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The Dharmaj Peoples Coop. Bank Ltd. Versus The CIT-I, Baroda

2015 (9) TMI 1177 - ITAT AHMEDABAD

Revision u/s 263 - Disallowance u/s 14A - Held that:- We find force into the contention of the ld.counsel for the assessee that the ld.CIT was not justified in terming the order of the AO as erroneous and prejudicial to the interests of the Revenue. The assessee has demonstrated that investments were made out of interest-free funds. Under these facts, the ld.CIT(A) was not justified to restore the issue with regard to disallowance of expenditure u/s.14A of the Act to the file of AO for fresh dec .....

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estments”, in our considered opinion has been rightly held by the learned CIT(A) to be a business loss. Accordingly this ground is not accepted. In the present case, the assessee has shown the investment as stock-in-trade as noted by the ld.CIT that the security was sold within one year and three months of the purchase that it shows that it was not the permanent investment of the bank as the bank has not waited till the maturity of the security. Therefore, in our considered view, the ld.CIT was .....

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The Assessee has raised the following grounds of appeal:- 1. The Ld. Commissioner of Income Tax-I, Baroda has erred in law and in facts in the revision of the order of Assessing Officer made u/s.143(3) dated 27.11.2009 holding the same as prejudicial to Revenue and also directing a fresh assessment. 2. The Ld.Commissioner of Income Tax-I, Baroda has erred in law and in facts in holding that no evidence has been placed on record to establish the investment in Government Securities by the appellan .....

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nd, revise or substitute any of the ground(s) of appeal contained hereinabove. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 27/11/2009, thereby the Assessing Officer (AO in short) made disallowance of ₹ 62,500/- and computed taxable income at ₹ 12,14,779/- as against the total taxable income as per return of S .....

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pon nonappreciation in right perspective. He submitted that the AO in the regular assessment had made enquiry in detail. He drew our attention towards page Nos.25 to 29 and also page Nos.48 & 49 of the paper-book of the assessee, wherein the notices issued u/s.142(1) of the are enclosed. The ld.Sr.counsel for the assessee submitted that it is not the case where the AO has not applied mind and has not made enquiries. He submitted that the AO had made thorough enquiry and after satisfying itse .....

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quired to be set off against any capital gains only and not from other heads of income . He submitted that this issue was duly considered by the AO as the AO had made a specific query. In support of this contention, he drew our attention towards page No.49 of the paper-book, wherein as per clause(8), the AO has asked to explain how the amount of ₹ 380,80,000/- is an allowable expense. Further, he submitted that the other reasoning of the ld.CIT was that the assessee had claimed exempted in .....

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ted income of ₹ 15,97,250/- was received. As per section 14A of the Act, deduction is not admissible in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income and expenditure incurred by way of interest, etc. has to be disallowed as per Rule 8D of the IT Rules. The ld.Sr.counsel for the assessee submitted that on both the counts, it is misplaced and contrary to the settled position of law. He submitted that it was pointed out to t .....

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submitted that it was submitted before the ld.CIT that deposit into the government security is normal business activity of the assessee. Therefore, any loss occurred on the sale of such government security was a trading loss and this loss was rightly required to be set off against the business income. In support of this contention, he placed reliance on the decision of the Tribunal (ITAT Mumbai I Bench) in the case of Dy.Director of Income tax (Intl. taxation) vs. Chohung Bank in ITA Nos.1081, .....

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ontrary, ld.Sr.DR supported the orders of the authorities below and submitted that the order of the AO was erroneous and prejudicial to the interests of the Revenue which is evident from the fact that the AO has not given any finding in the assessment order as to how the loss claimed by the assessee is a business loss and not a capital loss. Moreover, the AO has not given any finding as to how the Rule 8D would not be applicable on the facts of the present case. 4. We have heard the rival submis .....

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exercising the jurisdiction u/s.263 of the act for revising the order passed u/s.143(3) of the Act. The order of the AO can be termed as erroneous if the AO has not carried out any enquiry with regard to any claim even if the enquiry has been carried out. The finding on the particular claim or the issue is contrary to the provisions of law or the law laid down by the Court on the particular issue. In the case in hand, there is no dispute with regard to the fact that the AO has not recorded any .....

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of ₹ 30,80,000/- was debited to investment depreciation fund in the balance-sheet and also reduced from the total business income. The ld.CIT was of the opinion that as per section 70 of the Act, the loss on account of sale of Government securities is Long Term Capital Loss and is required to be set off against any capital gains only and not from other heads of income . Another ground for initiating proceedings was that on verification of the profit and loss account for the year 2006-07 re .....

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investment in SSNL, Mutual Funds, etc. (Schedule 4) valued at ₹ 1,53,41,188/- (total investment ₹ 16,83,16,712/-) on which exempted income of ₹ 15,97,250/- was received. As per section 14A of the IT Act, deduction is not admissible in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income and expenditure incurred by way of interest, etc. has to be disallowed as per Rule 8D of the IT Rules. 4.1. On the first ground, th .....

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st-bearing fund for purchasing the securities which has resulted into the earning of exempted income. It was contented that both these issues were thoroughly examined by the AO and the AO had rightly allowed the claim of the assessee. It was further contended that if anything adverse is found against the assessee that is required to be recorded in the assessment order but not recording the finding, however after thoroughly examining and satisfying itself would not make an order of the AO as erro .....

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of Gujarat in the case of CIT vs. Torrent Power Ltd. reported at (2014) 363 ITR 474(Guj.) has held as under:- 11. We notice that this appeal concerns the year 2006-2007 and the application of Rule 8D of the Income Tax Rules has come into being from 2007-2008 which has been held prospective by this Court, following the judgement of Bombay High Court in case of Godrej and Boyce Mfg. Col. Ltd v. Deputy Commissioner of Income Tax and another reported in (2010) 328 ITR 81(Bom), where Bombay High Cou .....

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that the expenditure incurred for earning exempt income should be disallowed under section 14A of the Act and when no bifurcation was made by the assessee, the Assessing Officer disallowed the total expenditure under such head and added back the entire sum being the amount of salary of the Directors to the income of the assessee. Both the tribunal and the Commissioner did not approve such decision, relying on judgement of Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd (supra) by h .....

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urt has done. That, however, does not mean in our prima-facie opinion that no disallowances can be made under Section 14A of the Act by bifurcating the expenditure in a reasonable manner towards earning of the taxable income and tax exempt income. 5. In the present case, since the amount involved is not very large, we reserve our final conclusion on such an issue in appropriate case. Therefore, we are not inclined to entertain this Tax Appeal. However, we should not be seen to have confirmed the .....

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ustained by the Tribunal. 4.4. The assessee has demonstrated that investments were made out of interest-free funds. Under these facts, the ld.CIT(A) was not justified to restore the issue with regard to disallowance of expenditure u/s.14A of the Act to the file of AO for fresh decision. In respect of Long term capital loss, it is demonstrated by the assessee that investments in government securities, is normal business activity of the assessee. The Coordinate Bench (ITAT Mumbai I Bench) in ITA N .....

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tment , whereas the securities acquired by the bank with the intention of trading by taking advantage of short-term price/interest, are to be considered as current investments . The securities from which the assessee has incurred loss were depicted as current investment as has also been noted by the AO in the assessment order. A Certificate from chartered accountant certifying that the securities sold by the assessee were under current investment category has been given to the lower authorities. .....

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