THE PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. GANESH HOUSING CORPORATION LTD.

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TAXAP/817/2019HC GujaratGJHC24065996201913 January 2020Bench: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE BHARGAV D. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first proposed substantial question of law (related to proportionate interest expenditure) could not be termed as such, in view of a previous order of the Court on the same date in another Tax Appeal. Regarding the second proposed question (under Section 14A), the Tribunal had noted that the assessee had not declared any exempt income, thus Section 14A was not attracted, citing the Gujarat High Court's decision in CIT vs. Corrtech Energy (P) Ltd. The Tribunal also observed that interest-free funds available to the assessee exceeded the amount of investments that could potentially yield interest. The High Court agreed with the Tribunal's reasoning and its reliance on the Corrtech Energy decision. Consequently, the appeal was dismissed.

What were the facts?

This Tax Appeal was filed by the Revenue against an order dated 15.05.2019 passed by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'B', for the assessment year 2012-2013. The appeal challenges the ITAT's decision to uphold the Commissioner of Income Tax (Appeals) [CIT(A)] order, which deleted certain disallowances made by the Assessing Officer. The disallowances in dispute pertained to proportionate interest expenditure of Rs. 8,36,975 and an amount of Rs. 6,96,18,668 under Section 14A of the Income Tax Act, 1961. The Revenue contended that the assessee had incurred substantial interest expenditure while giving interest-free loans and that the material on record was not appreciated by the lower authorities.

What were the issues?

1. Whether the Appellate Tribunal erred in law and facts in upholding the CIT(A)'s order deleting the disallowance of proportionate interest expenditure of Rs. 8,36,975, considering the assessee incurred substantial interest expenditure while giving interest-free loans? (Question of law and fact, concerning Section 37 of the Income Tax Act, 1961). 2. Whether the Appellate Tribunal erred in law and facts in upholding the CIT(A)'s order deleting the disallowance of Rs. 6,96,18,668 under Section 14A of the Act, without appreciating the material on record? (Question of law and fact, concerning Section 14A of the Income Tax Act, 1961). Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that the Tribunal erred in deleting the disallowance of proportionate interest expenditure, highlighting that the assessee had incurred substantial interest expenditure while providing interest-free loans. For the Section 14A disallowance, the Revenue contended that the Tribunal failed to appreciate the material on record.

Which sections of the Income-tax Act were involved?

Section 260A,Section 14A,Section 37

AI-generated summary — verify with the full judgment below

C/TAXAP/817/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 817 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus GANESH HOUSING CORPORATION LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 13/01/2020

ORAL ORDER

(PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal is filed under Section 260A of the Income Act, 1961 (for short the “Act”) at the instance of Revenue and it is directed against the order   dated   15.05.2019   passed   by   the   Income   Tax Appellate Tribunal, Ahmedabad Bench 'B', Ahmedabad in ITA   No.3085/Ahd/2015   for   the   assessment   year   2012­ 2013. 2. The Revenue has proposed the following questions as the substantial questions of law involved in this appeal:­ “2(A)  Whether  the Appellate  Tribunal  had erred in law and on facts in upholding the order of CIT(A)   deleting   the   disallowance   made   by   the Assessing   Officer   on   account   of   proportionate interest   expenditure   of   Rs.8,36,975/­   without appreciating   that   the   assessee­company   had Page 1 of 3

C/TAXAP/817/2019 ORDER incurred substantial  interest  expenditure while giving interest free loans? (B) Whether the Appellate Tribunal had erred in law and on facts in upholding the order of the CIT(A)   in   deleting   the   disallowance   of Rs.6,96,18,668/­   under   Section   14A   of   the   Act without   appreciating   the   material   brought   on record?” 3.     So   far   as   the   proposed   Question   No.2(A)   is concerned, the same cannot be termed as a substantial question of law in view of the order passed by this Court of even date in the Tax Appeal No.734 of 2019. 4.     So   far   as   the   proposed   Question   No.2(B)   is concerned, we take notice of the following findings recorded by the Tribunal:­ “52.3   With   the   assistance   of   the   learned representatives of the Revenue and assessee, we observe that the assessee has not declared any   exempt   income   and   consequently   the provisions of Section 14A is not attracted in view of CIT vs. Corrtech Energy (P) Ltd. 45 taxmann.com   116(Guj)   and   other   several decisions   in   this   regard.   Secondly,   the CIT(A)   has   also   recorded   a   finding   to   the effect that interest free funds available at the   disposal   of   assessee   is   in   excess   of amount   of   investments   which   give   rise   to potential interest is not permissible in such circumstances.   Hence,   we   do   not   see   any infirmity in the action of CIT(A) in deleting the disallowance of interest expenditure for the   purposes   of   section   14(A)   of   the   Act. Hence, we decline to interfere.” 3. Thus,  the   Tribunal   has  referred   to  and   relied upon the decision of this Court in the case of CIT vs. Corrtech Energy (P) Ltd. [(2014) 45 taxmann.com 116 (Guj)]. We are in agreement with the reasoning Page 2 of 3

C/TAXAP/817/2019 ORDER assigned   by   the   Tribunal   so   far   as   the   proposed Question No.2(B) is concerned. In the result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) GIRISH Page 3 of 3

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