SARANGDHAR RAMCHANDRA NIRMAL,AHMEDNAGAR vs. DEPUTY COMMISSIONER OF INCOME-TAX, AHMEDNAGAR

आदेश / ORDER

PER VIKAS AWASTHY, JM

These three appeals by three different assessees are directed against the order of Commissioner of Income Tax (Appeals)-2, Pune in their respective cases. All the impugned orders in the respective appeals are of even date i.e. 11.07.2016.

3 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

ITA No. 2506/PUN/2016 A.Y.2012-13

(Appeals) on following grounds:

“1. Hon. Commissioner (Appeals) erred in confirming additions of Rs.14,02,920/- made u/s.14A which may please be deleted or reduced. 2. Hon. Commissioner (Appeals) erred in confirming the additions of Rs.2,12,007/- on a/c of agricultural income which may please be deleted or reduced. 3. Hon. Commissioner (Appeals) erred in confirming the ad-hoc additions of Rs.1,75,079/- which may please be deleted or reduced. 4. Appellant prays to add, alter, amend, ratify, explain, and /or withdraw the ground/s as the occasion may demand.”

is a Director of Prabhat Dairy Pvt. Ltd. and is engaged in the business of

transport. The assessee is also having income from agriculture. During the

course of scrutiny assessment proceedings, the Assessing Officer observed

that the assessee has made investments to the tune of Rs.23,81,14,105/- in

shares and Mutual Funds. No suo-moto disallowance u/s.14A of the Act was

made by the assessee. The Assessing Officer made disallowance under

provisions of section 14A of the Income Tax Act, 1961 (hereinafter referred to

as ‘the Act’) r.w.r 8D of the Income Tax Rules, 1962. The Assessing Officer

computed disallowance under Rule 8D as under:

i) Clause 2(ii) Rs. 5,25,450/- ii) Clause 2(iii) Rs. 8,70,470/- Total Rs.14,02,920/-

dated 23.03.2015, the assessee carried the matter in appeal before the

4 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

Commissioner of Income Tax (Appeals). The Commissioner of Income Tax

(Appeals) confirmed the additions made by Assessing Officer in toto.

the assessee has not received any exempt income during the period relevant

to the assessment year under appeal from the investments, therefore, no

disallowance u/s.14A r.w.r. 8D is warranted. To support his contentions, the

ld. AR placed reliance on following decisions:

i) CIT Vs. Chettinad Logistics (P.) Ltd. (S.C), reported as 257 Taxman 2 (SC). ii) Pr. CIT Vs. M/s. Ballarpur Industries Limited, decided by Hon'ble Bombay High Court, Nagpur Bench, Income Tax Appeal No. 51 of 2016 decided on 13.10.2016 iii) Force Motors Limited Vs. DCIT, ITA No. 1205 & 1206/PUN/2016 decided on 18.07.2018 iv) DCIT Vs. Dishti Industries Ltd., ITA No.1277/PUN/2016 decided on 25.06.2018

6.1 The ld. AR further submitted that own interest free funds of the

assessee are much more than the investment made by assessee. This fact has

been recorded by the Assessing Officer in the assessment order. Despite that,

the Assessing Officer has made disallowance under Rule 8D(2)(ii). The Hon'ble

Jurisdictional High Court in the case of CIT Vs. HDFC Bank Ltd. reported as

366 ITR 505 has held that where own interest free funds are more than the

investments, it is presumed that investments are made out of own interest

free funds available with the assessee. The ld. AR pointed that the assessee

has taken term loan for his transport business. The loan has been utilized for

the purpose, it was taken. Borrowed funds have not been diverted for making

investments.

5 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

of Commissioner of Income Tax (Appeals) in confirming the disallowance

made u/s.14A r.w.r. 8D(2). The ld. DR pointed that the assessee has made

huge investment in share and mutual funds. No suo-moto disallowance has

been made by the assessee despite making huge investment. The possibility

of use of business hours, employee’s cost, electricity, stationary etc. in

making investment in shares/mutual funds cannot be ruled out.

assessee in appeal has assailed disallowance made u/s.14A r.w.r.8D. It is an

undisputed fact that no suo-moto disallowance u/s.14A of the Act was made

by the assessee. It is also an admitted fact that during the period relevant to

the assessment year under appeal, the assessee has not earned any tax free

income. In so far as disallowance under Rule 8D(2)(ii) is concerned, it is not

disputed by the Revenue that own interest free funds of the assessee are

sufficient to cover the investment made. Thus, in the light of the decision of

Hon'ble Jurisdictional High Court in the case of CIT Vs, HDFC Bank Ltd.

