Chudgar Ranchodlal Jethalal Trade Pvt.Ltd., Ahmedabad v. The Dy.CIT.,(OSD)Range-1,, Ahmedabad

ITA 1008/AHD/2011 | 2007-2008
Pronouncement Date: 04-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 100820514 RSA 2011
Assessee PAN AAACC4763B
Bench Ahmedabad
Appeal Number ITA 1008/AHD/2011
Duration Of Justice 2 year(s) 11 month(s) 28 day(s)
Appellant Chudgar Ranchodlal Jethalal Trade Pvt.Ltd., Ahmedabad
Respondent The Dy.CIT.,(OSD)Range-1,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 04-04-2014
Date Of Final Hearing 28-03-2014
Next Hearing Date 28-03-2014
Assessment Year 2007-2008
Appeal Filed On 06-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH AHMEDABAD .. ! ! ! ! ' #$ BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER !./ I.T.A. NO.1008/AHD/2011 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2007-08) CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD. 406 4 TH FLOOR CHINUBHAI CENTRE ASHRAM ROAD AHMEDABAD / VS. THE DCIT (OSD) RANGE-1 AHMEDABAD ( !./)* !./ PAN/GIR NO. : AAACC 4763 B ( (+ / // / APPELLANT ) .. ( -(+ / RESPONDENT ) (+ . / APPELLANT BY : MS. URVASHI SHODHAN ADV. -(+ / . / RESPONDENT BY : SHRI P.L. KUREEL SR.DR ' 0 / $1 / / / / DATE OF HEARING : 28/03/2014 23' / $1 / DATE OF PRONOUNCEMENT : 04/04/2014 4 / O R D E R PER SHRI KUL BHARAT JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VI AHMEDABA D (CIT(A) FOR SHORT) DATED 09/02/2011 PERTAINING TO ASSESSME NT YEAR (AY) 2007- 08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- I. LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING ACTION OF AO IN DISALLOWING RS.5 38 121/- BEING WEIGHT SHORT AGE EXPENSES. BOTH THE LOWER AUTHORITIES ERRED IN IGNORING THE EVIDENC ES PRODUCED BY THE APPELLANT IN THE FORM OF CORRESPONDENCES WITH THE P ARTIES AND DEBIT ITA NO.1008/AHD /2011 CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD.VS. DCI T ASST.YEAR 2007-08 - 2 - NOTES ISSUED BY THE PARTIES. LD.CIT(A) OUGHT TO HA VE DELETED THE DISALLOWANCE. 2. LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS CO NFIRMING ACTION OF AO OF DISALLOWING EXPENSES ON ADHOC BASIS OF RS.48 748/- BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT. BOTH LOWER A UTHORITIES ERRED IN IGNORING THE FACT THAT THE APPELLANT HAD SUFFICIENT OWN FUNDS TO INVEST IN TAX FREE DIVIDEND EARNING INVESTMENT. FURTHER THER E WAS NO EXPENSE WHICH CAN BE DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO SUCH INVESTMENT. LD. CIT(A) OUGHT TO HAVE DELETED THE DISALLOWANCE OF TH E EXPENSES. 3. LEVY OF INTEREST U/S.234A 234B 234C AND 234D IS U NJUSTIFIED. 4. INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) ARE UNJUSTIFIED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 11/12/2009 THEREBY THE ASSESSING OFFICER(AO) MADE VARIOUS DISALLOWANCES OF EXPENSES CLAIMED ON ACCOUNT OF SH ORTAGE OF WEIGHT AMOUNTING TO RS.5 38 121/- AND DISALLOWANCE U/S.14A R.W.RULE 8D OF RS.48 746/-. THE AO HAS ALSO MADE DISALLOWANCE OF BAD DEBTS AS CLAIMED BY THE ASSESSEE. AGAINST THIS THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO AFTER CONSIDERING THE SUB MISSIONS PARTLY ALLOWED THE APPEAL THEREBY THE BAD DEBTS DISALLOWE D BY THE ASSESSEE