Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-1,
Nashik, dated 02-03-2017 for the Assessment Year 2013-14.
The assessee raised the following grounds in the appeal :
“1. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-1, Nashik is not justified in confirming the disallowance made by the AO of Rs.2,03,621/- by invoking the provisions of section 14A of the Act read with Rule 8D. 2. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-1, Nashik is not justified in confirming the disallowance made by the AO of Rs.2,03,621/- by invoking the provisions of section 14A under the assumption that the appellant has used the interest bearing funds for making investment in tax free securities particularly when the said investment is not made by the appellant out of interest bearing funds and more particularly when non-applicability of the provision of section 14A was accepted in the assessment order pursuant u/s.143(3) for A.Y. 2011-12. 3. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-1, Nashik is not justified in confirming the disallowance made by the AO of Rs.2,03,621/- by invoking the provisions of section 14A even in respect of
2 ITA No.1007/PUN/2017 Santosh Chandulal Mandlecha
investments on which no any income is earned by the appellant during the year under review.
The Appellant craves for addition to, deletion, alteration, modification, change any of the above grounds of appeal.”
Before me, there is none to represent the assessee despite service of
notice. Acknowledgement is placed on record. However, considering the
smallness of the issue, I proceed to decide the solitary issue of disallowance
u/s.14A of the Act with the assistance of Ld. DR for the Revenue and the
material available on record.
Briefly stated relevant facts of the case are that the assessee is an
individual and is engaged in the business of manufacturing, supplying and
repairing of electronic equipments under the name and style of M/s. Reliance
Electronics. Assessee filed the return of income on 30-09-2013 declaring total
income of Rs.22,40,010/-. On the basis of information supplied by the assessee,
the AO found that the total turnover of the assessee is Rs.3,00,49,010 and the
assessee declared net profit @ 4.29% which works out to Rs.12,87,957/-. AO
further noticed that, during the year under consideration, the assessee earned
exempt income and made investment. Assessee claimed interest expenditure in
his profit and loss account without apportioning the expenses incurred for
earning the said exempt income. At the end of assessment proceedings
u/s.143(3) of the Act, the AO made addition of interest income of Rs.2,03,621/-
by invoking the provisions of section 14A read with Rule 8D of the Act.
In the First Appellate proceedings, the CIT(A) relying on various
judgments of High Court and the decisions of various Benches of the Tribunal
upheld the action of the AO.
After hearing the Ld. DR for the Revenue and the perusal of the material
available on record, I find that this solitary issue raised by the assessee is
3 ITA No.1007/PUN/2017 Santosh Chandulal Mandlecha
squarely covered in favour of the assessee. It is an undisputed fact that the
exempt income is only Rs.1,693/- whereas the disallowance made by the AO is
to the tune of Rs.2,03,621/-. On the faces of it and considering the settled legal
propositions, I find the disallowance made by the AO is not legally sustainable.
Various decisions are in existence for the proposition that disallowance if any
u/s.14A of the Act should not exceed the exempt income which form part of the
total income. Considering these facts and relying on the Hon’ble Bombay High
Court in the case of Reliance Utilities and Power Ltd. (supra), judgment in the
case of CIT Vs. HDFC Bank Ltd., 366 ITR 505 and the judgment of the Hon’ble
Delhi High Court in the said case Cheminvest Limited Vs. CIT 347 ITR 272
(Del.), I find it is obvious inference that assessee has adequate interest free
funds and assessee also earned profits in the current year. All these interest
free funds are sufficient enough to take care of the exempt income yielding
investments considering the principle of presumption, laid down by the
jurisdictional Hon’ble Bombay High Court in the case of Reliance Utilities and
Power Ltd., (supra). Therefore, in my view, the order of the CIT(A) on this
issue requires reversal on this issue. Accordingly, I direct the AO to re-compute
the disallowance made by the AO after granting reasonable opportunity of being
heard to the assessee. Further, the AO shall consider the above cited legal
proposition in the set-aside proceedings. Thus, the grounds raised by the
assessee are partly allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on this 25th day of May, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th May, 2018. Satish
4 ITA No.1007/PUN/2017 Santosh Chandulal Mandlecha
आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune