SHARMA COMMERICAL PRIVATE LIMITED, 91-91A JHOTWARA INDUSTRIAL AREA, JAIPUR-302012,JHOTWARA INDUSTRIAL, AREA, JAIPUR vs. INCOME TAX OFFICER WARD-3(1), JAIPUR, WARD-3(1) JAIPUR
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that since there were no fresh investments, no borrowed funds utilized for investments, and no exempt income earned during the year, the disallowance under Section 14A was not justified. Therefore, the disallowance was deleted.
What were the facts?
The assessee had made investments in shares in previous financial years, but no fresh investments or exempt income were generated from these investments in the current year. The Assessing Officer disallowed Rs. 6,71,879/- under Section 14A read with Rule 8D, which was confirmed by the CIT(A).
What were the issues?
Whether disallowance under Section 14A is sustainable when there are no fresh investments, no exempt income earned, and no evidence of borrowed funds used for investments during the year.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 271/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 271/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2015-16 cuke M/s Sharma Commercial Pvt. Ltd. The ITO, Vs. 90-91-A, Industrial Area, Ward-3(1), Jhotwara, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCS 4350 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : None (A.D. on record) jktLo dh vksj ls@ Revenue by : Miss Chanchal Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 17/02/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 18/02/2020 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Alwar dated 20.12.2018 for the assessment years 2015-16 wherein the limited issue relates to confirmation of addition of Rs. 6,71,879/- U/s 14A of the IT Act.
At the outset, it is noted that the matter was initially fixed for hearing on 16.04.2019 however, none appeared on behalf of the assessee. The matter was again listed for hearing on 07.01.2020 again none appeared on behalf of the assessee and the matter has now come up for hearing today i.e. 17.02.2020, again there is no appearance on behalf of the assessee nor any written submissions have been filed. Accordingly, it was decided to hearing the matter ex-parte qua the assessee after hearing the ld. DR and considering the material available on record.
In this case, the assessment was completed U/s 143(3) of the Act wherein the AO had made a disallowance of Rs. 6,71,879/- U/s 14A of the Act which on appeal has been confirmed by the ld. CIT(A). From perusal on records, the undisputed facts which are emerging from the records are that the assessee has made investment in shares of Jaipur Syntex Ltd., M/s Shree Sharma Steel Rolling Mills Pvt. Ltd. and Shree Sharma Steel Tech (India) Pvt. Ltd. totaling to Rs. 97,17,500/-. These investments were made in the previous financial years and there are no fresh investments which have been made during the year. Further, the assessee has not earned any income on this investment which has been claimed as exempt during the year under consideration. However, given that the assessee has claimed interest expenditure in its profit and loss account, the AO had made disallowance U/s 14A of the Act r/w Rule 8D amounting to Rs. 6,71,879/-.
Given the fact that the assessee has not made any fresh investment during the under consideration and all this investments were made in the previous financial years, there cannot be any disallowance of interest expenditure which can be related to making of such investments during the year. Further, there is nothing on record to suggest that in the previous financial years, the investments have been made out of the borrowed funds and there is recurring interest liability relatable to borrowed funds which were utilized to make such investments. Further, given that there is no movement during the year in the investments so made, and the investments at the beginning of the year and the investments at the end of the year are the same, they cannot be any administrative expenditure which can be related to have been incurred in relation to such investments. In light of the same and given the fact that there is no exempt income during the year which has been claimed as exempt by the assessee in respect of its investments, the disallowance so made by the Assessing Officer U/s 14A of the Act is hereby deleted and the order of the lower authorities are set aside to this extent.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 18/02/2020. Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 18/02/2020. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Sharma Commercial Pvt. Ltd., Jaipur. 2. izR;FkhZ@ The Respondent- ITO, Ward-3(1) Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A)
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