Avinash Bhosale Infrastructure Pvt. Ltd.,, Pune v. Deputy Commissioner of Income-tax,,

ITA 984/PUN/2016 | 2008-2009
Pronouncement Date: 14-10-2016 | Result: Allowed

Appeal Details

RSA Number 98424514 RSA 2016
Assessee PAN AABCA5452C
Bench Pune
Appeal Number ITA 984/PUN/2016
Duration Of Justice 5 month(s) 2 day(s)
Appellant Avinash Bhosale Infrastructure Pvt. Ltd.,, Pune
Respondent Deputy Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 14-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 14-10-2016
Assessment Year 2008-2009
Appeal Filed On 12-05-2016
Judgment Text
- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC PUNE BEFORE MS. SUSHMA CHOWLA JM . / ITA NO. 9 84 /PN/201 6 / ASSESSM ENT YEAR : 20 08 - 09 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 2 ABIL HOUSE GANESH KHIND ROAD RANGE HILL CORNER PUNE - 411007 . / APPELLANT PAN: A A BCA5452C VS. THE DY . COMMISSIONER OF INCOME TAX CIRCLE 1(1) PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SMT. SUMITRA BANERJI / DATE OF HEARING : 0 4 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 14 . 1 0 .201 6 / ORDER PER SUSHMA CHOWLA J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 1 PUNE DATED 0 1 . 0 2 .20 1 6 RELATING TO ASSESSMENT YEAR 20 08 - 09 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) R.W.S. 147 OF THE INCOME - TAX ACT 1961 (IN SHORT THE AC T) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ITA NO. 9 84 /PN/20 1 6 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 2 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5 12 750/ - U/S 14A R.W.R 8D WHEN THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. FOR THIS AND SUCH OTHER GR OUNDS AS MAY BE URGED AT THE TIME OF HEARING THE ORDER OF THE CIT(APPEALS) AND ASSESSING OFFICER MAY BE VACATED AND THE APPELLANTS CLAIM MAY BE ALLOWED OR ANY SUITABLE DIRECTIONS ISSUED. 3. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST DISALL OWANCE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES 1962 (IN SHORT THE RULES) AT RS. 5 12 750/ - . 4. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.11 13 960/ - W HICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES AND HAD ALSO INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE YEAR UNDER CONSIDE RATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 14A OF THE AC READ WITH RULE 8D OF THE RULES WERE ATTRACTED. SINCE THE ASSESSEE AS WELL AS THE ASSESSING OFFICER HAD NOT MADE ANY ADJUSTMENT ON THIS ACCOUNT THE ASSESSING OFFIC ER RECORDED REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND ISSUE D NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE OBJECTED TO REOPENING THE ASSESSMENT MERELY ON THE GROUND THAT UNDER SECTION 14A OF THE ACT DISALLOWANCE WAS TO BE M ADE. THE ASSESSEE ALSO POINTED OUT THAT IT HAD NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. ANOTHER CONTENTION RAISED BY THE ASSESSEE WAS THAT THERE WAS NO EXEMPT INCOME AND THEREFORE THERE WAS NO QUESTION OF ANY EXPENDITURE BEING RELAT ABLE T O THE SAID EXEMPT INCOME. THE ASSESSING OFFICER OBSERVED THAT WHERE THE ASSESSEE WAS NOT MAINTAINING SEPARATE DETAILS FOR EXEMPT INCOME AND TAXABLE INCOME IT COULD NOT BE ACCEPTED THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE RELATED TO EXEMPT INCOM E. HE WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 14A OF THE ACT WE RE ATTRACTED AND HENCE DISALLOWANCE ITA NO. 9 84 /PN/20 1 6 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 3 WAS CALCULATED AS PER RULE 8D OF THE RULES @ 0.5% OF THE AVERAGE INVESTMENTS AT RS.5 12 750/ - . 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. HE ALSO NOTED THAT IN ASSESSMENT YEAR 2012 - 13 ON SIMILAR FACTS THE ASSESSEE HAD NOT CHALLENGED INVOKING OF PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES BUT HAD ONLY REQUESTED FOR MODIFICATION OF QUANTUM OF DISALLOWANCE. HENCE TH E ORDER OF ASSESSING OFFICER IN THIS REGARD WAS CONFIRMED AGAINST WHICH THE ASSESSEE IS IN APPEAL. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT NO DIVIDEND INCOME WAS EARNED DURING THE YEAR AND IN THE ABSENCE OF ANY DIVIDEND INCOME THERE IS NO MERIT IN THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. IN THIS REGARD RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT IN ITA NO.749/2014 HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT IN ITA NO.749/2014 JUDGMENT DATED 02.09.2015 . ATTENTI ON WAS DRAWN TO THE PAGE 19 OF THE PAPER BOOK WHICH IS SCHEDULE TO THE PROFIT & LOSS ACCOUNT WHEREIN THE DIVIDEND INCOME HAS BEEN SHOWN AT NIL. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE COULD NOT CONTROVERT THE SAID CLAIM OF ASSESSEE TH AT DURING THE YEAR NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE. 8. