THE SPUNPIPE & CONSTRUCTION CO.(BARODA) PVT. LTD,VADODARA vs. THE ACIT, CIRCLE-2(1)(1), VADODARA

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ITA 478/AHD/2020Status: DisposedITAT Ahmedabad19 October 2022AY 2016-174 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while invoking Rule 8D(2)(ii) for interest disallowance was improper given sufficient interest-free funds, the disallowance of administrative and general expenses was justified due to insufficient explanation from the assessee. The Tribunal noted that similar disallowances were confirmed in previous assessment years.

What were the facts?

The assessee's appeal against the disallowance of Rs. 5,80,810 under Section 14A read with Rule 8D for AY 2016-17 was dismissed by the CIT(A). The assessee argued that facts for this year differed from previous years and the CIT(A) had not considered them.

What were the issues?

Whether the disallowance of expenses under Section 14A read with Rule 8D is justified, particularly concerning interest expenses and administrative expenses, and whether the CIT(A) properly considered the changed facts from previous assessment years.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD

Before: SMT.ANNAPURNA GUPTA & MS. SUCHITRA KAMBLE

Hearing: 28/09/2022Pronounced: 19/10/2022

PER MS.SUCHITRA KAMBLE, JUDICIAL MEMBER

1.

This appeal is filed by the Assessee against the order dated 28/11/2018 passed by the Commissioner of Income-tax (Appeals)-2, Vadodara [“CIT(A)” in short] for Assessment Year 2016-17. 2. The Grounds of appeal are as under :-

1.

The learned CIT(A) has erred in confirming the disallowance of Rs.5,80,810 under Section 14A read with Rule 8D on the ground that the CIT(A) has dismissed the appeal for AY 2014-2015 in as much as the assessee company has sufficient interest free funds and that the assessee The Spunpipe & Construction Co. (Baroda) Pvt.Ltd. vs. ACIT AY 2016-17 2 has not spent any administrative expenses and therefore the question of disallowance under Section 14A read with Rule 8D does not arise.

2.

The appellant says and submits that the facts for A.Y. 2014-2015 and AY 2016-2017 are different and that the AO or CIT(A) has not discussed anything about the change of facts and CIT(A) has simply followed the CIT(A) Order for A.Y. 2014-2015 without considering the facts of the case.

3.

The assessee is engaged in the business of manufacturing and supply of M.S. Pipes with coating, BWSC Pipes, in accepting turnkey contracts for providing and laying of pipes and civil works, fabrication/manufacturing of engineering goods, development of land, construction of building & in real estate. The assessee filed return of income on 07.102016 declaring total income at Rs.3,54,27,140/-. The Assessing Officer made disallowance of Rs.5,80,810/- u/s 14A read with Rule 8D and determined total income at Rs.3,40,06,680/-.

4.

Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5.

At the time of hearing, none appeared on behalf of the assessee despite giving notice of hearing. There is no new address given by the assessee. Therefore, we are proceeding on the basis of the submissions of the assessee made before the CIT(A) and Assessing Officer which are mentioned in the orders.

6.

The Ld. DR submitted that the Tribunal in assessee’s own case has partly allowed the issue thereby adding administrative expenses. The Ld. DR relied upon the order of the Tribunal being ITA Nos. 2594 & The Spunpipe & Construction Co. (Baroda) Pvt.Ltd. vs. ACIT AY 2016-17 3

2612/Ahd/2017 for A.Y. 2013-14 & 2014-15 respectively order dated 09.07.2019. 7. We have heard Ld. DR and perused all the relevant material available on record. It is pertinent to note that the assessee has sufficient interest free funds which are substantially excess of the corresponding investments. Therefore, invoking Rule 8D(2)(ii) is not proper and the same should be deleted to the extent of interest amount earned that of Rs. 3,99,522/-. But as relates to the element of administrative and general expenses which was incurred amounting to Rs.1,81,288/-, the assessee has not given any explanation to that effect except submitting that the assessee made temporary investment and therefore, the administrative expenses may be disallowed upto Rs.40,000/-. This explanation given by the assessee is insufficient and without any supportive evidence/documents. Therefore, the administrative expenses are rightly disallowed to the extent of Rs.1,81,288/- by the Assessing Officer. The Tribunal in A.Y. 2013-14 and 2014-15 in assessee’s case also confirmed the administrative and general expenses. Hence, appeal of the assessee is partly allowed.

8.

In result, appeal of the assessee is partly allowed.

Order pronounced in the Court on 19th October, 2022 at Ahmedabad. (ANNAPURNA GUPTA) JUDICIAL MEMBER

Ahmedabad, Dated 19/10/2022 ट".सी.नायर, व."न.स./T.C. NAIR, Sr. PS The Spunpipe & Construction Co. (Baroda) Pvt.Ltd. vs. ACIT AY 2016-17

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)-2, Vadodara

5.

"वभागीय ""त"न"ध , आयकर अपील"य अ"धकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड" फाईल /Guard file.

आदेशानुसार/ BY ORDER,

स"या"पत ""त ////

सहायक पंजीकार (Asstt.

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