Income Tax Appellate Tribunal - Ahmedabad
Lok Prakashan Ltd.,, Ahmedabad vs Dcit.,Central .Circle-1(3),, ... on 10 November, 2016
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ ''बी'' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, AHMEDABAD
BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND
SHRI S.S. GODARA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No.2476/Ahd/2013
नधारण वष/A.Y. 2010-11
Lok Prakashan Ltd., Vs DCIT,
Gujrat Samachar Bhavan, Central Circle - 1(3),
Khanpur, Ahmedabad-1 Ahmedabad
PAN : AAACL 2742 F
आयकर अपील सं./ ITA No.2863/Ahd/2013
नधारण वष/A.Y. 2010-11
ACIT, Vs Lok Prakashan Ltd.,
Central Circle - 1(3), Gujrat Samachar Bhavan,
Ahmedabad Khanpur, Ahmedabad-1
PAN : AAACL 2742 F
अपीलाथ / (Appellant) यथ / (Respondent)
By Assessee : Shri P.M. Mehta, AR
By Revenue : Shri Vilas V. Shinde, Sr DR
सुनवाई क तार ख/Date of Hearing : 17/08/2016
घोषणा क तार ख /Date of Pronouncement: 10/11/2016
आदे श/O R D E R
PER S.S. GODARA, JUDICIAL MEMBER
The assessee and Revenue have instituted the instant cross-appeals for assessment year 2010-11, against CIT(A)-I, Ahmedabad order 17.09.2013 passed in case No. CIT(A)-I/CC.1(3)/003/2013-14, in proceedings u/s 143(3) of the I.T. Act, 1963, in short the Act.
2. We advert to rival pleadings. The assessee's sole substantive ground in its appeal ITA No.2476/Ahd/2013 challenges the CIT(A) order confirming Section 14A r.w. Rule 8D disallowance of Rs.61,74,046/-
ITA Nos. 2476 & 2863/Ahd/2013 Assessee : Lok Prakashan Ltd A.Y. 2010-11 -2- comprising of interest amount of Rs.75,864/- and administrative expenditure of Rs.60,98,182/-, respectively. The Revenue's appeal ITA No.2863/Ahd/2013 on the other hand seeks to revive disallowance/addition of business development expenditure and that of outstanding creditors liability u/s 41(1) of the Act amounting to Rs.3,21,91,284/- and Rs.2,53,48,895/-; respectively.
3. We come to assessee's appeal first. It prints/publishes newspapers and magazines. The assessee invested sums of Rs.3,37,95,19,606/- and Rs.84,39,32,138/- in mutual funds and shares respectively. These investments totalled to Rs.4,22,34,51,744/-. The same gave rise to impugned dividend income of Rs.5,49,52,412/- treated as exempt under the provisions of the Act. This further followed tax free interest of Rs.1,74,38,356/-. The assessee suo moto disallowed a sum of Rs.10,81,020/-. The Assessing Officer sought to invoke section 14A r.w. Rule 8D for the purpose of computing disallowance of expenditure in relation to the above exempt income. The assessee filed reply inter alia stating that it had huge interest free funds, the impugned tax free investments had been made from non-interest bearing funds in order to acquire strategic interest and that its sou moto disallowance figure hereinabove covered all facets of Rule 8D of the Income-tax Rules. The Assessing Officer in assessment order dated 05.03.2013 rejected all these pleas. He noticed that the assessee had debited interest amount of Rs.4,88,440/- in P&L Account. Its assessment order for AY 2006-07 duly stated that the above interest had been paid on account of application money in IPOs of various companies. The Assessing Officer further observed that such kind of investments would create need for borrowed funds. He accordingly proceeded to compute the impugned disallowance and reduced the same from assessee's suo moto figure (supra).
ITA Nos. 2476 & 2863/Ahd/2013 Assessee : Lok Prakashan Ltd A.Y. 2010-11 -3-
4. The assessee preferred appeal. The case file indicates that the CIT(A) follows his order for AY 2009-10 in assessee's own case holding that it had failed to prove nexus between its non-interest bearing funds vis-a-vis the impugned tax free investments. He further concludes that interest expenses of Rs.19,69,881/- had already been debited therein. The CIT(A) accordingly confirms Assessing Officer's findings relating to the impugned disallowance. This leaves the assessee aggrieved.