WERE DELETED AND THE OTHER DISALLOWANCES; NAMELY EX PENSES CLAIMED ON ACCOUNT OF SHORTAGE OF WEIGHT AND DISALLOWANCE MA DE U/S.14A R.W. RULE 8D WERE CONFIRMED WERE CONFIRMED BY THE LD.CIT(A). NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. APROPOS TO GROUND NO.1 THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN TRADING OF READY CO TTON BALES SINCE LAST ITA NO.1008/AHD /2011 CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD.VS. DCI T ASST.YEAR 2007-08 - 3 - MORE THAN 21 YEARS AND THE DEBIT NOTES WERE RAISED BY THE CONCERNED PARTIES. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NO DISPUTE THAT THE MATERIAL WAS WEIGHED AND TRANSP ORTED AND DURING THE COURSE OF TRANSIT THERE WAS WEIGHT LOSS. THE LD.C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED IN DISALLOWING THE GENUINE EXPENSES. 3.1. THE LD.SR.DR SUBMITTED THAT THE ASSESSEE HAS B EEN ENGAGED IN THIS LINE OF BUSINESS FOR MANY YEARS AND THE ASSESSEE HA S NEVER CLAIMED THIS KIND OF EXPENSES IN EARLIER YEARS. HE FURTHER SUB MITTED THAT THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THERE WAS LOSS OF WEIGHT. 3.2. IN REJOINDER THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EVIDENCES WERE PLACED ON RECORD; NAMELY THE LEDGER ACCOUNT OF WEIGHT SHORTAGE EXPENSES THE DEBIT NOTES RAISED BY THE CO NCERNED PARTIES. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT MERELY B ECAUSE THE ASSESSEE HAS CLAIMED THIS KIND OF EXPENDITURE FOR THE FIRST TIME AND IT CANNOT BE THE SOLE GROUND FOR MAKING DISALLOWANCE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO AS WELL AS THE LD.CIT(A) HAS DI SALLOWED THE EXPENDITURE ON THE BASIS THAT IN EARLIER YEAR THE A SSESSEE HAS NOT CLAIMED SUCH KIND OF EXPENDITURE. IN OUR CONSIDERED VIEW S INCE THE ASSESSEE HAS PLACED ON RECORD THE DEBIT NOTES RAISED BY VARIOUS PARTIES TO WHOM THE ITA NO.1008/AHD /2011 CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD.VS. DCI T ASST.YEAR 2007-08 - 4 - MATERIAL WAS SUPPLIED THEREFORE THE AUTHORITIES BE LOW WERE NOT JUSTIFIED IN DISALLOWING THE EXPENSES CLAIMED BY THE ASSESSEE . WE THEREFORE DIRECT THE AO TO DELETE THIS ADDITION. ACCORDINGLY GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 5. SECOND GROUND IS AGAINST THE DISALLOWANCE OF EXP ENDITURE ON ADHOC BASIS OF RS.48 748/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED TH AT IT IS SETTLED POSITION OF LAW THAT RULE 8D IS NOT APPLICABLE IN THE YEAR U NDER APPEAL. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE BOMBAY HIGH CO URT RENDERED IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. VS. DY.CIT REPORTED AT (2010) 328 ITR 81 (BOM.). SHE FURTHER SUBMITTED THAT THE INVESTMENT WAS NOT MADE OUT OF THE INTEREST-BEARING FUNDS. SHE PLACED RELIANCE ON THE DECISION OF HONBLE COORDINATE BENCH (ITAT A BENC H AHMEDABAD) RENDERED IN THE CASE OF ACIT VS. TORRENT PHARMACEUT ICALS LTD. IN ITA NOS.1869 & 1881/AHD/2009 (CROSS-APPEALS) FOR AY 200 5-06 DATED 31/05/2012. 6. ON THE CONTRARY LD.DR SUPPORTED THE ORDER OF TH E AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD.