DCIT, LUDHIANA vs. M/S RICO AUTO INDUSTRIES LIMITED, LUDHIANA

आदेश/Order Per Sanjay Garg, Judicial Member:

The present is the appeal by the Revenue and corresponding Cross Objections (C.O.) by the assessee against order dated 25.11.2016 of the Commissioner of Income Tax (Appeals)-1, Ludhiana [hereinafter referred to as CIT(A)].

ITA No. -203/Chd/2017 & C.O. 23/Chd/2017 M/s Rico Auto Industries , Ludhiana 2

ITA No. 203/Chd/2017 – Revenue’s appeal

aggrieved by the action of the CIT(A) in deleting the addition made by the

Assessing officer u/s 14A of the Income-tax Act, 1961 (in short 'the Act')

in respect of the disallowance of expenditure relatable to the investments

made by the assessee for earning of tax exempt income and further for

deletion of the disallowance made by the Assessing officer u/s 36(1)(iii) of

the Act in respect of investment made for non-business purposes using

borrowed funds. Further, the Revenue is also aggrieved by the action of the

CIT(A) in deleting the disallowance made on foreign travelling expenses.

disallowance u/s 36(1)(iii) of the Act are concerned, the Ld. CIT(A) after

examining the account of the assessee has categorically held that the

assessee has been possessed sufficient own / interest free funds to meet the

aforesaid investments. That the loan taken by the assessee were utilized

for specific purposes. Further that the assessee had also earned interest

income from the advances made. He, therefore, directed the Assessing

officer to calculate the interest disallowance under Rule 8D(2)(ii) by

taking into consideration the net interest expenditure incurred. Further,

for the purpose of disallowance under Rule 8D(2)(iii), he directed the

Assessing officer to exclude the investments which did not yield any tax

exempt income. Even the Ld. Counsel has also demonstrated that assessee

was possessed of own sufficient funds to meet the investments. The issue

is, thus, squarely covered by the decisions of the Hon'ble Jurisdictional

High Court in ‘CIT Vs. Kaspsons Associates’, 381 ITR 204 (P&H),

Lakhani Marketing Inc.’ 226 Taxman 45 (P&H) and further of the

ITA No. -203/Chd/2017 & C.O. 23/Chd/2017 M/s Rico Auto Industries , Ludhiana 3

Hon'ble Supreme Court in the case of ‘Hero Cycles Ltd., 379 ITR 347 (SC). Further, the Ld. Counsel for the assessee has brought our attention

to the decisions of the ITAT in the own case of the assessee for assessment

year 2010-11 in ITA No. 1093/Chd/2014 dated 22.11.2016 and also of

assessment year 2011-12 (ITA No. 692/Chd/2016 alongwith

C.O.33/Chd/2016) and submitted that the issue is squarely covered in

favour of the assessee by the above decisions also.

CIT(A) on this issue and the same is accordingly decided in favour of the

assessee.

foreign travel expenses. The plea of the assessee has been that foreign

travel was done by the Director of the company for business purposes. The

above plea of the assessee has not been categorically rebutted by the

Assessing officer, however, he had disallowed 10% of the expenditure

observing that the personal element could not be ruled out. However, the

Ld. CIT(A) after considering the facts and circumstances of the case has

deleted the disallowance made by the Assessing officer in this respect.

any infirmity in the order of the CIT(A) on this issue also. There is no

merit in the appeal of the Revenue and the same is accordingly dismissed.

C.O.No.23/Chd/2017

Now coming to the Cross objections of the assessee.

ITA No. -203/Chd/2017 & C.O. 23/Chd/2017 M/s Rico Auto Industries , Ludhiana 4

has agitated the action of the CIT(A) in restricting the disallowance u/s

14A of the Act at Rs. 1,10,335/-.

The Ld. Counsel for the assessee has stated at bar that he does not

press this ground, hence, this ground No.1 of the C.O. is dismissed as ‘not

pressed’.

action of the CIT(A) in not allowing the expenditure incurred on

abandoned project. The Ld. CIT(A) observed that the assessee has not

furnished the reliable evidences in this respect. However, the plea of the

Ld. Counsel for the assessee has been that the Ld. CIT(A) has not

specifically asked for reliable evidences on this issue.

In view of the above submissions of the Ld. Counsel for the

assessee, this issue is restored to the file of the Assessing officer to

examine the claim of the assessee afresh and give a finding on merits in

accordance with law.

assessee has agitated the action of the lower authorities in rejecting the

claim of expenditure in relation to electricity penalty. The claim of the

assessee is that the same is part of the business expenditure; however, the

lower authorities have not examined this issue.

In view of this, this issue is restored to the file of the Assessing

officer for examining this issue afresh and give finding on merits in

accordance with law.

ITA No. -203/Chd/2017 & C.O. 23/Chd/2017 M/s Rico Auto Industries , Ludhiana 5

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member

Dated : 5.11. 2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar