M/s Trident Limited, Ludhiana v. ACIT, Ludhiana

ITA 173/CHANDI/2016 | 2011-2012
Pronouncement Date: 29-11-2017 | Result: Allowed

Appeal Details

RSA Number 17321514 RSA 2016
Assessee PAN AABFU8813G
Bench Chandigarh
Appeal Number ITA 173/CHANDI/2016
Duration Of Justice 1 year(s) 8 month(s) 27 day(s)
Appellant M/s Trident Limited, Ludhiana
Respondent ACIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 29-11-2017
Date Of Final Hearing 15-02-2017
Next Hearing Date 15-02-2017
First Hearing Date 15-02-2017
Assessment Year 2011-2012
Appeal Filed On 03-03-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB CHANDIGARH BEFORE SHRI SANJAY GARG JUDICIAL MEMBER AND DR. B.R.R. KUMAR ACCOUNTANT MEMBER ITA NOS.184 /CHD/2016 (ASSESSMENT YEAR : 2011-12) ACIT VS. M/S TRIDENT LTD. CIRCLE-1 LUDHIANA E-212 KITCHLU NAGAR LUDHIANA PAN: AABFU8813G ITA NOS.173/CHD/2016 (ASSESSMENT YEAR : 2011-12) M/S TRIDENT LTD. VS. ACIT E-212 KITCHLU NAGAR CIRCLE-1 LUDHIANA LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ASHWANI KUMAR SH. ADITYA KUMAR DEPARTMENT BY : SHRI. RAVI SARANGAL DATE OF HEARING : 19.09.2017 DATE OF PRONOUNCEMENT : 29/11/2017 O R D E R PER DR.B.R.R.KUMAR A.M . : BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE REVEN UE AND THE ASSESSEE AGAINST THE COMMON ORDER OF LD. CIT(A)-I LUDHIANA DT. 28/12/2015. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 184/CHD/2016: 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE W AS THE LD. CIT(A) JUSTIFIED IN LAW IN DELETING THE ADDITIONS OF RS. 2 15 56 021/- MADE U/ S 14A OF THE ACT AND R/W RULE 8D? 2. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND T HAT OF THE AO BE RETORED. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 173/CHD/2016: THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT 1961 BY THE LD. CIT(A)-1 LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD DISALLOWANCE MADE BY THE LD. AO U/S 36(1)(III). (A) OF RS. 1 51 71 075/- ON ACCOUNT OF INTEREST ON INVE STMENTS. (B) OF RS. 40 60 316/- ON ACCOUNT OF INTEREST ON INTERE ST FREE ADVANCES / LOANS TO SISTER CONCERNS / RELATED PARTIES. 2 4. GROUND NO. (A) IN ITA NO. 173/CHD/2016 FOR THE A Y 2011-12 HAS BEEN WITHDRAWN BY THE ASSESSEE. 5. GROUND NO. (B) IN ITA NO. 173/CHD/2016 FOR THE A Y 2011-12 DEALS WITH INTEREST ON INVESTMENT. 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE HAD TOTAL INVESTMENT OF RS. 44 51 76 925/- AND ASKE D THE ASSESSEE TO JUSTIFY THE CLAIM OF EXPENDITURE UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT 1961 ON THE GROUNDS THAT THE MONEY HAS BEEN DIVERTED BY THE ASSESSEE FOR MAKING INVESTMENTS WHICH WAS NOT THE BUSINESS OF THE ASSESSEE. 7. THE CIT(A) HAS CONFIRMED THE ADDITION ON THE GRO UNDS THAT ASSESSEE IS IN A DIFFERENT FORM OF BUSINESS AND THE INVESTMENTS ARE NOT FOR BUSINESS PURPOSE. 