SURINDRA ENGG. CO.LTD,MUMBAI vs. ITO 8(3)(2), MUMBAI

This appeal is filed by the filed against the order of CIT(A) dated 16.04.2014 for the assessment year 2010-11.

Following grounds are raised in the appeals read as under:-

The short facts of the case are as under. The assessee company has filed the return income on 28.09.2010 declaring total income of Rs.Nil/-. Assessee received exempt income being dividend income/share of profit of exempt u/s 10 (2A) of the I.T. Act. Assessee has ITA.NO.4175/Mum/2014 M/s Surindra Engg.Co.Ltd.

The Assessing Officer has verified the claim and found that assessee has made investments, opening value and closing value are shown at Rs. 11,29,49,590/- and the average value of the investments comes to Rs. 11,29,49,590/-. The assessee has claimed the expenses against the exempt income irrespective of the fact whether the investment is made out of borrowed funds or own sources. The majority part of the expenses is claimed under the head of administrative expenses and other expenses. The Assessing Officer was of the view part of the Administrative expenses also relate to earning of exempt income and cannot be distinguished and appropriate to the exempt income and taxable income. The assessee has not maintained segregation of expenses claim related to exempt income and taxable income to justify the claim that no expenses were incurred in respect of exempt income. Therefore Assessing Officer has calculated the disallowances u/s.14A of the Act. i) The amount of expenditure directly relating to N.A NIL income which does not form part of total income ii) Proportionate of interest expenditure computed in 10718839* Rs.9,13,943/- accordance with the formula given in Rule 8D (ii) 112949590 ----------------- 1324686943 Amount equal to one-half percent of the average of 11,29,49,590*0.5% Rs.564,747/- iii) the value of investment, income from which does not or shall not form part of the total income as appearing in the Balance Sheet of the assessee on the first day and last of the previous year Total Rs. 14,78,690/-

Matter carried out to CIT(A) and CIT(A) has dismissed the appeal of the assessee.

During the course of the hearing the Ld.A.R. Submitted that the issue in controversy is covered by the decision of the assessee’s own case in A.Y. 2009-10 wherein the similar issue had come up before the tribunal and tribunal in assessee’s own case in A.Y.2009-10 has allowed the claim of the assessee and deleted the addition. The Ld.A.R has drawn own attention to the 39th annual report on page 25 of the report and drawn our attention that assessee has made the investment of 820,000 shares in Mukat Pipes Ltd., 570,00 shares in Mukat Tanks & Vessels Pvt. Ltd., 1,461,500 shares in Muktanandan Pipes Ltd., and 100,000 share in Mukat Finance Ltd., they are all sister concern of the assessee and these are assessee’s old investments and that investments is carried out from earlier years and this is a strategically investment. Therefore there is no question of making any expenses on the shares. Ld.A.R submitted that the share capital of the assessee in A.Y. 2009-10 and 2008-09 remains the same which is shown in the balance sheet of the assessee. Therefore when the tribunal has allowed the claim in earlier years this may be allowed.

The Ld.D.R. submitted that assessee has not maintained segregating of expenses claim related to exempted income. The assessee had shown considerable amount of administrative expenses and other expenses in profit and loss account. Therefore assessee’s claim cannot be allowed.

We have heard the rival contentions of both the parties looking to the facts and circumstances of the case we find that the assessee had made investments of shares from earlier years and assessee had shares of his sister concern and that is statistical investment. Therefore no expenditure was incurred. Moreover assessee had not exempted income during the year under consideration. Therefore when assessee has not earned any dividend from exempted income and when the tribunal has allowed the claim of the assessee in earlier orders in wherein the tribunal has following the decision of Delhi High Court has allowed as under:-

During the course of hearing ld.A.R was asked to justify the agricultural income which was claimed to be exempted but no evidence was submitted. Moreover assessee do have exempted income. Therefore we disallow Rs.50,000/- which is an exempted income.

In the result assessee’s appeal is partly allowed.

Second ground relates to making addition of Rs.82,53,393/- towards debit balance written off. The Assessing Officer has perused the details of sundry balance written off. It was observed that assessee has claimed sundry balance of written off amount to Rs.82,53,393/- in respect of several parties. The show cause notice was issued to the assessee to explain the reason of write-off along with the evidences.

The assessee has explained that all these related to the business of the assessee and where advances given to the contractors. Assessee has claimed as business loss. However assessee did not submit any evidence or any reason why the advances were write-off. The Assessing Officer observed that write-off amounts were deposited again to security deposit of Rs.22,99,089/-; Civil deposit of Rs.19,67,348/- and no names were given. Therefore AO has added the income of the assessee and CIT(A) has confirmed the same.

During the course of the hearing Ld.A.R submitted that the similar addition was made in A.Y.2009-10 and tribunal has restored this issue to the file of A.O. Therefore the Ld.A.R fairly considered that this issue may be restored to the file of A.O to verify that whether the said party is debitor or creditor. Therefore they have to be verified and if the amount has been write-off in the subsequent year same cannot be added in this year. Therefore this issue may be restored to the file of A.O. Ld.D.R fairly submitted that this issue may be restored to the file of A.O as per the decision of the tribunal.

We have heard the rival contentions of both the parties looking to the facts and circumstances of the case we found that the assessee has claimed the sundry balance write-off amounting to Rs.82,53,393/- in respect of the several parties. The assessee submitted that the write-off amount is business loss carried in course of business. Therefore we are of the view that when the tribunal has restored this file to A.O, we respectfully following the same we restore this file as per the decision of in the assessee own case in A.Y.2009-10 wherein the tribunal has held as under:-

In the result the appeal is partly allowed.