5. We have heard both the parties qua the impugned issue of correctness of Section 14A r.w. Rule 8D disallowance of Rs.61,74,046/- in question. There is no dispute about the relevant facts and figures narrated hereinabove pertaining to assessee's tax free investments and exempt income forming subject matter of the instant appeal. Shri Mehta takes us to paper-book page No.104 containing this tribunal's order in ITA No.1510 & 1659/Ahd/2012 decided on 12.02.2016 in assessee's own case for AY 2009-10 upholding identical section 14A disallowance pertaining to proportionate interest and administrative expenditure. He states very fairly that the said co-ordinate bench has confirmed similar disallowance on identical facts. His only contention is that another co-ordinate bench of this tribunal in Morgan Stanley India Securities Pvt Ltd vs. ACIT- ITA No.5072/Mum/2005 decided on 13.04.2011 followed in DCIT vs. Trade Apartment Ltd ITA No.1277/Kol/2011 decided on 30.03.2012 hold that such an interest disallowance is to be computed on net interest figure instead of the gross one. The Revenue does not dispute this legal position. We thus find force in assessee's contention on this limited aspect of interest disallowance and direct the Assessing Officer to proceed on net interest basis only. We agree with ld. CIT(A)'s findings in principle and remit the issue back to the Assessing Authority to re-compute the ITA Nos. 2476 & 2863/Ahd/2013 Assessee : Lok Prakashan Ltd A.Y. 2010-11 -4- impugned interest disallowance afresh after affording adequate opportunity of hearing to the assessee. The assessee's only substantive ground as well as its appeal ITA No.2476/Ahd/2013 partly succeeds for statistical purposes.
6. We now come to Revenue's appeal ITA No.2863/Ahd/2013. Its first substantive ground challenges the CIT(A)'s order deleting business development expenditure disallowance of Rs.3,21,91,284/- as made by the Assessing Officer in assessment order by treating the same to be capital expenditure. Both the ld. Representatives are ad idem that this tribunal's order in assessee's own case for AYs 2005-06 to 2009-10 (supra) follows yet another decision in its case pertaining to AY 2001-02 holding identical business development expenditure to be Revenue in nature. Ld. Departmental Representative fails to point out any distinction on the relevant facts involved. We thus find no reason to interfere in the CIT(A)'s conclusion under challenge. The Revenue fails in its first substantive ground.
7. The Revenue's latter substantive ground seeks to revive section 41(1) addition of outstanding creditors liability of Rs.2,53,48,895/- as added in the course of assessment. The Assessing Officer invoked the above statutory provision for the reason that the assessee had been showing the impugned liabilities for a time period exceeding three years. The CIT(A) reverses the same. The case file indicates that this tribunal in AY 2009-10 (supra) follows hon'ble jurisdictional high court's decision in CIT vs. Nitin S. Garg, (2012) 22 taxman.com 59 (Guj) to hold that such a reason in absence of any evidence proving remission or cessation of liability is not sustainable. The Revenue does not point any exception thereto in facts of the instant case. We accordingly follow judicial ITA Nos. 2476 & 2863/Ahd/2013 Assessee : Lok Prakashan Ltd A.Y. 2010-11 -5- consistency to uphold the CIT(A)'s findings under challenge. This latter ground as well as Revenue's appeal ITA No.2862/Ahd/2013 is declined.
8. The assessee's appeal ITA No.2476/Ahd/2013 is partly allowed for statistical purposes. The Revenue's appeal ITA No.2863/Ahd/2013 is dismissed.
Order pronounced in the Court on this day, the 10th November, 2016 at Ahmedabad Sd/- Sd/-
(PRAMOD KUMAR) (S.S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad, Dated 10/11/2016
*Bt
आदे श क! "त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. !यथ / The Respondent.
3. संबं%धत आयकर आयु&त / Concerned CIT
4. आयकर आयु&त(अपील) / The CIT(A)
5. )वभागीय त न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
TRUE COPY आदे शानुसार/ BY ORDER,
TRUE COPY
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad