Income Tax Appellate Tribunal - Jaipur
M/S Bhandari Health Care Pvt. Ltd., ... vs Deputy Commissioner Of Income Tax, ... on 5 July, 2018
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh fot; iky jkWo] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k
BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 665/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2012-13.
M/s. Bhandari Health Care Pvt. Ltd., cuke The Principal Commissioner of
A-138, Tonk Road, Gopalpura, Vs. Income Tax (Central),
Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAACB 7547 E
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sandeep Jhanwar (CA)
jktLo dh vksj ls@ Revenue by: Smt. Poonam Rai (DCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 02.07.2018.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 05/07/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, J.M.
This appeal by the assessee is directed against the order dated 29th May, 2017 of ld. CIT (A) for the assessment year 2012-13. The assessee has raised the following grounds :-
" 1. Under the facts and circumstances of the case, the ld. CIT (Appeals)-2, Jaipur has erred in not quashing the assessment order passed by DCIT, Circle-6, Jaipur u/s 143(3) of the I.T. Act, 1961 which is illegal and bad in law.
2. Under the facts and circumstances of the case, the ld. CIT (Appeals)-2, Jaipur, has erred in confirming the addition of Rs. 11,413/- made by DCIT, Circle-6 on account of making disallowance under section 14A of the Income Tax Act, 1961 read with rule 8D(2) of the Income Tax Rules, 1962.
3. Under the facts and circumstances of the case, the ld. CIT (Appeals)-2, Jaipur, has erred in not allowing the assessee's 2 ITA No. 665/JP/2017 M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
claim that a sum of Rs. 3,45,357/- should have been treated as Capital Gain as against considering the same as business income. She has erred in not admitting the assessee's contention that inadvertent mistake of assessee while filing the return of income should have been corrected by the assessing officer while making the assessment of total income. She has erred in holding that the claim has right not been allowed by the Assessing Officer.
4. The assessee craves the right to add, amend, alter, or modify any of the ground of the appeal."
2. At the time of hearing, the ld. A/R of the assessee has stated at bar that the assessee does not press ground no. 1 of the assessee's appeal and the same may be dismissed as not pressed. The ld. D/R has not objected if the ground no. 1 of the assessee's appeal is dismissed. Accordingly, ground no. 1 of the assessee's appeal is dismissed as not pressed.
Ground No. 2 is regarding disallowance of Rs. 11,413/- under section 14A of the IT Act.
3. During the year under consideration, the assessee sold various mutual funds. The AO noted that the assessee had made certain investments during the period under consideration to generate exempt income and also claimed some expenses which were shown as deductions from the taxable income of the assessee. The AO has also noted that the assessee has also earned exempt income during the year. Accordingly, the AO made a disallowance on account of indirect administrative expenses being 0.5% of the average investment amounting to Rs. 11,413/-. The assessee challenged the action of the AO before the ld. CIT (A), but could not succeed.
3ITA No. 665/JP/2017
M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
4. Before us, the ld. A/R of the assessee has submitted that the assessee has not received any exempt income during the year under consideration. Further, the capital gain arising from the sale of mutual funds in question is a taxable income and, therefore, in the absence of any exempt income earned by the assessee, no disallowance is called for under section 14A. In support of his contention he has relied upon the decisions of Hon'ble Punjab & Haryana High Court in case of Principal CIT vs. State Bank of Patiala, 78 taxmann.com 3, CIT vs. Hero Cycles Ltd., 189 Taxman 50 and decision of Hon'ble Delhi High Court in case of Cheminvest Ltd. vs. CIT, 378 ITR 33 (Delhi).
4.1. On the other hand, the ld. D/R has submitted that the AO has given a finding that the assessee has earned exempt income during the year under consideration. She has relied upon the orders of the authorities below.
5. We have considered the rival submissions as well as the relevant material on record. We note that the only investment made by the assessee is in the mutual funds which are debt fund and not equity fund and, therefore, until and unless the AO has pointed out a specific item of income which is exempt, we do not find any reason to presume that the assessee has earned tax free income during the year under consideration. Further, we have examined the record and find that in the return of income the assessee has offered the income from sale of mutual funds as business income though subsequently the assessee claimed the same as Long Term Capital Gain which is also not exempt from tax. Hence in the absence of any exempt income earned or accrued during the year under consideration, the provisions of section 14A cannot be invoked for disallowance of indirect 4 ITA No. 665/JP/2017 M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
administrative expenses. The Hon'ble Delhi High Court in case of Cheminvest Ltd. vs. CIT (supra) has held in para 22 and 23 as under :-
" 22. In the impugned order, the ITAT has referred to the decision in Maxopp Investment Ltd. (supra) and remanded the matter to the AO for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd. (supra)was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was disallowable under Section 14 A of the Act. In the said case admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present case.