8. BEFORE US THE LD. AR SUBMITTED THAT THE OBSERVAT ION OF THE LD. CIT(A) IS NOT CORRECT IN THE SENSE THAT THE INVESTMENTS ARE ALSO MADE FOR BUSINESS PURPOSE AND THERE WAS A COMMERCIAL EXPEDIENCY. THE LD. AR FURTHER SUB MITTED THAT THE TOTAL SHARE CAPITAL OF THE COMPANY STANDS AT RS. 223.00 CRORES THE TOT AL RESERVES AND SURPLUS OF THE COMPANY ARE RS. 309.23 CRORES WHERE AS THE INVESTME NTS MADE ARE ONLY TO THE TUNE OF RS. 44.51 CORES. THE LD. AR SUBMITTED A COPY OF THE BALANCE SHEET DEPICTING THE DETAILS OF SHARE CAPITAL AND RESERVES AND SURPLUS AVAILABLE . THE LD. AR ARGUED THAT THE COMPANY HAS GOT THEIR OWN FUNDS WHICH WERE UTILIZED FOR INVESTMENTS. THE LD. AR FURTHER SUBMITTED THAT SINCE THE OWN FUNDS HAVE BEEN UTILI ZED FOR INVESTMENTS NO PROPORTIONATE DISALLOWANCE OF INTEREST HAS BEEN CALLED FOR. 9. THE LD. DR RELIED ON THE ORDER OF THE AUTHORITIE S BELOW. 10. CRISPLY TO SAY THAT THE DISALLOWANCE OF INTERES T UNDER SECTION 36(1)(III) ON ADVANCES CONFIRMED BY THE LD. CIT(A) IS ON THE PRIN CIPLE THAT THE ASSESSEE UTILIZED MIXED FUNDS FOR INVESTMENT. THE LD. CIT(A) RELIANC E THAT THE FUNDS UTILIZED BY THE ASSESSEE ARE MIXED FUNDS IT CANNOT BE DISTINGUISHE D WHETHER SURPLUS FUNDS OR BORROWED FUNDS ARE USED FOR THE SAID INVESTMENTS CANNOT BE A CCEPTED IN VIEW OF THE FURTHER DEVELOPMENT OF THE JUDICIAL PRONOUNCEMENTS ON THE I SSUE. WHEN THE ASSESSEE HAS GOT OWN FUNDS AVAILABLE AT THEIR DISPOSAL NO DISALLOWAN CE IS CALLED FOR AS ENUNCIATED IN VARIOUS JUDGMENTS. IN THE CASE OF BRIGHT ENTERPRISE S PVT. LTD. VS. CIT (PUNJAB & HARYANA HIGH COURT IN ITA NO. 224/2013 DT. 24/07/2015 IT WA S HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE THEN IT WILL BE PRESUMED THAT THESE HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. SIMILAR VIEW WAS HELD IN THE CASE OF CIT VS. KAPSONS ASSOCIATES INVESTMENT PVT. LTD. [2015] 381 ITR 204 (P&H) WHEREIN THE HONBLE COURT HAS HELD THAT INTEREST ON INVESTMENT IN OTHER PROPERTIES NOT FOR BUSINESS PUR POSE CANNOT BE DISALLOWED IF THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS A T ITS DISPOSAL. SIMILAR VIEW WAS TAKEN IN 3 THE CASE OF HERO CYCLES PVT. LTD. 63 TAXMAN 308 (SU PREME COURT) 2015 WHEREIN THE HONBLE SUPREME COURT HELD THAT ONCE IT IS A ESTABL ISHED THAT THERE IS A NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS NO DISALLOWANCE IS CALLED FOR. HENCE RESPECTFULLY FOLLOWING THE RATIO LAID DOWN B Y THE VARIOUS JUDICIAL PRONOUNCEMENTS THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST IS HEREBY DELETED. 11. THE GROUND NO. 1 IN ITA NO. 184/CHD/2016 OF THE REVENUES APPEAL RELATES TO DELETION OF THE ADDITION OF RS. 21556021/- MADE UND ER SECTION 14A OF THE INCOME TAX ACT 12. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS DISALLOWED UNDER SECTION 14A OF THE INCOME TAX ACT 1961 AN AMOUNT OF RS. 21 556021/- BASED ON THE CALCULATION MADE AS PER RULE 8D(2) TAKING THE TOTAL INTEREST EX PENDITURE AVERAGE VALUE OF INVESTMENTS AVERAGE VALUE OF ASSETS AND HALF PERCE NTAGE OF AVERAGE VALUE OF INVESTMENTS INTO CONSIDERATION. 