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES THE ISSUE WHICH ARISES FOR ADJUDICATION IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE MADE UNDER SEC TION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE PROVISIONS OF THE SECTION ARE ATTRACTED WHERE THE ASSESSEE HAS EARNED EXEMPT INCOME THEN THE EXPENDITURE RELATABLE TO SUCH EXEMPT ITA NO. 9 84 /PN/20 1 6 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 4 INCOME IS NOT TO BE ALLOWED AS DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT. THE MANNER OF COMPUTATION OF DISALLOWANCE IS PROVIDED UNDER RULE 8D OF THE RULES. THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT ( 2010 ) 328 ITR 81 (BOM) HAD HELD THAT THE MACHINERY PROVISIONS OF RULE 8D OF THE RULES ARE TO BE APPLIED PROSPECTIVELY FROM ASSESSMENT YEAR 2008 - 09. THE YEAR UNDER APPEAL BEFORE THE TRIBUNAL IS ASSESSMENT YEAR 2008 - 09 HENCE THE ISSUE HAS TO BE DECIDED BY KEEPING THE PROVISIONS OF BOTH SECTION 14A OF THE ACT AND RULE 8 D OF THE RULES IN MIND. THE CLAIM OF ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE INVESTMENT WAS MADE OUT OF ITS OWN SOURCES AND FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME SO THERE IS NO QUESTION OF DISALLOWANCE OF ANY EXPENDITURE ATTRIBUTABLE TO SUCH EXEMPT INCOME. THE ASSESSING OFFICER ON THE OTHER HAND CONSIDERED THE FACT THAT THE ASSESSEE HAS DEBITED INTEREST EXPENDITURE AND SINCE THE ASSESSEE WAS NOT MAINTAINING SEPARATE FUND FLOW FOR THE REGULAR BUSINESS ACTIVITY AND THE TAX FREE INCOME HENCE THE SAID EXPENSES HAD TO BE DISALLOWED. FURTHER THERE W ERE VARIOUS OTHER EXPENSES DEBITED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT AND THE SAME HAD TO BE TAKEN NOTE OF. THE SECOND PLANK OF REASONING OF ASSESS ING OFFICER WAS THE RELIANCE ON SPECIAL BENCH OF DELHI TRIBUNAL IN CHEMINVEST LTD. VS. ITO WHEREIN IT WAS HELD THAT EVEN IF THE ASSESSEE HAD NOT RECEIVED ANY TAX FREE INCOME IN RESPECT OF INVESTMENTS IN SHARES IT COULD NOT BE SAID THAT NO DISALLOWANCE WA S TO BE MADE UNDER SECTION 14A OF THE ACT. 9. NOW COMING TO THE FACTS OF THE PRESENT CASE THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD SHOWN OTHER INCOME OF RS. 84 03 219/ - WHICH COMPRISED OF INTEREST EARNED AND INTEREST ON DEBENTURES FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD NOT RECEIVED ANY DIVIDEND ON INVESTMENTS MADE IN SHARES OF DIFFERENT COMPANIES. THE INTEREST ON DEBENTURES ADMITTEDLY ITA NO. 9 84 /PN/20 1 6 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 5 WAS TAXABLE AND WAS NOT WITHIN PURVIEW OF SECTION 14A OF THE ACT. THE FINANCIAL EXPENSES WERE O NLY TO THE TUNE OF RS.6 500/ - WHICH WAS ON ACCOUNT OF BANK CHARGES AND COMMISSION THERE WAS NO EXPENDITURE CLAIMED ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS. SO THE FIRST PLANK OF ARGUMENT OF ASSESSING OFFICER IN THIS REGARD IS NOT WARRANTED. THE S ECOND ASPECT OF INVESTMENT MADE BY THE ASSESSEE IS THAT THE INVESTMENTS AS ON 31.03.2008 ON ACCOUNT OF SHARES OF COMPANIES IS BROUGHT FORWARD FROM THE EARLIER YEARS AND NO FRESH INVESTMENT HAS BEEN MADE DURING THE YEAR AS EVIDENT FROM SCHEDULE E TO THE BAL ANCE SHEET PLACED AT PAGE 18 OF THE PAPER BOOK. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES OF THE CASE WHERE NO FRESH INVESTMENT HAS BEEN MADE AND NO DIVIDEND HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THE QUESTI ON WHICH ARISES IS WHETHER ANY DISALLOWANCE COULD BE MADE ON ACCOUNT OF EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. FIRST OF ALL THE ASSESSING OFFICER THOUGH MAKES REFERENCE TO THE DEBITING OF INTEREST EXPENDITURE BUT IN FINAL ANALYSIS DISALLOWAN CE MADE WAS ON ACCOUNT OF RULE 8D(III) OF THE RULES I.E. 0.5% OF AVERAGE INVESTMENT FOR EXPENSES OTHER THAN THE INTEREST. THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE RELYING ON THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN CHEMINVEST LTD. VS. ITO (SUPRA). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT THE DECISION OF SPECIAL BENCH HAS BEEN REVERSED BY THE HONBLE DELHI HIGH COURT IN CHEMINVEST LTD. VS. CIT (SUPRA). THE ISSUE BEFORE THE HONBLE HIGH COURT WAS WHETHER DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME WAS EARNED OR RECEIVED BY THE ASSESSEE. THE HONBLE HIGH COURT VIDE PARA 23 HELD AS UNDER: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFORE THE COURT ANSW ERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14AOF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. ITA NO. 9 84 /PN/20 1 6 AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. 6 10. FURTHER THE HONBLE DELHI HIGH COURT IN CIT VS. HOLCIM INDIA PVT. LTD. IN ITA NO.486/2014 & ITA NO.299/2014 VIDE JUDGMENT DATED 05.09.2014 HAD HELD SIMILAR PROPOSITION. 11. IN VIEW OF ABOVE SAID JUDICIAL PRECEDENTS THERE IS NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN THE ABSENCE OF AN Y EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. NO DISALLOWANCE WAS WARRANTED UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES AND THE SAME IS THUS DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 1 2 . IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF OCTOB ER 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 14 TH OCTO BER 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPO NDENT; 3. ( ) / THE CIT(A) - 1 PUNE ; 4. / THE PR. CIT - 1 PUNE ; 5. 6. - / DR SMC ITAT PUNE; / GUARD FILE . / BY ORDER // TRUE COPY // / SR. PRIVATE SECRETARY / ITAT PUNE