ACIT, JAIPUR vs. BIMAL ROY SONI, JAIPUR

PER SHRI KUL BHARAT, J.M.

These two cross appeals by the revenue and assessee are directed against the order of ld. CIT (A)-1, Jaipur dated 18.03.2016 pertaining to assessment year 2011-12. First, we take up assessee’s appeal in ITA No. 416/JP/2016. The assessee has raised the following grounds of appeal :- Dr. Bimal Roy Soni, Jaipur.

“1. On the facts and in the circumstances of the case, the ld. CIT erred in confirming the disallowance of interest amounting to Rs. 33,19,540/- (total disallowance Rs. 80,26,665/-) made by assessing officer by invoking the provisions of section 14A (r.w. rule 8D) of Income Tax Act, 1961. 1. 1. That the ld. CIT (A) has further erred in ignoring the fact that there was no direct nexus between the borrowed funds and investment in securities having exempted income, thus the disallowance of Rs. 33,19,540/- confirmed by CIT (A) deserves to be deleted.

Act, 1961 (hereinafter referred to as the Act) was framed vide order dated

and financial institutions. Under these facts, the AO invoked the provisions of section 14A read with rule 8D and made disallowance of Rs. 80,26,665/- and added

the same to the income of the assessee. Aggrieved by this, the assessee preferred

an appeal before ld. CIT (A), who after considering the submissions restricted the addition to the extent of Rs. 33,19,540/-. Aggrieved, the revenue is in appeal before

this Tribunal. Dr. Bimal Roy Soni, Jaipur.

and gone through the orders of the authorities below. It is contended that the investment made in the sister concerns was to have controlling interest and in respect of the investment made in partnership firms, it is contended that income

from partnership firms in the form of remuneration is duly offered for tax. The income in the form of share in profits of the firm is also subject to tax which was borne by the partners. It is submitted that share in profits of firm apparently seems

to be exempt income, but eventually the same comes in the hands of the partners

after suffering tax in their profit sharing ratio. Thus the tax is also borne by the respective partner. We find that the Coordinate Bench in ITA Nos. 105 &

687/JP/2012 for the A.Y. 2008-09 & 09-10 has decided the issue in para 4.3. of its order by holding as under :-

“4. 3. We have heard rival contentions, perused the material on record and gone through the orders of the authorities below. The ld. CIT (A) has deleted the disallowance on the ground that it has been held by the coordinate Bench in assessee’s own case pertaining to A.Y. 2002-03 that provisions of section 14A are not applicable. Since the facts are identical in the year under appeal also, the contention of the assessee throughout has been that the investment wherefrom it has earned exempt income were made for the purpose of maintaining the controlling interest. Therefore, in view of the decision of the Tribunal, provisions of section 14A would not be applicable. The coordinate Bench in Dr. Bimal Roy Soni, Jaipur.

assessee’s own case in the assessment year 2002-03 had deleted the addition on the basis that provisions of section 14A would not be applicable in the case of the assessee as the investment has been made solely for the purpose of having the controlling interest. There is no change into the facts in this year as well. The revenue has not brought to our notice any contrary binding precedent. Moreover, the assessee has dividend income to the tune of Rs. 756/- and the disallowance towards expenditure is made at Rs. 44,89,436/-. In view of above, we do not see any reason to interfere in the order of the ld. CIT (A). The same is hereby upheld.”

The facts are identical in this year as well. Therefore, taking a consistent view, we

direct the AO to delete the addition. Ground raised in this appeal is allowed.

Now we take up revenue’s appeal in ITA No. 554/JP/2016. The revenue 4. has raised the following grounds of appeal :-

“ Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in deleting the disallowance of Rs. 47,07,125/- out of total disallowance of Rs. 80,26,665/- made by the AO under the provisions of section 14A of the I.T. Act r.w. Rule 8D of the I.T. Rules.”

as made in ITA No. 416/JP/2016. The only effective ground in revenue’s appeal is against restricting the disallowance made under rule 8D of the Income Tax Rules.

Since this issue is decided in favour of the assessee in the assessee’s appeal in ITA

No. 416/JP/2016, we do not see any merit in the contention of the ld. D/R, the same

is dismissed.

Order pronounced in the open court on 08 /03/2017. ( HkkxpUn] ½ ( dqy Hkkjr) (BHAG CHAND ) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 08/03/2017. d/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत Dr. Bimal Roy Soni, Jaipur.