The Sandesh Limited, Ahmedabad v. The ACIT., Circle-8,, Ahmedabad

ITA 2418/AHD/2007 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 241820514 RSA 2007
Assessee PAN AAACT5730D
Bench Ahmedabad
Appeal Number ITA 2418/AHD/2007
Duration Of Justice 3 year(s) 7 month(s) 16 day(s)
Appellant The Sandesh Limited, Ahmedabad
Respondent The ACIT., Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2004-2005
Appeal Filed On 04-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.2418/AHD/2007 ASSESSMENT YEAR:2004-05 DATE OF HEARING:13.1.11 DRAFTED:17.1.11 THE SANDESH LIMITED SANDESH BHAVAN NR. VASTRAPUR GAM LAD SOCIETY ROAD AHMEDABAD 380 015 PAN NO.AAACT5730D V/S . DY. COMMISSIONER OF INCOME-TAX CIRCLE-8 AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R.C. SHAH AR RESPONDENT BY:- SHRI SHELLEY JINDAL CIT-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD IN APPEAL NO . CIT(A)- XIV/DCIT.C.8/2006-07 DATED 29-03-2007. THE ASSESSME NT WAS FRAMED BY DCIT (OSD) CIRCLE-8 AHMEDABAD U/S143(3) OF THE IN COME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 21-12-2006 FOR ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OF FICER U/S.14A OF THE ACT ON ACCOUNT OF ADMINISTRATIVE EXPENSES. FOR THIS A SSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1) THAT THE C.I.T. FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.946400 U/S 14A OF THE I.T. ACT IN RESPECT OF THE TAX-FREE INTEREST ITA NO.2418/AHD/2007 A.Y 2004-05 SANDESH LTD. V. DCIT CIR-8 ABD PAGE 2 INCOME OF RS.1.73 CRORES AND DIVIDEND INCOME OF RS. 4.91 LACS BY ALLOCATING THE TOTAL SALARY EXPENSES OF RS.7.28 CRO RES IN THE PROPORTION OF TURNOVER OF PUBLICATION DIVISION FINANCE & LEAS ING DIVISION AND THE INCOME FROM THE INVESTMENTS WITHOUT APPRECIATING TH E FACTS OF THE CASE AS EXPLAINED IN THE STATEMENT OF FACTS FILED BEFORE THE LEARNED C.I.T.(A) AND THAT THE APPELLANT ALSO TRADES IN UNITS OF MUTU AL FUNDS. IT IS SUBMITTED THAT THE BASIS ADOPTED BY THE A.O. IS NOT BASED ON THE FACTS AND THEREFORE DESERVES TO BE REJECTED. IT IS SUBM ITTED THAT IN VIEW OF THE FACTS OF THE CASE A LUMP SUM DISALLOWANCE OF R S.10000 U/S.14A WOULD MEET THE END OF JUSTICE LOOKING TO THE TIME A ND THE COST INVOLVED IN MAKING/LOOKING AFTER THESE INVESTMENTS AND THAT THE BALANCE ADDITION BE DELETED. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.9 46 400/- U/S 14A OF THE ACT BEING 1.3% OF THE TOTAL SALARY EXPENSES AT RS7.28 CRORES AGAINST DISALLOWANCE OF TAX FREE INTEREST INCOME AND DIVIDEND INCOME PROPORTIONATE W ITH TOTAL TURNOVER OF THE ASSESSEE-COMPANY. THE ASSESSEE BEFORE THE LOWER AUT HORITIES STATED THAT ITS BUSINESS IS PRINTING & PUBLISHING OF THE DAILY NEWS PAPER AND THE MAGAZINES SINCE 1923 AND OVER THE YEARS IN THE USUAL COURSE O F THE SAID BUSINESS SURPLUS WERE GENERATED WHICH WAS INVESTED IN VARIOUS SECUR ITIES FROM TIME TO TIME TO EARN INCOME. THE TAX FREE INCOME IN QUESTION FOR TH E ASSESSMENT YEAR 2004- 05 WAS GENERATED FROM THE INVESTMENT INTO THE TAX F REE INSTRUMENTS OF SSNNL AMC & NPC AS AND WHEN FLOATED BY THE RESPECTIVE IN STITUTIONS IN THEIR IPOS ANY ONE CAN GET THE ALLOTMENT OF THESE INSTRUMENTS BY APPLYING INTO THE IPOS BY FILING UP JUST A SIMPLE APPLICATION FORM. THESE INVESTMENTS DO NOT REQUIRE MUCH TIME AND EFFORTS OR COST AND IT IS ONLY A ONET IME JOB FOR THE WHOLE DURATION OF SUCH INVESTMENTS AND DIN THE SAME WAY A SSESSEE HAS RECEIVED THE ALLOTMENT OF THESE INVESTMENTS FROM THEIR IPOS . THE ASSESSEE LISTED THE DATE OF INVESTMENT OF THESE INVESTMENTS ITSELF CLAR IFY THE SAME AS UNDER:- S/NO PARTICULARS DATE OF INVESTMENTS INVESTMENT AMOUNT 1. 