(SUPRA) DISA LLOWANCE OF INTEREST AND OTHER EXPENSES RELATABLE TO EXEMPT INCOME ARE T O BE DISALLOWED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.1008/AHD /2011 CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD.VS. DCI T ASST.YEAR 2007-08 - 5 - WE FIND THAT THE COORDINATE BENCH IN THE CASE OF AC IT VS. TORRENT PHARMACEUTICALS LTD.(SUPRA) DECIDED THE ISSUE BY O BSERVING AS UNDER:- 16. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUS ED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAS G IVEN A CATEGORICAL FINDING IN PARA-6.3 OF HIS ORDER SAME IS REPRODUCED HEREINBELOW:- '6.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE AR OF THE APPELLANT. HOWEVER I AM NOT IN AG REEMENT WITH THE CONTENTION OF THE APPELLANT THAT EARNING OF DIV IDEND INCOME DOES NOT REQUIRE ANY SPECIFIC/SPECIAL ADMINISTRATIV E EFFORTS AS EVEN WHERE COMPANY PRESUMES TO HAVE NOT INVESTED IN SINGLE PENNY OF MONEY IN SHARES /SCRIPTS COMPANY WOULD HA VE TO PAY SALARY TO ITS EMPLOYEES. I FIND FORCE IN THE OBSERV ATION OF THE AO THAT CERTAIN ADMINISTRATIVE EFFORTS WERE NECESSARIL Y REQUIRED FOR EARNING THE EXEMPT INCOME. HENCE I AM OF THE OPINI ON THAT THE DISALLOWANCE OF RS.3 LAKHS MADE BY THE ASSESSING OF FICER IS QUIRE JUSTIFIED AND THIS GROUND IS DISMISSED.' WE FIND THAT CASE LAW CITED BY LD. AR IN THE MATTER OF CATHOLIC SYRIAN BANK LTD.& ORS. (SUPRA) WHEREIN THE HON'BLE KERALA HIGH COURT HAS HELD THAT SO FAR AS DISALLOWANCE OF ADMIN ISTRATIVE EXPENSE IS CONCERNED THERE IS NO PRECIOUS FORMULA OR PROPORTIONATE DISALLOWANCE NO DISALLOWANCE CALLED FOR FOR PROPORTIONATE ADMINISTRATIVE COST ATTRIBUTABLE TO EARNING OF TAX FREE INCOME UNTIL RULE 8D OF THE I.T. RULE 1962 CA ME INTO FORCE. IT IS FURTHER HELD THAT THE PROPORTIONATE DISALLOWANCE U/S. 14A SHOULD BE LIMITED TO ONLY INTEREST LIABILITY AND NOT OVERH EAD OR ADMINISTRATIVE EXPENDITURE WHICH SHOULD BE CONSIDE RED FOR DISALLOWANCE UNDER RULE 8D OF THE I.T. RULE 1962 F ROM 2007-08. RESPECTFULLY FOLLOWING THE RATIO IN THE CASE OF CAT HOLIC SYRIAN BANK LTD.& ORS. (SUPRA) WE HEREBY DELETE THE ADDITI ON MADE ON ACCOUNT OF ADMINISTRATIVE EXPENSES. THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. 8. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF HONBLE COORDINATE BENCH AS WELL AS THE DECISION OF HONBL E BOMBAY HIGH ITA NO.1008/AHD /2011 CHUDGAR RANCHODLAL JETHALAL TRADE PVT.LTD.VS. DCI T ASST.YEAR 2007-08 - 6 - COURT IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. VS . DY.CIT REPORTED AT (2010) 328 ITR 81 (BOM.) WE HEREBY DIRECT THE A O TO DELETE THE ADDITION. THEREFORE THIS GROUND OF ASSESSEES APP EAL IS ALLOWED. 9. GROUND NO.3 IS AGAINST LEVY OF INTEREST U/S.234A 234B 234C & 234D OF THE ACT BEING CONSEQUENTIAL IN NATURE. 10. GROUND NO.4 IS AGAINST INITIATION OF PENALTY PR OCEEDINGS U/S.271(1)(C) BEING PRE-MATURE AND THEREFORE THE SAME IS REJECTED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 04/ 04 /2014 71.. .../ T.C. NAIR SR. PS 4 / $8 98'$ 4 / $8 98'$ 4 / $8 98'$ 4 / $8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. -(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-VI AHMEDABAD 5. 8 #; $ / DR ITAT AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER -8$ $ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD