Income Tax Appellate Tribunal - Chandigarh
Luminous Impex Pvt. Ltd., Ludhiana vs Acit, C-7, Ludhiana on 31 October, 2018
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए" , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "A", CHANDIGARH
ी संजय गग , या यक सद य एवं डा. बी.आर.आर, कुमार, लेखा सद य
BEFORE: Sh. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM
आयकर अपील सं./ ITA NOS. 689 & 690/Chd/2018
नधा रण वष / Assessment Years : 2013-14 & 2014-15
Luminous Impex Pvt. Ltd. बनाम The ACIT
B-XIX, 554/2, FF-2 C-7, Aaykar Bhawan
Cemetery Road, Civil Lines Ludhiana, Punjab
Ludhiana
थायी लेखा सं./PAN NO: AABCL4015A
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri. Navneet Sharma
राज व क! ओर से/ Revenue by : Smt. Chandrakanta
सन
ु वाई क! तार&ख/Date of Hearing : 12/09/2018
उदघोषणा क! तार&ख/Date of Pronouncement : 31/10/2018
आदे श/Order
PER DR. B.R.R. KUMAR, A.M
Both the above appeals have been filed by the Assessee against the separate order of the Ld. CIT(A)-3, Ludhiana.
2. Assesee has raised following grounds in ITA No. 689/Chd/2018:
1. a) That the worthy CIT(A)-3, Ludhiana erred in law and on facts in sustaining the disallowance made by Ld Assessing Officer ,U/s 14A r.w. rule 8D at Rs. 14,93,495/-.inspite of the fact that the appellant company had not claimed any dividend income exempt u/s 10(34) of the IT Act and further tax has been paid on dividend income and the same has been accepted by the Ld AO in its order. The expenses on earning agriculture income has already been reduced from the exempted agriculture income by the appellant.
Directions be given not to disallow any expenses u/s 14A r.w.rule 8D..
2. Without prejudice, the worthy CIT(A)-3, Ludhiana further erred in law By upholding the disallowance made by the Assessing Officer
i) By considering the amount of interest of Rs 7,00,000/- on loan for business purposes, while computing disallowance u/s 14A read with rule 8D.
Directions be given to exclude the amount of interest paid on loans while computing disallowance u/s 14A by applying rule 8D.
ii) By considering total average investments of the appellant company at Rs.7,38,36,408/- instead of average total investments of Rs.31,44,729/- on 2 which the exempt dividend income received, for computing disallowance u/s 14Aread with rule 8-D. Directions be given to consider only those investments on which exempt dividend income arose during the year and not the total investments of the appellant company, as held by Hon'ble ITAT in the case of Ramtech Software solutions and Hon'ble ITAT Special Bench in the case of Vireet Investment (P) Ltd.
iii) By not restricting the amount of disallowance u/s 14Ato the extent of exempt dividend income of Rs. 40,675/-.
Directions be given to restrict the disallowance u/s 14Ato the extent of exempt dividend income as held by the Appellate Courts in the case of CIT Vs. M/s Mascot Footcare in ITA No. 67 of 2009 (P&H, High Court).and this Hon'ble Bench in the case of Aarti Steels Ltd (ITAT CHD) 2.1 Assesee has raised following grounds in ITA No. 690/Chd/2018:
1 That the Worthy CIT(A)-3 Ludhiana, erred in law and on facts in not restricting the disallowance at Rs 51,521 made u/s 14A r.w.rule 8D by the appellant in its return and further, erred in law in not deleting the disallowance of Rs . 20,53,762/-
made by Ld Assessing Officer U/s 14A r.w. rule 8D,
i)By considering total average investments in shares & securities, made by the appellant company at Rs. 10,36,44,729/- instead of average total investments of Rs.31,44,729/- on which the exempt dividend income received, for computing disallowance u/s 14A read with rule 8-D. Directions be given to consider only those investments on which exempt dividend income arose during the year and not the total investments of the appellant company, as held by Hon'ble ITAT in the case of Ramtech Software solutions and Hon'ble ITAT Special Bench in the case of Vireet Investment (P) Ltd
i) By considering amount of investment of Rs 5,08,94,798/- made in agriculture land, inspite of the fact that no agriculture income was received during the year under consideration.