9.20% -SSNNL 24.09.2002 10000000 2. 9.00% -A M C 01.04.2000 70000000 3. 5.50% -NUCLEAR POWER 06.08.2003 50000000 ITA NO.2418/AHD/2007 A.Y 2004-05 SANDESH LTD. V. DCIT CIR-8 ABD PAGE 3 CORPORATION THE ASSESSEE CLAIMED IT HAS RECEIVED DIVIDEND INCOM E OF RS.4 91 940/- FROM THE INVESTMENT/TRADING OF UNITS OF VARIOUS MUTUAL F UNDS. DURING THE YEAR ASSESSEE-COMPANY HAS ISSUED BELOW MENTIONED 19 CHEQ UES FOR THESE INVESTMENTS/TRADING OF UNITS AND BY VIRTUE OF THE T ERMS OF THE SCHEMES DIVIDEND WAS REINVESTED AUTOMATICALLY THUS INCREASE S THE PURCHASE OF UNITS TO THAT EXTENT FOR WHICH COMPANY OR ANY OTHER INVESTO R DOES NOT REQUIRES TO DO ANY THING THE DETAILS OF THE SAME ARE AS UNDER:- S/NO. PARTICULARS DATE OF INVESTMENT INVESTMENT AMOUNT 1. ILFS LIQUID FUND 03-04-2003 10000000 2. J.M. HIGH LIQUID FUND 04-04-2003 20000000 3. BIRLA MUTUAL FUND 04-04-2003 10000000 4. ING TREASURY MANAGEMENT FUND 04-04-2003 10000000 5. JM HIGH LIQUIDITY FUND 10-04-2003 10000000 6. JM HIGH LIQUIDITY FUND 18-04-2003 10000000 7. JM SHORT TERM FUND 06-05-2003 10000000 8. JM HIGH LIQUIDITY FUND 08-05-2003 15000000 9. JM HIGH LIQUIDITY FUND 16-05-2003 10000000 10. JM HIGH LIQUIDITY FUND 31-05-2003 10000000 11. JM HIGH LIQUIDITY FUND 06-06-2003 15000000 12. ZURICH INDIA LIQUID FUND 13-06-2003 5000000 13. JM INCOME FUND 30-06-2003 20000000 14. HDFC INCOME FUND 01-07-2003 50000000 15. JM INCOME FUND 01-07-2003 10000000 16. KOTAK MAHINDRA M FUND K BOND 01-07-2003 10000000 17. PRUDENTIAL ICII INCOME FUND 01-07-2003 10000000 18. TEMPLETON INDIA INCOME FUND 02-07-2003 10000000 19. TEMPLETON INDIA INCOME FUND 02-07-2003 10000000 ITA NO.2418/AHD/2007 A.Y 2004-05 SANDESH LTD. V. DCIT CIR-8 ABD PAGE 4 FROM THE ABOVE FACTS IT IS EVIDENT THAT DURING THE ENTIRE YEAR ASSESSEE HAD ISSUED NINETEEN NUMBERS OF CHEQUES FOR THE INVESTME NT/TRADING OF UNITS OF MUTUAL FUNDS AND 1 NUMBER OF CHEQUES FOR THE INVEST MENT INTO THE BONDS OF NPC. HENCE IN ALL THERE WERE 20 NUMBERS OF CHEQUES HAVE BEEN ISSUED IN THE ASSESSMENT YEAR 2003-04 ON WHICH TAX FREE INCOM E OF RS.23 20 021/- WERE RECEIVED AT RS.155 00 000/- WERE RECEIVED ON A N INVESTMENTS MADE IN THE YEAR EARLIER YEA FOR WHICH NO TRANSACTION HAS B EEN CARRIED OUT DURING THE YEAR 2003-04 AND FROM THIS ONE CAN EASILY JUDGE THE TIME EFFORTS AND COST INVOLVED FOR CARRYING OUT SUCH TRANSACTIONS WHICH CAN BE ATTRIBUTED TOWARDS THE SAID TAX FREE INCOME FOR DISALLOWANCE U/S.14A A ND ACCORDINGLY ASSESSEE HAD OFFERED RS.1 LAKH AS THE COST OF CARRYING OUT T HE SAID TRANSACTIONS WHICH HAS LED TO THE SAID TAX FREE INCOME AND ABSOLUTELY REASONABLE AND JUSTIFIED AND THEREFORE IN THE LIGHT OF THE ABOVE FACT TO CON SIDER THE OFFER OF RS.1 LAKH. IN VIEW OF THESE FACTS ASSESSEE ONLY CONTENDED BEFORE US THAT AS AGAINST THE DIVIDEND INCOME OF RS.4 91 940/- THE DISALLOWANCE O F SALARY EXPENSE AT RS.9 46 400/- WILL BE HIGHER AND REQUESTED FOR A FA IR AND REASONABLE ESTIMATE. 4. CONSIDERING THE FACTS IN ENTERITY WE ARE OF THE VIEW THAT ASSESSING OFFICER AS WELL AS CIT(A) HAS ERRED IN MAKING DISAL LOWANCE OF RS.9 46 400/- ON AN INCOME OF RS.9 46 400/- AND REASONABLE DISALLOWA NCE OF RS.1 LAKH WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY WE RESTRICT THE DISALLOWANCE AT RS.1 LAKH AND PARTLY ALLOWED THE CLAIM OF ASSESSEE. 5. IN THE RESULT ASSESSEES APPEAL IS ALLOWED PARTLY. ORDER PRONOUNCED IN OPEN COURT ON 21/01/2011 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 21/01/2011 *DKP ITA NO.2418/AHD/2007 A.Y 2004-05 SANDESH LTD. V. DCIT CIR-8 ABD PAGE 5 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XIV AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD