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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD – JUDICIAL MEMBER:
These cross appeals filed against each other by the assessee and revenue are against the order dated 24.09.2015 passed by the Commissioner of Income Tax (Appeals)-Gandhinagar, Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “The Act”) arising out of the same order dated 27.01.2015 for the Assessment Year 2012-13
- 2 - ITA Nos.2997 & 3394/Ahd/2015 Royal Techno Project India Pvt. Ltd. Asst.Year – 2012-13 Since both the appeals relate to same assessee those are heard analogously and are being disposed of by a common order.
First we take up ITA No.2997/Ahd/2015 for A.Y. 2012-13 following grounds has been taken by the assessee: (i) “On facts & in law as well as in the circumstances of the case of the appellant, the Ld CIT(A) has grossly erred in confirming the disallowance of interest expenses of Rs.3,65,110/- u/s 40(a)(ia) of the Act, when he ought to have delete the same. (ii) On fact & in law as well as in the circumstances of the case of appellant, the Ld CIT(A) has grossly erred in confirming the disallowance u/s 14A of Rs.1,47,623/- when he ought to have deleted the same. (iii) On facts & in law as well as the circumstances of the case of the appellant, the Ld CIT(A) has grossly erred in confirming the disallowance of Rs.6,65,858/- out of ROC Expenses, when he ought to have deleted the same.”
Brief facts of the case are that the appellant is a domestic company engaged in the business of civil construction on contract basis with government and local authority etc. The appellant has submitted its e-return of income on 25.09.2012 showing total income of Rs.82,92,610/-. The return so filed is supported by Tax Audit Report u/s 44AB of the Act. The case of the assessee having come under scrutiny, a notice u/s 143(2) of the Act was issued. In compliance thereto the appellant attended and submitted details called for. Thereupon, the AO finalized regular assessment u/s 143(3) of the Act on 27.01.2015 determining total income at Rs.1,54,49,010/-.
Being aggrieved, the appellant filed an appeal before the Ld CIT(A), Gandhinagar, who has passed the appellate order dated 24.09.2015 whereby the appellant’s appeal has been partly allowed.
Being aggrieved and dissatisfied with the impugned appellate order, the appellant has preferred the present appeal before the Hon’ble Tribunal for getting due justice.
- 3 - ITA Nos.2997 & 3394/Ahd/2015 Royal Techno Project India Pvt. Ltd. Asst.Year – 2012-13 3. So far as Ground No. 1 is concerned with regard to interest expenses of Rs.3,65,110/- u/s 40(a)(ia) of the Act is concerned.
Learned AR has not pressed this ground of appeal therefore same is dismissed as not pressed.
Ground No.2 is concerned with regard to disallowance of Rs.1,47,623/- u/s 14A.
During the course of assessment proceedings the Assessing Officer noticed that assessee has shown investment of Rs. l,00,81,096/-at the end of financial year relevant to A.Y.2012-13 and the assessee has received dividend income of Rs.2,62,276/-.The Assessing Officer queried the assessee as to why disallowance of expenses as per section 14A read with rule 8D should not be made. In response to which the assessee explained that there is no expenses incurred for earning dividend income and therefore, there is no justification is disallowing any part of expenses U/S.14A of the Act. However, without issue of any further show cause notice and providing an opportunity to the assessee for defending its case, the Assessing Officer has made disallowance of Rs. 1,47,623/- U/S.14A out of interest expenses. It is pertinent to note that in computation at para.7.10 against first item in the table the Assessing Officer herself has mentioned amount of Rs.NIL as 'expenditure incurred by assessee to earn exempted income'. Yet, the Assessing Officer has disallowed the sum of Rs.1,47,623/-, out of interest and financial expenses.