13. THE LD. CIT(A) BASED ON THE DECISIONS TAKEN FOR THE AY'S 2008-09 2009-10 & 2010- 11 HAS DELETED THE ADDITION AND DIRECTED THE ASSESS ING OFFICER TO CONSIDER THE DISALLOWANCE WHILE CALCULATING BOOK PROFITS UNDER S ECTION 115JB. 14. BEFORE US THE LD. DR ARGUED THAT THE ASSESSEE H AD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR FUNDS BEING USED FOR INVESTME NTS AND TO ACCOUNT FOR EXEMPT INCOME. HE FURTHER ARGUED THAT THERE IS NO BASIS FO R THE DISALLOWANCE MADE BY THE ASSESSEE UNDER SECTION 14A. LD. DR FURTHER ARGUED T HAT A) ONE BY SIMPLY ASSUMING THAT THE FACTS IN THE CASE O F THE ASSESSEE IN AY 2008-09 IS SIMILAR TO THE FACTS IN PRESENT AY 2011-12 WHICH IS ACTUALL Y NOT SO AS HAS BEEN DISCUSSED ABOVE. B) SECONDLY BY NOT CONSIDERING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AVON CYCLES(SUPRA) THE FACTS OF WHICH ARE SIMILA R TO THE FACTS OF THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR. C) THIRDLY BY RELYING ON THE DECISIONS OF HONBLE ITA T AND HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF THE ASSESSEE FOR A.Y. 2008-09 WITHOUT APPRECIATING THE FACT THAT THE FACTS AS DISCUSSED BY THE LD. AO IN 2008-09 ARE DIS TINGUISHABLE FROM THE FACTS IN THE PRESENT ASSESSMENT YEAR. 15. LD. DR RELIED ON THE JUDGMENT IN THE CASE OF PU NJAB TRACTORS LTD. VS. CIT PATIALA 78 TAXMANN 65 (P&H HIGH COURT) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE DOES NOT PROVIDE ANY BIFURCATION OF THE EXPENDITURE INCURRED IN RESPECT OF ITS INCOME THE ASSESSING OFFICER HAS NO OPTION BUT TO ESTIMATE THE EXPENDITURE AND TO RECOMPUTE THE INCOME BY WAY OF DIVIDEND TO ARRIVE AT THE DEDUCTIO N THAT MAY BE ALLOWED UNDER SECTION 80M OF THE ACT. ASSUMING THAT SOME PORTION OF THE EXPENDITURE IS ATTRIBUTABLE TO THE DIVIDEND EARNED THE ASSESSING OFFICER MUST EST IMATE THE EXTENT THEREOF. IF THE ASSESSEE FURNISHED PROOF OR DETAILS OF SUCH EXPENDI TURE TO THE SATISFACTION OF THE 4 ASSESSING OFFICER HE MAY ACCEPT THE SAME HOWEVER THE ASSESSEE DOES NOT FURNISH A BIFURCATION OF THE EXPENSES OR ANY REASONABLE BASIS FOR ARRIVING AT THE SAME THE ASSESSING OFFICER HAS NO OPTION BUT TO MAKE A REASO NABLE ESTIMATE OF THE SAME. 16. BEFORE US THE LD. AR SUBMITTED THAT IN ANY CASE THE DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED THE EXEMPT INCOME EARNED BY THE A SSESSEE AND HE WOULD BE SATISFIED IF THE DISALLOWANCE IS RESTRICTED UP TO T HE EXEMPT INCOME. THE LD. DR HAS ALSO NOT SUBMITTED ANYTHING CONTRA. 17. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DELHI HIGH COURT IN CASE OF JO INT INVESTMENTS PVT. LTD. VS. CIT 372 ITR 694 (DEL) AMAR PACKAGING PVT. LTD. VS. ITO IN ITA NO. 2358/DEL/2013 (ITAT DELHI BENCH) AND ALSO IN CASE OF DAGA GLOBAL CHEMICAL PV T. LTD. (ITAT MUMBAI BENCH) IN ITA NO.5592/MUM/2012 HAS TAKEN VIEW THAT DISALLOWANCE C ANNOT EXCEED THE EXEMPT INCOME. HENCE KEEPING IN VIEW THE ABOVEMENTIONED JUDGMENTS IT IS HEREBY DIRECTED THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. THE APPEAL OF THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 18. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOW ED AND THAT OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29/11/2017 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR