Income Tax Appellate Tribunal - Hyderabad
Charans Life Devices Pvt. Ltd., ... vs Dcit, Central Circle-2, Hyderabad, ... on 31 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A", HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 1545/HYD/2016
Assessment Year: 2011-12
M/s. Charans Life Devices Dy.CIT, Central Circle-2,
Private Limited, Vs HYDERABAD
HYDERABAD
[PAN: AACCC0638H]
(Appellant) (Respondent)
For Assessee : Shri A.V. Raghu Ram, AR
For Revenue : Shri M. Naveen, DR
Date of Hearing : 10-05-2018
Date of Pronouncement : 31-05-2018
ORDER
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 28-07-2016. Assessee has raised two issues in five grounds - one being the disallowance of discounts given to the customers and other one is application of provisions of Section 14A of the Income Tax Act [Act].
2. Briefly stated, assessee is a company in the business of trading in pace makers, stents and other life saving appliances. It declared income of Rs. 1,26,08,960/-
:- 2 -:
I.T.A. No. 1545/Hyd/2016 and while scrutinizing the assessment, AO noted that assessee debited an amount of Rs. 85,73,800/- towards discount offered to various customers. After verifying the various credit notes submitted in the course of assessment, AO did not accept the discounts given amounting to Rs. 8,35,190/- as they have not been acknowledged by assessee's customers. Another amount of Rs. 8,66,314/- was also disallowed as discount was given only by journal vouchers and not acknowledged by the other party. Accordingly, an amount of Rs. 17,01,504/- was disallowed by the AO. AO also invoked provisions of Sec.14A and disallowed amount of Rs.10,99,431/-
3. Before the Ld.CIT(A), assessee submitted that the certificates from other parties - one from Apollo Hospitals and other from Care Hospitals [Quality Care India Ltd.,] certifying the discount given to them. Ld.CIT(A), however, did not consider the evidence at all and dismissed the grounds simply stating that assessee could not submit any confirmation letters or otherwise proof for the credit notes from the recipients.
4. It was the submission of Ld. Counsel that these confirmations have been filed before the Ld.CIT(A) and relied on certificates placed on record at Pages 2 and 3 with a letter submitted to CIT(A) at Pg. 1 in support of the contentions.
5. After considering the rival contentions, we are of the opinion that this issue can be re-examined by the AO as :- 3 -:
I.T.A. No. 1545/Hyd/2016 assessee has furnished the additional evidence before the CIT(A), which was not even acknowledged by the Ld.CIT(A) in the order. In order to give an opportunity to assessee to explain the discount given, we remit the issue to AO to examine the certificates being furnished by assessee and allow necessary credit after due verification. Ground is considered allowed for statistical purposes.
6. The other issue which was agitated before the Ld.CIT(A) is with reference to disallowance u/s. 14A of Rs. 10,99,431/-. AO invoked the provisions of Section 14A even though assessee has only made the investment. Ld.CIT(A) without considering the submissions, confirmed the addition on the reason that assessee has accepted investments made towards share application to get dividend income.
6.1. It was the submission that assessee has not earned any dividend income. Hence, no disallowance u/s. 14A is warranted.
6.2. After considering the rival contentions, we are of the opinion that this issue also requires re-examination by the AO. There is no evidence on record that assessee has not earned any dividend income. This issue was not even discussed by the AO or CIT(A). Without claim of any exemption, the provisions of Section 14A cannot be invoked, just because assessee has made investments. Even for application of Rule 8D(ii), it is necessary to establish that :- 4 -:
I.T.A. No. 1545/Hyd/2016 interest paid is not connected to the business and assessee has diverted the borrowed funds, so as to rope in such interest expenditure within the provisions of Rule 8D(2)(ii). This exercise has not been undertaken by the AO. Since assessee in the submissions made before authorities admits that some borrowed funds have been invested, whether the provisions of Section 36(1)(iii) will apply or not was also not examined. Consequently, we set aside the issue to the file of AO to reconsider the issue afresh based on the facts and law. Grounds are considered allowed for statistical purposes.
7. In the result, the appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 31st May, 2018 Sd/- Sd/-
(D. MANMOHAN) (B. RAMAKOTAIAH)
VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated 31st May, 2018
TNMM
:- 5 -:
I.T.A. No. 1545/Hyd/2016
Copy to :
1. M/s. Charans Life Devices Private Limited, C/o. A.V. Raghu Ram, P. Vinod & M. Neelima Devi, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad.
2. Dy.CIT, Central Circle-2, Hyderabad.
3. CIT(Appeals)-1, Hyderabad.
4. Pr.CIT-1, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.