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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Amarjit Singh , Accountant Member And Ms. Madhumita Roy, Judicial Member ITA No. 2558/Ahd/2017 Assessment Year 2014-15
BGA Tradelink Pvt. Ltd. The DCIT, D/38, Aryaman Circle-1(1)(1), Bungalows, Vs Ahmedabad Opp. Anand Niketan (Respondent) School, Shilaj Rly. Crossing, Ahmedabad-380058 PAN: AADCB6410H (Appellant)
Revenue by: Shri James Kurian, Sr. D.R. Assessee by: Shri S.N. Soparkar and Shri Parin Shah, ARs Date of hearing : 19-03-2019 Date of pronouncement : 27-03-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
The solitary ground of appeal of the assessee is directed against the decision of ld. CIT(A) in confirming the addition made by the assessing officer on account of disallowance u/s. 14A of the act.
I.T.A No. 2558/Ahd/2017 A.Y. 2014-15 Page No 2 BGA Tradelink Pvt. Ltd. vs. DCIT
The fact in brief is that the assessee has filed return of income declaring income of Rs. 27,65,90,490/- on 30th Sep, 2014. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 3rd Sep, 2015. During the course of assessment, the assessing officer noticed that assessee has earned dividend income of 2,64,87,948/- which was exempt from tax. The assessing officer has asked the assessee to explain why not the expenses incurred for earing exempt income should not be disallowed u/s.14A r.w. Rule 8D of the IT Rule. In response, the assessee stated that it has invested in the shares from its own fund and has not incurred any expenditure for the same. The assessing officer had not accepted the contention of the assessee stating that assessee had not produced any material to establish that no amount of interest bearing funds had been utilized to make the investment on which exempt income was earned. Further, the assessing officer has also stated that assessee must have incurred administrative expenses such as documentation, salaries of employees, in relation to investment portfolio, stationary, computer etc. Therefore, the assessing officer has computed the disallowance as per provision of section 14A r.w.s. Rule 8D to the amount of s. 94,76,690/- and added to the total income of the assessee.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has confirmed the disallowance made by the assessing officer reiterating the same reason mentioned by the assessing officer.
During the course of appellate proceedings before us, the ld. counsel has submitted paper book containing information and submission made
I.T.A No. 2558/Ahd/2017 A.Y. 2014-15 Page No 3 BGA Tradelink Pvt. Ltd. vs. DCIT
before the assessing officer and ld. CIT(A) during the course of assessment and appellate proceedings. He has also placed reliance on the following decisions. (i) 409 ITR 401 CIT vs. Shreno Ltd. (2018) (Guj)(HC) (ii) 376 ITR 553 Pr. CIT vs. India Gelatine and Chemical Ltd. (iii) 354 ITR 630 CIT-IV vs. Suzlan Energy Ltd. (Guj) (HC)
He has also placed reliance on the decision of HDFC Bank Ltd. Vs. Dy. CIT of Mumbai High Court Writ Petition No. 1753 of 2016 dated 25th Feb, 2016. He has further contended that assessee has made investment from its own fund therefore ld. CIT(A) has erred in confirming the addition made by assessing officer without any reason. He also referred to page no. 12 of paper book which is balance sheet of the assessee company as on 31st March, 2014 as per which the total interest free fund with the assessee was to the amount of Rs. 44 crores as against total investment was to the amount of Rs. 42 crores. He has also referred page no. 43 of paper book demonstrating that assessee has made investment out of its own fund. On the other hand, ld. departmental representative has supported the order of lower authorities.
We have heard the rival contention and perused the material on record carefully. With the assistance of ld. representatives, we have gone through the material on record that as on 31st March, 2014 the total interest free fund consisting of capital and reserve of the assessee company was Rs. 44,01,43,494/- as against which the total investment made by the assessee was to the amount of Rs. 42,30,86,522/-. The relevant parts of the
I.T.A No. 2558/Ahd/2017 A.Y. 2014-15 Page No 4 BGA Tradelink Pvt. Ltd. vs. DCIT
information about the interest free funds and investment made by the assessee are reproduced as under:- Particulars As at 31/03/2013 As at 30/11/2013 As at 31/03/2014 Capital + Reserves 23,16,75,312/- 23,16,75,312/- 44,01,43,494
Profit earned till date N.A. 25,53,06,095 N.A. Total Own Funds 23,16,75,312 48,69,81,407 44,01,43,494
Investments 1,74,62,596 6,73,93,632 42,30,86,522
We have also noticed from the balance sheet of the assessee company placed in the paper book at page no. 12 that assessee was having interest free fund to the amount of Rs. 44 crores and the investment made by the assessee company was to the amount of Rs. 42 crores as on 31st March, 2014. After considering the above material fact and material on record, we observe that it is clearly demonstrated from the balance sheet that assessee company was having own capital and reserves surplus to the amount of Rs. 44,01,43,494/- as on 31st March, 2014 as against which investment in shares and securities as on 31st march, 2014 was made to the amount of Rs. 42,30,86,521/-. These facts demonstrate that assessee company had sufficient own fund for making investment in the shares. After placing reliance on the decision for Mumbai High Court in the case of Reliance Utilities and Power 313 ITR 340 with regard to investment in tax free securities out of assessee’s own fund and considering the other judicial decisions referred by the assesssee, we are not inclined with the decision of ld. CIT(A) in sustaining the impugned addition made by the assessing officer without giving reason for its justification, therefore, we are of the view that no interest expenditure should be disallowed u/s. 14A r.w. rule 8D in the case of the assessee.
I.T.A No. 2558/Ahd/2017 A.Y. 2014-15 Page No 5 BGA Tradelink Pvt. Ltd. vs. DCIT
However, regarding administrative expenditure, we are of the view that no exempt income can be earned without incurring any administrative expenditure, therefore, we restore this issue of computing administrative expenditure incurred for earning exempt income to the file of assessing officer and direct the assessing officer to compute administrative expenditure @ 0.5% of investment from which the assessee has earned the tax free income. Therefore, the appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 27-03-2019
Sd/- Sd/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 27/03/2019 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