Nirma Credit & Capital Pvt.Ltd.,, Ahmedabad v. The DY.CIT.,Circle-5,, Ahmedabad

ITA 980/AHD/2012 | 2008-2009
Pronouncement Date: 19-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 98020514 RSA 2012
Assessee PAN AAACN5351J
Bench Ahmedabad
Appeal Number ITA 980/AHD/2012
Duration Of Justice 4 year(s) 5 month(s) 15 day(s)
Appellant Nirma Credit & Capital Pvt.Ltd.,, Ahmedabad
Respondent The DY.CIT.,Circle-5,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 19-10-2016
Date Of Final Hearing 20-07-2016
Next Hearing Date 20-07-2016
Assessment Year 2008-2009
Appeal Filed On 04-05-2012
Judgment Text
I.T.A. NO.980/AHD/2012 ASSESSMENT YEAR: 2008 - 09 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM ] I.T.A. NO. 980/AHD/2012 ASSESSMENT Y EAR : 200 8 - 09 NIRMA CREDIT AND CAPITAL PVT LTD ................... . APPELLANT NIR MA HOUS E ASHRAM ROAD AHMEDABAD 380 009 [PAN: AAACN5351J] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 5 AHMEDABAD . ...... . ... . RESPONDENT APPEARANCES BY: S N SOPARKAR FOR THE APPELLANT SATISH SOLANKI FOR THE RESPONDENT D ATE OF CONCLUDI NG THE HEARING : 20 .0 7 .2016 DATE OF PRONOUNCING THE ORDER : 19 . 1 0 .2016 O R D E R PER PRAMOD KUMAR AM [1] BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 22 ND MARCH 2012 IN THE MATTER OF ASS ESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2008 - 09 ON THE FOLLOWING GROUNDS: 1. IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANY S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED ON POINTS OF LAW AND FACTS. 2. IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS 1 06 56 837 UNDER SECTION 14A OF THE INCOME TAX ACT. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANT COM PANY S CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING APPELLANT S GROUND FOR DISALLOWANCE MADE MORE BY RS 50 000 WHILE MAKING THE ABOVE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT FOR RS 1 06 56 837 I.T.A. NO.980/AHD/2012 ASSESSMENT YEAR: 2008 - 09 PAGE 2 OF 3 [2] TO ADJUDICATE ON THIS APPEAL ON LY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A COMPANY ENGAGED IN THE BUSINESS OF FINANCING AGRICULTURE PRODUCE AND TRADING ACTIVITIES IN SHARES AND SECURITIES. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARNED A DIVIDEND INCOME OF RS 25 26 127. WHEN THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY PROPORTIONATE DISALLOWANCE NOT BE MADE UNDER SECTION 14A IT WAS SUBMITTED BY THE ASSESSEE THAT THERE WA S NO OCCASION FOR ANY SUCH DISALLOWANCE AS THE ASSESSEE HAD NOT INCURRED ANY INTEREST EXPENSES. THE ASSESSING OFFICER REJECTED THIS CLAIM ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE NEXUS NOR FILED THE SUPPORTING EVIDENCES TO SHOW THAT INTEREST E XPENDITURE IS INCURRED ONLY FOR EARNING TAXABLE INCOME . HE THEN PROCEEDED TO MAKE THE DISALLOWANCE UNDER RULE 8D R.W.S 14A WHICH WORKED OUT TO RS 1 06 56 837. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. [3] WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL ON REC ORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. [4] AS FAR AS INTEREST PAID BY TH E ASSESSEE IS CONCERNED WE FIND THAT THE NET INTEREST PAYMENT BY THE ASSESSEE WAS ONLY RS 18.59 LAKHS AND NOT RS 70.19 LAKHS AS ADOPTED BY THE ASSESSING OFFICER IN HIS COMPUTATION AS IS THE SETTLED LEGAL POSITION INCLUDING BY PRECEDENTS IN THE CASES OF MORGAN STANLEY INDIA SECURITIES LTD VS ACIT [(2011) 55 DTR 177 (MUM)] AND DCIT VS TRADE APARTMENTS LTD (ITA NO. 1277/KOL/2011; ORDER DATED 30 TH MARCH 2012) WHAT IS TO BE TAKEN INTO ACCOUNT IS THE NET AMOUNT