA LLOWANCE MADE BY THE AO UNDER RULE 8D(III) OF THE INCOME TAX RULES. THE HON'BLE TRIBUNAL HAS ALSO NOT DEALT WITH ISSUE IN THE ORDER. IT IS THUS HUMBLY PRAYED THAT SINCE THERE IS A MISTAKE APPARENT FROM RECORD IN NOT DEAL ING WITH THE ISSUE SPECIFICALLY THE SAME REQUIRES CONSIDERATION AND FI NDING BY THE HON'BLE TRIBUNAL. THUS BOTH THE ABOVE ISSUES NEEDS RECONSIDERATION AN D MAY BE DEALT WITH DENOVO. 3. SHRI SUBHASH AGGARWAL APPEARED FOR THE APPLICANT AND WAS UNABLE TO POINT OUT ANY DEFECT IN THE ORDER OF THE TRIBUNA L. 4. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL ON 17.1.2013 VIDE PARA S 18 TO 21 OF THE ORDER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED BY THE REVENUE VIDE GROUND NO.2 WAS AG AINST THE DELETION MADE BY THE CIT (APPEALS) I.E. DISALLOWANCE OF RS.4 2,68,522/- MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE INCOME TAX RULES. THE APPLICANT VIDE CROSS OBJECTION IS IN AP PEAL AGAINST THE DISALLOWANCE OF RS.5 LACS UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES. VIDE PARA 20 THE FACTUAL A SPECTS OF THE ISSUE WERE CONSIDERED BY THE TRIBUNAL AND IT WAS NOTED TH AT THE ASSESSING OFFICER HAD MADE DISALLOWANCE UNDER RULE 8D(2)(II) AT RS.38,34,256/- 3 AND UNDER RULE 8D(2)(III) AT RS.9,34,266/-. ON CO NSIDERATION OF THE ISSUE I.E. THE FUNDS AVAILABLE VIS--VIS VALUATION OF THE ASSET TAKEN BY THE ASSESSING OFFICER, NET OF CURRENT LIABILITIES AND P ROVISION IT WAS OBSERVED THAT THE AVERAGE OF THE TWO WOULD BE RS.215.34 CRORES AN D APPLYING THE FORMULA UNDER RULE 8D(2)(II) OF THE IN COME TAX RULES THE DISALLOWANCE WORKS OUT TO RS.10,49,851/-. THE ASSE SSEE HAD DISALLOWED SUM OF RS.13,95,065/- PAID FOR THE PORTFOLIO MANAGE MENT . THE TRIBUNAL FURTHER VIDE PARA 21 OF THE ORDER HELD AS UNDER: 21. ON THE PERUSAL OF THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES WE FIND THAT THE EXPENDITURE RELATABLE TO THE EARNING OF EXEMPT INCOME IS EQUAL TO AGGREGATE OF THE AMOUNT O F EXPENDITURE DIRECTLY RELATABLE TO THE INCOME WHICH DOES NOT FOR M PART OF THE TOTAL INCOME I.E. RULE 8D(2)(I) AND THE DISALLOWANC E OF INTEREST AS PROVIDED UNDER RULE 8D(2)(II) AND FURTHER DISALLOWA NCE COMPUTED UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES. THE DISALLOWANCE MADE BY THE ASSESSEE ON ACCOUNT OF DIRECT EXPENDITU RE RELATABLE TO THE EARNING OF EXEMPT INCOME I.E. FEE PAID FOR PORT FOLIO MANAGEMENT TOTALING RS.13,95,065/- IS DISALLOWABLE UNDER RULE 8D(2)(I) OF THE INCOME TAX RULES. UNDER THE PROVIS IONS OF RULE 8D(2)(II) THE INTEREST RELATABLE TO THE INVESTMENT IN TAX FREE FUNDS IS TO BE COMPUTED AND AS PER THE WORKING OF THE ASS ESSEE ITSELF THE SAME COMES TO RS.10,49,851/-. CONSEQUENTLY, WE DIR ECT THE ASSESSING OFFICER TO DISALLOW RS.10,49,851/- BEING THE INTEREST SO RELATABLE TO THE EARNING OF EXEMPT INCOME. WE FIND NO MERIT IN THE ALTERNATE PLEA RAISED BY THE ASSESSEE THAT NO DISAL LOWANCE OF INTEREST IS CALLED FOR AFTER SETTING OFF THE INTERE ST PAID AND INTEREST RECEIVED, WHERE THERE IS NO INTEREST PAYMENT. ADMI TTEDLY THE ASSESSEE HAD PAID TOTAL INTEREST OF RS.2.92 CRORES OUT OF WHICH INTEREST PAID ON TERM LOAN RAISED FOR SPECIFIC PURP OSE TOTALS TO RS.1.70 CRORES AND BALANCE INTEREST PAID BY THE ASS ESSEE IS RS.1.21 CRORES. THE FUNDS UTILIZED BY THE ASSESSEE BEING M IXED FUNDS AND IN VIEW OF THE PROVISIONS OF RULE 8D(2)(II) OF THE INCOME TAX RULES THE DISALLOWANCE IS CONFIRMED AT RS.10,49,851/-. W E FIND NO MERIT IN THE ADHOC DISALLOWANCE MADE BY THE CIT (APPEALS) AT RS.5,00,000/-. CONSEQUENTLY GROUND OF APPEAL RAISE D BY THE REVENUE IS PARTLY ALLOWED AND GROUND RAISED BY THE ASSESSEE IN CROSS OBJECTION IS ALLOWED. 6. THE FIRST DISALLOWANCE WAS MADE BY THE APPLICANT UNDER SECTION 80D(2)((I) OF THE INCOME TAX RULES I.E. THE DIRECT EXPENSES RELATABLE TO THE EARNING OF EXEMPT INCOME. UNDER THE PROVISION OF RULE 8D(2)(II) OF THE ACT THE INCOME TAX RULES THE INTEREST RELATABLE TO THE INVESTMENT IN TAX FREE FUNDS WAS COMPUTED AT RS.10,49,851/- AND T HE SAME WAS 4 DISALLOWED. THE ALTERNATE PLEA RAISED BY THE APPLI CANT WAS OF SETTING OFF OF INTEREST PAID AND INTEREST RECEIVED WAS REJECTED BY THE TRIBUNAL. FURTHER UNDER RULE 8D(2)(III) OF THE INCOME TAX RUL ES THE CIT (APPEALS) HAD UPHELD THE DISALLOWANCE OF RS.,5 LACS, AGAINST WHICH THE APPLICANT WAS IN CROSS OBJECTION WHICH HAS BEEN DELETED BY TH E TRIBUNAL. IN VIEW OF THE FINDINGS OF THE TRIBUNAL THE MISCELLANEOUS A PPLICATION MOVED BY THE APPLICANT IS MIS-CONCEIVED AS THE ISSUE IN DETA IL HAS BEEN ADDRESSED AND IN THE ABSENCE OF THE APPLICANT FINDING ANY ERR OR IN THE SAME, THERE IS NO MERIT IN THE PRESENT MISCELLANEOUS APPLICATIO N MOVED BY THE APPLICANT AND THE SAME IS DISMISSED. 7. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE APPLICANT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DECEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD DECEMBER, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5