(supra.), no disallowance under Rule 8D(2)(ii) is warranted.

income during the year. The Hon'ble Bombay High Court and in various

decisions, the Tribunal has held that where no exempt income is earned by

the assessee in the relevant period, disallowance u/s. 14A is not warranted.

Ballarpur Industries Limited (supra.) has held that the provisions of Section

14A of the Act, would not apply where no exempt income was received or

receivable during the relevant previous year.

6 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

The Co-ordinate Bench of the Tribunal in the case of Force Motors

Limited Vs. DCIT (supra.) and in the case of DCIT Vs. Dishti Industries

Ltd.(supra.) and various other decisions have been consistently holding that

no disallowance u/s.14A is warranted where no exempt income is earned by

the assessee during the relevant previous year.

Thus, in view of undisputed facts and the law laid down by the Hon'ble

Bombay High Court, no disallowance under the provisions of section 14A

r.w.r 8D is to be made where the assessee has not earned any exempt

income. Accordingly, ground No.1 raised in appeal by the assessee is

allowed.

Bar that he is not pressing the same. Thus, in view of statement made by the

ld. AR, ground Nos. 2 and 3 raised in appeal are dismissed as not pressed.

no adjudication.

assessment year 2012-13 is partly allowed in the terms aforesaid.

ITA No. 2507/PUN/2016 A.Y.2012-13

“1. Hon. Commissioner (Appeals) erred in confirming additions of Rs.7,06,459 /- made u/s.14A which may please be deleted or reduced. 2. Hon. Commissioner (Appeals) erred in confirming the additions of Rs.50,956/- on a/c of agricultural income which may please be deleted or reduced.

7 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

disallowance under Rule 8D:

i) Clause 2(ii) Rs.2,43,999/-

ii) Clause 2(iii) Rs.4,62,460/- Total Rs.7,06,459/-

tune of Rs.9,33,74,007/- and own interest free funds available with the

assessee are to the tune of Rs.12,10,88,559/-. The assessee has not earned

any tax free income during the relevant period. These facts are not disputed

by the Revenue. Since the facts of the present case are identical to the facts

in ITA No.2506/PUN/2016, findings given while adjudicating ground No. 1 of

the said appeal would apply mutatis mutandis to the present case as well.

Accordingly, ground No. 1 raised in appeal by assessee is allowed for

similar reasons.

Bar that he is not pressing the same. Thus, in view of statement made by the

ld. AR, ground Nos. 2 and 3 raised in appeal are dismissed as not pressed.

requires no adjudication.

8 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

assessment year 2012-13 is partly allowed in the terms aforesaid.

ITA No. 2508/PUN/2016 A.Y.2012-13

“1. Hon. Commissioner (Appeals) erred in confirming additions of Rs.470906/- made u/s.14A which may please be deleted or reduced. 2. Hon. Commissioner (Appeals) erred in confirming the additions of Rs.230086/- on a/c of agricultural income which may please be deleted or reduced. 3. Hon. Commissioner (Appeals) erred in confirming the ad-hoc additions of Rs.119827/- which may please be deleted or reduced. 4. Appellant prays to add, alter, amend, ratify, explain, and /or withdraw the ground/s as the occasion may demand.”

disallowance u/s.14A r.w.r. 8D(2)(iii) of Rs.4,70,906/-. The assessee has

made investment in share and mutual funds to the tune of Rs.9,38,63,100/-.

The assessee has not earned any exempt income from the investments during

the relevant previous year. These facts are not disputed by the Revenue. The

facts of the present case are identical to the facts in ITA No.2506/PUN/2016.

Thus, the findings given while adjudicating ground No. 1 of the said appeal

would apply mutatis mutandis to the present case as well. Accordingly,

ground No. 1 raised in appeal by the assessee is allowed in the similar

terms.

Bar that he is not pressing the same. Thus, in view of statement made by the

ld. AR, ground Nos. 2 and 3 of the appeal are dismissed as not pressed.

9 ITA Nos.2506 to 2508/PUN/2016 A.Y.2012-13

Order pronounced on Friday, the 28th of September, 2018.

Sd/- (�वकास अव�थी /VIKAS AWASTHY) �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 28th September, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-2, Pune. 4. The Pr. CIT-1, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.