It is submitted that the assessee having not made any expenditure relatable to investment in shares, so there is no applicability of Sec. 14A r.w.r 8D. Furthermore, the assessee, during the course of assessment proceedings, has stated that investment made in shares has been made out of interest free funds. As may be verified from the audited)
- 4 - ITA Nos.2997 & 3394/Ahd/2015 Royal Techno Project India Pvt. Ltd. Asst.Year – 2012-13 balance sheet, the assessee company is already having sufficient interest free funds at its disposal, as stated below: Particulars As on 31.03.2012 As on 31.03.2011 Share Capital Rs.12,29,80,000/- Rs.12,27,80,000/- Reserve and surplus Rs. 1,36,34,071/- Rs. 74,84,022/- Share holder deposits Rs. 43,86,529/- ----------- Sundry Creditors (Current liabilities) Rs.97,85,928/- Rs.1,00,31,915/- Interest Free deposits Rs.1,58,01,386/- Rs.13,93,294/-
As we can see in this year that the assessee has not made any investment and are carried forward from the earlier year. Therefore, when assessee has not made any investment in the year under consideration there is no exempt income. So in such case, no disallowance can be made thus we allow this ground of appeal.
Ground No.3 is concerned with regard to confirming the disallowance of Rs.6,65,858/- out of ROC expenses.
During the course of assessment proceeding, the assessee has incurred Rs.6,65,858/- as ROC expenses and Learned AO made an addition of Rs.6,65,858/- by stating that same is capital expenditure. During the appellate proceeding before the Learned CIT(A), assessee submitted detailed reply stating that expenses of Rs.3,16,320/- are incurred for registration and Rs.73,440/- for ROC charges and Rs.2,47,248/- are incurred for stamp duty expenses. As we can see assessee has made this expenditure for its business purpose as a running revenue expenses and same is after the commencement of the business therefore in our considered opinion such expenses are allowable expenses. In the result, this ground of appeal of the assessee is allowed.
- 5 - ITA Nos.2997 & 3394/Ahd/2015 Royal Techno Project India Pvt. Ltd. Asst.Year – 2012-13 Now we take up Revenue’s appeal in ITA No.3394/Ahd/2015 for A.Y. 2012-13:
At the time of the hearing, we observed that the tax effect in the appeal filed by the Revenue is less than Rs. 20 lacs. As per the Circular No. 3 of 2018 dated 11/07/2018 issued by CBDT recently all pending appeals filed by Revenue are liable to be dismissed/ withdrawn/ not pressed to reduce the litigation where the tax effect does not exceed the prescribed monetary limit, i.e., Rs.20 Lacs. The relevant extract of the circular is reproduced below: “2. In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/ appeals before Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:
S. Appeals/ SLPs in Income-tax matters Monetary Limit No. (Rs.) 1. Before Appellate Tribunal 20,00,000 2. Before High Court 50,00,000 3. Before Supreme Court 1,00,00,000
The monetary limit for filing the appeals by the Revenue before the Tribunal has been increased to Rs. 20 Lacs. It is also clarified in the said Circular that the said monetary limit is applicable retrospectively even to the appeals pending before the Tribunal. The CBDT has also instructed that such pending appeals below this specified tax limit of Rs.20 lacs may be withdrawn / not pressed.
In the case on hand, it was noticed that the tax effect on the disputed issue raised by the Revenue is claimed to be less Rs.20 Lacs. Therefore appeal of the Revenue is required to be dismissed in limine in terms of the above circular.
- 6 - ITA Nos.2997 & 3394/Ahd/2015 Royal Techno Project India Pvt. Ltd. Asst.Year – 2012-13
The Ld. DR for the Revenue fairly agreed on the applicability of the CBDT Circular No. 3 of 2018. Accordingly, the appeal of the Revenue is dismissed as not maintainable. However, the Revenue is on the liberty to move the miscellaneous application to recall the order if the tax effect exceeds the threshold limit or the case of the Revenue falls in any of the exception provided in the aforesaid CBDT Circular in any manner. The MA shall be filed within the prescribed time. Hence the appeal of the Revenue is dismissed.
In the result, assessee’s appeal is partly allowed and revenue’s appeal is dismissed. This Order pronounced in Open Court on 26/04/2019
Sd/- Sd/- ( PRADIP KUMAR KEDIA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 26/04/2019 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Gandhinagar, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 04.04.2019 (Dictation Pages 3) 2. Date on which the typed draft is placed before the Dictating Member 10.04.2019 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S 29.04.2019 5. 6. Date on which the fair order is placed before the Dictating Member for pronouncement… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………