Directions be given not to consider Rs 5,08,94,978/- i.e investment in agriculture land from which no exempt agriculture income was received by the appellant company, as held by appellate authorities as mentioned above.
ii) By not restricting the amount of disallowance u/s 14Ato the extent of exempt income of Rs. 32450/- being dividend income.
Directions be given to restrict the disallowance u/s 14Ato the extent of exempt dividend income as held by the Appellate Courts in the case of CIT Vs. M7s Mascot Footcare in ITA No. 67 of 2009 (P&H, High Court). & Aarti Steels Ltd v/s DCIT in ITA No. 268/chd/2015 dated 30.11.2015 ( Chd ITAT) Directions may be given to delete the disallowance made u/s 14A w.r t rule 8D or in alternative be restricted to dividend income of Rs 32,450/- only.
3. Since the issue involved in both the appeals is similar therefore they are being disposed by way of this common order for the sake of convenience.
34. Brief facts of the case are that the assessee has made total investments of Rs. 10.36 Crores during the year under consideration as well as in earlier years out of its own funds. No borrowed amounts were utilized on the said investments.
4.1 The assessee company received dividend income of Rs. 40,675/- on some of the investments, which was not claimed exempt under section 10(34) of the IT Act and the amount was not reduced while computing taxable income of the assessee company and accordingly tax on the said amount was paid.
5. However the Assessing Officer disallowed an amount of Rs. 6,04,578/-
under section 14A of the Income Tax Act,1961.
6. The Ld. CIT(A) confirmed the addition.
7. We find that the assessee has earned dividend of Rs. 40,675/- which is the income exempt as per the provisions of Income Tax Act,1961. The issue of disallowance under section 14A has been dealt in a number of cases by this Tribunal wherein after going through the judicial pronouncements of various Courts the disallowance cannot exceed the exempt income.
Hero Management Services Ltd (2014) 360 ITR 68 (Delhi HC).
CIT vs. Hero Cycles Ltd (2010) 323 ITR 518 (P & H HC) ACIT vs. Iqbal M. Chagla (Mumbai Tribunal).
CIT vs. Winsome Textile Industries Ltd. (2009) (P & H) (HC) CIT vs. Lakhani Marketing (P & H) (HC), CIT vs. Corrtech Energy Pvt. Ltd (2014) 45 taxman 116 (Gujrat) (HC), CIT vs. Shivam Motors (Allahabad) (HC).
Daga Global Chemicals P vt. Ltd. vs. ACIT (ITAT Mumbai) ITA No. 5592/MUM/2012 Dated 01.01.2015.
Joint Investment Pvt. Ltd. vs. CIT (Delhi HC) and CIT vs. Taikisha Engineering India Ltd. (Delhi HC) and ACIT vs. Iqbal M. Chagla (Mumbai Tribunal).
And also the Apex Court judgment in the case of Maxopp Investment Ltd vs. CIT (Supreme Court) in Civil Appeal Nos. 104-109 Of 2015 , the principle has been laid down that in any case the disallowance cannot increase the exempt income.
48. Accordingly it is hereby directed that the disallowance be restricted to the exempt income earned by the assessee of Rs. 40,675/- for the A.Y. 2013-14 and to Rs. 51,521/- for the A.Y. 2014-15.
9. As a result, both the above appeals of the Assessee are allowed.
Order pronounced in the Open Court.
Sd/- Sd/-
संजय गग डा. बी.आर.आर, कुमार,
(SANJAY GARG ) ( DR. B.R.R. KUMAR, AM)
या यक सद य/ Judicial Member लेखा सद य/ Accountant Member
आदे श क! त,ल-प अ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय/ ु त/ CIT
4. आयकर आय/ ु त (अपील)/ The CIT(A)
5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File