Gujarat High Court
Commissioner Of Income Tax Ii vs Prayas Engineering ... on 17 November, 2014
Author: Ks Jhaveri
Bench: Ks Jhaveri, K.J.Thaker
O/TAXAP/1237/2014 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 1237 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE K.J.THAKER
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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COMMISSIONER OF INCOME TAX II....Appellant(s)
Versus
PRAYAS ENGINEERING LTD....Opponent(s)
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Appearance:
MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE K.J.THAKER
Page 1 of 5
O/TAXAP/1237/2014 JUDGMENT
Date : 17/11/2014
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. By way of this appeal, the appellant has challenged the judgment and order dated 29.4.2014 passed bythe Income Tax Appellate Tribunal, Ahmedabad Bench 'D', Ahmedabad in IT(SS)A No. 2826/Ahd/2010 for AY 2007-08.
2. The facts of the present case are that that the assessee has filed original return of income on 31.10.2007 showing total income of Rs. 9,50,66,931/-. Thereafter, revised return of income was filed on 20.3.2008, showing the total income of Rs. 9,50,43,048/-. The case was selected for scrutiny by issuing notice u/s. 143(2) by DCIT Anand Circle on 24.7.2008. Subsequently, the case was assigned to the Addl. CIT, Anand Range. Thereafter, intimation regarding assigning the assessment to Addl. CIT and notice u/s. 142(1) requisitioning paper return, audited accounts and tax audit report was sent on 28.11.2008, which was complied with by the assessee by giving the same on 3.12.2008. Subsequently, notice u/s. 142(1) along with details questionnaire was issued on 3.9.2009. Thereafter, after considering the documents, the assessment order came to be passed. Against the said assessment order, the assessee has preferred Page 2 of 5 O/TAXAP/1237/2014 JUDGMENT an appeal before the CIT(A) which was partly allowed, against which, the assessee has preferred an appeal before the ITAT which was dismissed. Against the said order, the present Tax Appeal is preferred by the Revenue.
3. Heard the learned advocate appearing for the appellant-Revenue and considered the submissions. Learned advocate appearing for the appellant has contended that the circular issued by CBDT is very clear and the issue is governed by section 194J. The learned CIT(A) as well as ITAT, while considering the question has observed in para-7.2 as under:
"7.2 I have considered the submissions. Appellant's claim that only demat charges were incurred to earn tax free dividend income of Rs. 47,41,406/- is not acceptable. As held by ITAT Chennai Bench in the case of Southern Petro Chemicals Industries, investment decisions are key decisions taken by direct involvement of top management and part of administrative and managerial expenses have to be held as attributable to earning of tax free income from such investments. Appellant did not allocate any administrative or managerial expenses towards earning of dividend income. The Assessing Officer,being not satisfied with the correctness of the claim of appellant, rightly invoked section 14A(2) and Rule 8D. As held by the Special Bench of ITAT in the case of Daga Capital Management Pvt. Ltd., "Rule 8D inserted in Income Tax Rules prescribes a method, by which Assessing Page 3 of 5 O/TAXAP/1237/2014 JUDGMENT Officer has to determine the disallowance in terms of sub-section (2) and (3) - sub-section (1) of section 14A itself being clarificatory and retrospective, sub-section (2) and (3) providing for mechanism to given effect to sub-section(1), cannot be construed as prospective". The ITAT Special Bench further held that in order to escape applicability of section 14A, onus was on the assessee to prove that no expenditure was incurred for earning taxable income. In view of this, it is held that section 14A(2) and Rule 8D are applicable to appellant's case and Assessing Officer was justified in applying the same in AY 2007-08 to work out disallowable expenditure. Regarding interest expense attributable to exempt income, appellant's contention that no interest was attributable to share investment due to there being no specific borrowing for investment in shares is not acceptable. It is not the appellant's case that all the borrowings were directly linked or correlated to a particular asset or investment. In such a situation, Rule 8D is the prescribed method to calculate interest attributable to exempt income on proportionate basis. Disallowance of Rs. 6,54,647/- u/s. 14A is upheld."
4. In that view of the matter, the same view is confirmed by the Tribunal in its order, and therefore, we are in complete agreement with the order passed by the Tribunal. No substantial question of law is made out and the appeal is devoid of any merits and deserves to be dismissed. Hence, this appeal is dismissed.
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