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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 552/Ahd/2018 Assessment Year 2013-14
M/s. Khyati Realities Ltd. The ACIT, 99, Chinubhai Towers, Circle-2(1)(2), Ashram Road, Vs Ahmedabad Ahmedabad-380009 (Respondent) PAN: AAACK8006B (Appellant)
Revenue by: Shri M. Anand Kumar, Sr. D.R. Assessee by: Shri Tushar Hemani, A.R. Date of hearing : 06-06-2019 Date of pronouncement : 14-06-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee’s appeal for A.Y. 2013-14, arises from order of the CIT(A)-6, Ahmedabad dated 31-01-2018, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
Ground nos. 1 to 5 of the appeal of the assessee are filed against the decision of ld. CIT(A) made by the assessing officer u/s. 14A of the act r.w. Rule 8D of the IT Rules, 1962 of Rs. 4,22,831/- and adding back disallowance of Rs. 42,283/- u/s. 14A to book profit u/s. 115JB of the act.
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The fact in brief is that assessee has filed return of income declaring income of Rs. 48,49,535/- on 29th Sep, 2013. Subsequently, the case was selected under security by issuing of notice u/s. 143(2) of the act on 3rd Sep, 2014. During the course assessment, the assessing officer noticed that assessee has shown total investment of Rs. 6,18,72,437/- in shares and paid interest to the amount of Rs. 8,25,877/- on borrowed funds which included borrowing from banks. However, the assessing officer observed that assessee has not disallowed any expenses u/s. 14A r.w. Rule 8D of the Rule, therefore, the assessing officer has computed the disallowance u/s. 14A rule 8D of the I.T. Rule to the amount of Rs. 4,22,831/- and added to the total income of the assessee. The assessing officer has also added the aforesaid disallowance of Rs. 4,22,831/- in the book profit determined u/s. 115JB of the Act.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
During the course of appellate proceedings before us, the ld. counsel has furnished paper book containing copy of acknowledgment of return of income and statement of total income along with copy of audit report and audit report under the Companies Act. The ld. counsel has contended that assessee has not earned any exempt income as dividend from investment in the shares. The ld. counsel has submitted that assessee was having substantial interest free fund for making investment and referred page no. 16 to 37 of the paper book. The ld. counsel has also contended that major part of investment was made by the assessee as capital contribution in the
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partnership firms where the assessee was partners out of interest free funds available with the assessee company in the form of share capital and reserves and surplus. The ld. counsel has referred a number of judicial pronouncements stating that when assessee has substantial interest free funds, disallowance u/s. 14A is unwarranted. The judicial pronouncements referred by the ld. counsel are placed below. CIT vs. Reliance Industries Ltd. -410 ITR 466 (SC) CIT vs. Torrent Power Ltd. - 363 ITR 474 (Guj) CIT vs. Suzlan Energy Ltd. – 354 ITR 630 (Guj) CIT vs. Gujarat Power Corporation Ltd. – 352 ITR 583 (Guj) CIT vs. Hitachi Home & Life Solutions (I). Ltd. – (2014) 41 taxmann.com 540 (Guj) CIT vs. Reliance Utilities & Power Ltd. -313 ITR 340 (Bom) Munjal Sales Corporation vs. CIT- 298 ITR 298 (SC) The ld. counsel has also placed reliance on the decision of Wadhwa Residence Pvt. Ltd. vs. ACIT (2018) 95 taxman.com 294 (Mum-Trib) wherein it is held that assessee had higher amount of interest free funds that invested, it was to be presumed that investment was made out of interest free funds available with assessee.
On the other hand, ld. departmental representative has supported the order of ld. CIT(A).
We have heard both the sides and perused the material on record. The assessing officer has computed disallowance u/s. 14A r.w. Rule 8D of the IT Rule on the basis of investment of Rs. 6,18,72,437/- on the presumption that the assessee has made investment in shares. With the assistance of ld. representatives, we have gone through the material on record and noticed that assessee was having interest free funds of Rs. 8,09,55,620/- as against total investment of Rs. 6,18,72,437/- reflected in the balance sheet as on 31st
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March, 2013. It is also noticed from the page no. 30 of the paper book that major part of the investment was made by the assessee company as capital in the partnership firms. It is noticed that the assessing officer has not considered all these material facts in her findings while adjudicating the impugned expenses u/s. 14A r.w. Rule 8D of the IT rule. The ld. CIT(A) has also not given any categorical finding on this material aspect that assessee has made investment in the partnership firm out of substantial amount of interest free fund available with it as elaborated above in this order. In the light of the above facts and circumstances, we consider that the ld. CIT(A) is not justified in her decision to sustain the impugned disallowance without disproving the material fact that assessee was having total interest free funds to the tune of Rs. 8,09,55,620/- as against total investment of Rs. 6,18,72,437/- and without giving any specific finding to demonstrate that how assessee has incurred any expenditure for earing exempt income. Therefore, the appeal of the assessee is allowed on this issue.
Regarding second issue in appeal of adding back disallowance of Rs. 4,22,831/- u/s. 14A of the act to book profit calculated u/s. 115JB of the act. We consider that the Special Bench of ITAT Delhi in the case of CIT vs. Vineet Investment Pvt. Ltd. 165 ITD 27 (Delhi)(SB) has held that such disallowance made u/s. 14A of the act is not to be added in computing book profit u/s. 115JB of the act. Therefore, we do not find any merit in the action of the assessing officer of adding the disallowance made u/s. 14A to the book profit. Accordingly, the same is deleted and appeal of the assessee on this issue is also allowed.
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The sixth ground of appeal is of general nature which does not require any adjudication, therefore, the same is dismissed.
Ground No. 7 of the assessee regarding levying of interest u/s. 234A/B/C of the act is also dismissed as levying of interest under the aforesaid sections are mandatory as per provisions of law.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 14-06-2019
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 14/06/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद