Radicura Pharmaceuticals Pvt. Ltd. v. ITO, Ward-15(1), New Delhi
[Citation -2016-LL-1014-23]

Citation 2016-LL-1014-23
Appellant Name Radicura Pharmaceuticals Pvt. Ltd.
Respondent Name ITO, Ward-15(1), New Delhi
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 14/10/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags disallowance of interest • time barred
Bot Summary: PAN: AAACR1536P Assessee By : Shri Sanjay Jain, CA Department By : Shri N.K. Bansal, Sr. DR Date of Hearing : 13.10.2016 Date of Pronouncement : 14.10.2016 ORDER This appeal by the assessee arises out of the order passed by the CIT(A) on 28.7.2014 in relation to the assessment year 2011-12. The assessee has filed an application for condonation of delay. Briefly stated, the facts of the case are that that the assessee is engaged in the business of manufacturing as well as trading in medicines. The assessee suo motu disallowed expenses amounting to Rs.32,041/- on account of Demat charges and Expenses on portfolio management services treating them as covered u/s 14A. The AO invoked the provisions of section 14A read with Rule 8D and made an addition of Rs.3,48,691/-. The Hon ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 has held that if there are interest free funds available with the assessee sufficient to meet investments and, at the same time, some interest bearing loan is taken, it should be presumed that the investments were made from interest free funds and no disallowance of interest should be made. The 3 ITA No.5980/D/2014 Hon ble Gujarat High Court in Principal CIT vs. India Gelatine and Chemicals Ltd. 376 ITR 353 has followed this principle in the context of section 14A by holding that no disallowance of interest u/s 14A should be made where investments made by the assessee in shares and mutual funds are out of interest free funds. As the Investments made by the assessee in shares and securities fetching exempt dividend income is held to be made out of interest free funds in terms of Reliance Utilities, respectfully following India Gelatine and Chemicals Ltd, I order for the deletion of the addition towards interest amounting to Rs.3,03,087/-.


IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-1 : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA No.5980/Del/2014 Assessment Year : 2011-12 Radicura Pharmaceuticals Pvt. Ltd., Vs. ITO, B-117, Okhla Industrial Area, Phase I, Ward-15(1), New Delhi. New Delhi. PAN: AAACR1536P (Appellant) (Respondent) Assessee By : Shri Sanjay Jain, CA Department By : Shri N.K. Bansal, Sr. DR Date of Hearing : 13.10.2016 Date of Pronouncement : 14.10.2016 ORDER This appeal by assessee arises out of order passed by CIT(A) on 28.7.2014 in relation to assessment year 2011-12. 2. This appeal is time barred as delayed by 25 days. assessee has filed application for condonation of delay. I am satisfied with ITA No.5980/D/2014 reasons which led to delayed filing of appeal before Tribunal. As such, delay is condoned and appeal is admitted for hearing. 3. only issue raised in this appeal is against confirmation of addition of Rs.3,48,691/- u/s 14A of Act. 4. Briefly stated, facts of case are that that assessee is engaged in business of manufacturing as well as trading in medicines. It received dividend income of Rs.96,785/-from investment in shares and securities. Such income was claimed as exempt. assessee suo motu disallowed expenses amounting to Rs.32,041/- on account of Demat charges and Expenses on portfolio management services treating them as covered u/s 14A. AO invoked provisions of section 14A read with Rule 8D and made addition of Rs.3,48,691/-. This further disallowance consisted of two parts, namely, disallowance of interest amounting to Rs.3,03,087/- and disallowance @ % of average of value of investments at Rs.45,604/-. ld. CIT(A) upheld addition. assessee is aggrieved against this addition. 2 ITA No.5980/D/2014 5. I have heard rival submissions and perused relevant material on record. It is observed from assessee s balance sheet, copy of which is available on record, that Investment in shares and securities, fetching exempt dividend income, stood at Rs.79,05,765/-. As against that, assessee has Shareholders fund to tune of Rs.5,76,20,504/- as at end of year. This shows that amount invested in shares and securities is far less than amount of shareholders funds. Hon ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) has held that if there are interest free funds available with assessee sufficient to meet investments and, at same time, some interest bearing loan is taken, it should be presumed that investments were made from interest free funds and, consequently, no disallowance of interest should be made. This decision was rendered by Hon ble Bombay High Court after following judgment of Hon ble Summit Court in East India Pharmaceutical Works vs. CIT (1997) 224 ITR 627 (SC). 3 ITA No.5980/D/2014 Hon ble Gujarat High Court in Principal CIT vs. India Gelatine and Chemicals Ltd. (2015) 376 ITR 353 (Guj) has followed this principle in context of section 14A by holding that no disallowance of interest u/s 14A should be made where investments made by assessee in shares and mutual funds are out of interest free funds. As Investments made by assessee in shares and securities fetching exempt dividend income is held to be made out of interest free funds in terms of Reliance Utilities (supra), respectfully following India Gelatine and Chemicals Ltd (supra), I order for deletion of addition towards interest amounting to Rs.3,03,087/-. 6. other component of disallowance u/s 14A amounting to Rs.45,604/- is on account of % of average of value of investments towards administrative expenses. This addition is strictly in conformity with Rule 8D(2)(iii). same is, therefore, upheld. 4 ITA No.5980/D/2014 7. In result, appeal is partly allowed. order pronounced in open court on 14.10.2016. Sd/- [R.S. SYAL] ACCOUNTANT MEMBER Dated, 14th October, 2016. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. 5 Radicura Pharmaceuticals Pvt. Ltd. v. ITO, Ward-15(1), New Delhi
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