OF INTEREST AND NOT THE GROSS AMOUNT CLEARLY THEREFORE THE COMPUTATION OF DISALLOWANCE IS VITIATED BY THIS FACTUAL ERROR. WE ALSO FIND THAT THE ASSESSEE HAD MADE A SUO MOTU DISALLOWANCE UNDER SECTION 14 A FOR AN AMOUNT OF RS 50 000 IN COMPUTATION OF INCOME AND THE BASIC CLAIM OF THE ASSESSEE IS T HAT SINCE THE ASSESSING OFFICER DID NOT FIND ANY FAULT IN THIS DISALLOWANCE IT WAS NOT OPEN TO HIM TO INVOKE RULE 8D. THIS AMOUNT AS NOTED BY THE CIT(A) AT PAGE 5 REPRESENTED PAYMENT MADE TO NIRMA MANAGEMENT SERVICES PVT LTD FOR HANDLING THE INVESTMENT IN SECURITIES . WE HAVE FURTHER NOTED THAT THE STAND OF THE ASSESSING OFFICER WAS THAT SINCE THERE WAS A HUGE INTEREST PAYMENT AND SINCE THE ASSESSEE HAS NOT EXPLAINED OR PROVED THAT THE INVESTMENT WAS MADE OUT OF INTEREST FREE FUNDS ONLY A PART OF THE INTEREST DISALLOWANCE WAS TO ATTRIBUTED TO DIVIDEND INCOME. IT WOULD SHOW THAT CONTRARY TO THE CLAIM OF THE ASSESSEE THE ASSESSING OFFICER DID RAISE AN ISSUE ABOUT NOT ALLOCATING ANY PART OF INTEREST COSTS TO DIVIDEND INCOME WHICH CALLED INTO QUESTION N IL INTEREST ATTRIBUTION TO THE DIVIDEND EARNINGS. IT CANNOT THEREFORE BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT CHALLENGED OR DOUBTED BY THE ASSESSING OFFICER. CLEARLY CONDITION PRECEDENT FOR INVOKING DISALLOWANCE UNDER SECTION 14A(1) I.E. THE ASS ESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESSE E NOT BEING SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT WAS FU LFILLED. HERE IS AN AMOUNT I.E.INTEREST WHICH WAS DEBITED IN THE BOOKS OF ACCOUNTS BUT NO PART OF THE SAME WAS ALLOCATED TO DIVIDEND INCOME EVEN THOUGH AS NOTED BY THE ASSESSING I.T.A. NO.980/AHD/2012 ASSESSMENT YEAR: 2008 - 09 PAGE 3 OF 3 OFFICER INVESTMENT IN SHARES WERE SHOWN AT RS 17 69 60 241 AND THE ASSE SSEE HAS NOT EXPLAINED OR PROVED THAT THE INVESTMENT WAS MADE OUT OF INTEREST FREE FUNDS ONLY . THE NON ALLOCATION OF INTEREST COST WAS CHALLENGED BY THE ASSESSING OFFICER AND IT IS NOT EVEN THE CASE OF THE ASSESSEE THAT ANY PART OF THE INTEREST INCOME WA S OFFERED SUO MOTU BY THE ASSESSEE. THE MERE FACT THAT THE ASSESSEE HAD OFFERED SOME OTHER EXPENSES FOR DISALLOWANCE ON HIS OWN AND THAT DISALLOWANCE IS NOT FAULTED CANNOT AFFECT THE DISALLOWANCE IN RESPECT OF A SPECIFIC HEAD I.E. INTEREST. AS A MATTER OF FACT THE EXPENSE WHICH WAS OFFERED FOR DISALLOWANCE WAS A SPECIFIC AND DIRECT EXPENSES AND EVEN AFTER OTHER DISALLOW ANCE UNDER RULE 8D FOR INDIRECT EXPENSES IT IS TO BE ADDED AS A DIRECT EXPENSE ANYWAY AS REQUIRED BY THE RULE. THE EXTENDED DISCUSSIONS I N CIT(A) S ORDER MAKE THIS ASPECT VERY CLEAR UNDER THESE CIRCUMSTANCES INVOKING RULE 8D R.W.S 14A WAS FULLY JUSTIFIED FOR INVOKING DISALLOWANC . AS FOR THE DECISIONS CITED BEFORE US THESE DECISIONS ARE EITHER DEALING WITH PRE RULE 8D SITUATION OR THE SIT UATIONS IN WHICH THE ASSESSEE HAS NOT CALLED INTO QUESTION CORRECTNESS OF ALLOCATION OR OF NON ALLOCATION OF COSTS. THESE SITUATIONS ARE MATERIALLY DIFFERENT. NOTHING THEREFORE TURNS ON THESE JUDICIAL PRECEDENTS. IN VIEW OF THESE DISCUSSIONS WHILE WE UP HOLD THE DISALLOWANCE IN PRINCIPLE WE DIRECT THE ASSESSING OFFICER TO ADOPT THE NET INTEREST PAYMENT AS AGAINST GROSS INTEREST PAYMENT IN COMPUTATION FOR THE PURPOSE OF DISALLOWANCE UNDER RULE 8D. THE DISALLOWANCE IS PARTLY MODIFIED ACCORDINGLY. [5] IN T HE RESULT THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER 2016. SD/ - SD/ - S S GODARA PR AMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD 19 TH DAY OF OCTOBER 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHE S AHMEDABAD