23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression „does not form part of the total income‟ in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year."
Similar view has been taken by the Hon'ble Punjab & Haryana High Court in case of Principal CIT vs. State Bank of Patiala (supra). Though the Hon'ble Supreme Court in case of Maxopp Investment Ltd. vs. CIT, 402 ITR 640 (SC) held that the dominant purpose of investment is not relevant for the disallowance of expenditure under section 14A and upheld the rule of apportionment. However, the decisions of 5 ITA No. 665/JP/2017 M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
Hon'ble High Courts on the point that when no dividend income or exempt income was earned during the year then no disallowance can be made under section 14A has not been disturbed by the Hon'ble Supreme Court. Accordingly, the disallowance made by the AO on account of indirect administrative expenditure in the absence of any exempt income is not sustainable and the same is deleted.
Ground No. 3 is regarding the claim of Rs. 3,45,357/- as capital gain which was offered to tax as business income.
6. The ld. A/R of the assessee has submitted that the assessee has mistakenly offered the said amount of Rs. 3,45,357/- on account of sale of mutual funds as business income whereas it is long term capital gain. Though the assessee has not filed any revised return claiming the said amount as long term capital gain, however, when the very nature of the income is capital gain and not business income then the ld. CIT (A) ought to have accepted the claim of the assessee. The ld. A/R has referred to the relevant computation and submitted that even the assessee has not considered the index cost of mutual fund for computing the capital gain and if the same is taken into consideration, the net result will be long term capital loss. Hence he has submitted that the matter may be remanded to the record of the AO for proper computation of income of the assessee. He further submitted that the AO cannot take the advantage of ignorance of the assessee and he has to grant relief which is available to the assessee as per law. In support of his contention he has relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. Sam Global Securities Ltd. 360 ITR 682 (Delhi).
6ITA No. 665/JP/2017
M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
6.1. On the other hand, the ld. D/R has vehemently opposed to the contention of the assessee and submitted that the assessee itself has offered the said income as business income and, therefore, in the absence of revised return, the AO had no jurisdiction to accept the claim of the assessee. She has relied upon the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT, 284 ITR 323 (SC). Further, the ld. D/R has submitted that the assessee is trying to set up a new case at this stage by claiming the index cost of mutual fund whereas the assessee has never claimed so even while offering the said income as business income. The ld. D/R has further submitted that the ground no. 3 of the assessee's appeal is only regarding the claim of capital gain of Rs. 3,45,357/- which cannot be revised to a negative income from the sale of mutual funds. He has relied upon the orders of the authorities below.
7. We have considered the rival submissions as well as the relevant material on record. We find that as per return of income and computation of income, the assessee has offered Rs. 3,45,357/- as business income under the head Other Income. This amount of Rs. 3,45,357/- has been computed by the assessee as per the cost of mutual fund and sale of mutual fund and, therefore, in the absence of revised return, the claim of the assessee could not be considered by the AO. However, when this plea was raised before the ld. CIT (A), the ld. CIT (A) could have examined the issue whether the income arising from sale of mutual fund is a capital gain or business income. In case the assessee is found to be indulged in regular activity of sale and purchase of mutual funds and had considered the same as trading activity, then having regard to the past history of the assessee the said 7 ITA No. 665/JP/2017 M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
income can be considered as business income of the assessee. However, in the absence of such enquiry or investigation and further in the absence of treatment of any such income in the earlier assessment years, this issue cannot be decided conclusively. As regards the objection of the ld. D/R by placing reliance on the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (supra), we find that the Hon'ble Supreme Court itself has taken into consideration the decision in the case of National Thermal Power Company Ltd. vs. CIT, 229 ITR 383 (SC) and observed that it is open to the assessee to raise the point of law even before the appellate authority. The question involved in this ground is the nature of income whether it is capital gain or business income which is dependent upon the treatment of the investment in the books of accounts as well as in the earlier assessment years. Accordingly, in the facts and circumstances of the case, we set aside this issue to the record of the AO for considering the claim of the assessee by conducting a proper enquiry and verification of facts on this issue. Needless to say, the assessee be given a proper opportunity of hearing before deciding the issue.
8. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 05/07/2018.
Sd/- Sd/-
(foØe flag ;kno) (fot; iky jkWo ½
(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 05/07/2018.
Das/
8
ITA No. 665/JP/2017
M/s. Bhandri Health Care Pvt. Ltd., Jaipur.
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- M/s. Bhandari Health Care Pvt. Ltd., Jaipur.
2. The Respondent - The DCIT, Circle-6, Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 665/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 9 ITA No. 665/JP/2017 M/s. Bhandri Health Care Pvt. Ltd., Jaipur.