ASSISTANT COMMISSIONER OF INCOME TAX, KOTA vs. M/S N R SWITCH - -RADIO, KOTA

PER BHAGCHAND, AM

The appeal filed by the Revenue emanates from the order of the

ld. CIT(A), Kota dated 16-11-2017 for the Assessment Year 2013-14

raising therein solitary ground of appeal as under.

‘’On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 20,409/- made by treating interest income as income from other sources.’’

ITA No.185/JP/2018 ACIT , Circle – 1, Kota vs M/s. N.R. Switch-N-Radio Service (P) Ltd. Kota 2.1 Brief facts of the case are that the AO on perusal of the balance

sheet of the assessee during assessment proceeding noted that the

assessee is having investment of Rs. 7,33,352/- on shares. The income of

this investment is not includible while computing the total income. The

AO noted that the assessee has not disallowed anything u/s 14A of the

Act. The AO vide query letter dated 30-11-2015 asked the assessee to

furnish working of disallowance as per provisions of section 14A r.w.r.

8D. The assessee was further asked vide order sheet entry dated 10-03-

2016 to show cause as to why disallowance u/s 14A read with rule 8D

should not be made. The AO during assessment proceeding noted that

the assessee had not submitted anything in this regard. The AO has given

the reference of CBDT Circular No. 5/2014 and also the relevant

provision of Section 14A of the Act in the assessment order. The AO

disallowed an amount of Rs. 20,409/- and added the same to the total

income of the assessee by observing as under:-

‘’7.3 In view of the provisions of Section 14A and in the light of Board’s Circular No. 5/2014 and having regard to the income of the assessee, I am not satisfied with the correctness of the claim of the assessee in respect of its income which does not part of the total income under this Act. Therefore, the disallowance u/s 14A is calculated as

ITA No.185/JP/2018 ACIT , Circle – 1, Kota vs M/s. N.R. Switch-N-Radio Service (P) Ltd. Kota prescribed under Rule 8D (details mentioned at page 5) and added to the total income of the assessee.’’

2.2 In first appeal, the ld. CIT(A) has deleted the addition made by the

AO by observing as under:-

‘’…Based on the above legal precedents relevant to the facts of this case where no exempt income has been earned by the appellant to warrant disallowance as per the provisions laid down u/s 14A r.w.r. 8D and further since the AO had not brought out any nexus between interest bearing funds having been diverted towards such investment of Rs. 7,33,352/-, the addition of Rs. 20,409/- is accordingly directed to be deleted. This ground of appeal is treated as allowed.

2.3 During the course of hearing, the ld. DR supported the order of the

AO and also mentioned that the issue of disallowance u/s 14A r.w.rule

8D falls under exception as mentioned in para 8(b) of the Board’s

Circular No. 21/2015.

2.4 On the other hand, the ld.AR of the assessee supported the order of

the ld. CIT(A) and also relied on the decision of Hon'ble Allahabd High

Court in the case of Addl. CIT vs Dhampur Sugar Mills Pvt. Ltd. 111

ITA No.185/JP/2018 ACIT , Circle – 1, Kota vs M/s. N.R. Switch-N-Radio Service (P) Ltd. Kota DTR (2014) 350 (All.). The Hon'ble Court held that where the entire

interest expenditure was attributable to business income in which

resultant income was assessable to tax, disallowance u/s 14A is not

warranted – in favour of assessee.

2.5 We have heard the rival contentions and perused the materials

available on record. The facts of this ground is that the AO disallowed the

sum of Rs. 20,409/- u/s 14A of the Act read with rule 8D holding that the

investment made by the assessee company is not correct as the company

has not earned any income. In first appeal, the ld. CIT(A) has deleted the

addition made by the AO amounting to Rs. 20,409/- holding that the AO

had not brought out any nexus between interest bearing funds having

been diverted towards such investment of Rs. 7,33,352/-. It is noted that

the ld. CIT(A) has taken into consideration the various case laws in his

order which finds support in favour of the assessee. The decision of

Hon'ble Allahabad High Court in the case of Addl. CIT vs Dhampur

Sugar Mills (P) Ltd. finds support in favour of the assessee on the issue in

question. In view of the facts, circumstances of the case and the case laws

(supra), we concur with findings of the ld. CIT(A). Thus the appeal of

the Revenue is dismissed.

ITA No.185/JP/2018 ACIT , Circle – 1, Kota vs M/s. N.R. Switch-N-Radio Service (P) Ltd. Kota 3.0 In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 09 -07-2018.

Sd/- Sd/- ¼ fot; iky jko ½ ¼HkkxpUn½ (Vijay Pal Rao) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 09 /07/ 2018 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The ACIT, Circle – 1, Kota 1. 2. izR;FkhZ@The Respondent- M/s. N R Switch-N-Radio Service (P) Ltd. vk;dj vk;qDr¼vihy½@ CIT(A). 3. 4. vk;dj vk;qDr@ CIT, विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No.185 /JP/2018) 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत