M/s. Ruby Merry Enterprises (P) Ltd. v. The JCIT (OSD) Central Circle- 3 Jaipur
[Citation -2016-LL-1014-35]

Citation 2016-LL-1014-35
Appellant Name M/s. Ruby Merry Enterprises (P) Ltd.
Respondent Name The JCIT (OSD) Central Circle- 3 Jaipur
Court ITAT-Jaipur
Relevant Act Income-tax
Date of Order 14/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags disallowance of interest • share application money • investment in share • interest paid
Bot Summary: AR of the assessee at the outset of the hearing prayed that such issue has already been decided in favour of the assessee by the SMC Bench vide its order dated 06-11-2015 in ITA No. 475/JP/2012 in assessee's own case. As regards Ground No. 1 raised by the assessee, it is noted that such issue has already been decided in favour of the assessee by the ITAT, Jaipur SMC Bench in assessee's own case. The bank statement of the assessee revealed that the payment of Rs. 80,00,000/- was made by the assessee on 13.2.2008 and another payment of Rs. 80,00,000/- was made on the same date against the share application money of M/s. Career Point Infosystem Ltd. No shares were allotted against the investment in share application money. Prescribed, if the AO, having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income. Further, sub-section of section 14A empowers the AO to apply sub-section in a case where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income. D/R which may show that the AO has given a finding on the basis of accounts maintained by the assessee that he is not satisfied with the claim of the assessee. Respectfully following the decision of ITAT Jaipur SMC Bench in assessee's own case for the assessment year 2009-10, the appeal of the assessee on the issue in question is allowed.


IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM ITA No. 474/JP/2015 Assessment Year : 2008-09 M/s. Ruby Merry Enterprises (P) Ltd. cuke JCIT (OSD) 1-GHA-1 Dada Badi Extension, Vs. Central Circle- 3 Kota Jaipur PAN/GIR No.: AADCR 2727 D Appellant Respondent Assessee by: Shri Vijay Goyal , CA Revenue by:Shri Mukesh Verma, CIT-. DR Date of Hearing : 10/10/2016 Date of Pronouncement : 14 /10/2016 ORDER PER BHAGCHAND, AM assessee has filed appeal against order of ld. CIT(A), Alwar dated 17-03-2015 for assessment year 2008-09 raising therein following grounds of appeal. 1. On facts and in circumstances of case and ld. CIT(A) erred in confirming disallowance of Rs. 1.80 lacs made by AO u/s 14A of I.T. Act, 1961 on account of interest paid on loans taken for share application money Rs. 1,60,00,000/- given to M/s. Career Point Info System Ltd. 2 ITA No. 474/JP/2015 M/s. Ruby Merry Enterprises Pvt. Ltd. vs. JCIT (OSD) Central Circle- 3, Jaipur . 2. That order of ld. CIT(A), confirming addition made by AO is arbitrary, whimsical capricious, perverse and against law and facts of case. order of ld. CIT(A) in this regard deserves to be set aside and addition made by AO deserves to be deleted. 3. assessee prays for leave to add, to amend, to delete or modify all or any grounds of appeal on or before hearing of appeal. 2.1 Ground Nos. 2 and 3 of assessee are general in nature which does not require any adjudication. 3.1 As regards Ground No. 1 raised by assessee, ld. AR of assessee at outset of hearing prayed that such issue has already been decided in favour of assessee by SMC Bench vide its order dated 06-11-2015 in ITA No. 475/JP/2012 (A.Y. 2009-10) in assessee's own case. Hence, this issue is covered by ITAT order. 3.2 During course of hearing, ld. DR relied on order of ld. CIT(A) and submitted that ld. CIT(A) upheld action of AO. relevant portion of ld. CIT(A) is reproduced as under:- 4.3 I have perused assessment order as well as submissions made by appellant including judicial citation given therein and find that addition of Rs. 1,80,000/- has been made u/s 14A of I.T. Act by AO on account of interest paid on loans taken for payment of share application money. AO has stated in order that appellant had made fresh investment of Rs. 1.60 crores towards share application money to M/s. Career Point Infosystems Ltd. AO has noted that payment of Rs. 1.60 crores was made after raising loans on which interest @ 9% has 3 ITA No. 474/JP/2015 M/s. Ruby Merry Enterprises Pvt. Ltd. vs. JCIT (OSD) Central Circle- 3, Jaipur . been paid and accordingly disallowance of interest amounting to Rs. 1,80,000/- was made. 4.4 appellant has stated that investment was made towards shares for earning of profits and had been wrongly shown as investments in balance sheet. Further, share sale and purchase is part of normal business of company and therefore, no disallowance may be made. appellant has also placed reliance on certain judicial decisions to substantiate its contentions. 4.5 Having considered material placed on record, I find that appellant has reiterated submissions filed before AO and has not been able to place evidence to controvert findings given by AO in order. Appellant has failed to reubut or produce evidence that intention was to earn profits from investment made in these share during year under consideration as no sale of such shares was made even in subsequent period. shares of investee company were not listed on any Stock Exchange. Further, AO has found that share application money was returned back on28-08-2008. judicial decisions cited by appellant are found to be not applicable to facts of this particular case. 4.6 4.7 Further, Hon'ble ITAT Mumbai Bench has in case of Stream International Service (P) Ltd. (2013) 023 ITR (Trib) 0070 (Mum), held that application of Section 14A is justified, even in no income has been realized on such investments. disallowance of expenses incurred in relation to such sources of income is justified u/s 14A of I.T. Act. In case of Prakash Narottam Das Gupta vs. ITO (2013) 021 ITR (Trib) 0255 (Mum.),it has been held that disallowance of expense i.e. interest paid u/s 14A of I.T. Act is valid and justified. Also Hon'ble Hon'ble Kerala High Court has upheld disallowance of expenses u/s 14A of I.T. Act in case of Catholic Syrian Bank vs. Addl. CIT 349 ITR 0569 (Ker.) 4 ITA No. 474/JP/2015 M/s. Ruby Merry Enterprises Pvt. Ltd. vs. JCIT (OSD) Central Circle- 3, Jaipur . 4.8 Considering above facts, I hold that AO was justified in making disallowance of Rs. 1,80,000/-u/s 14A of I.T. Act, 1961 and confirm same. 3.3 We have heard rival contentions and perused materials available on record. As regards Ground No. 1 raised by assessee, it is noted that such issue has already been decided in favour of assessee by ITAT, Jaipur SMC Bench in assessee's own case (supra). observation of ITAT Jaipur SMC Bench (supra) is reproduced as under:- 3. I heard rival submissions and carefully considered same along with orders of tax authorities below. I noted that AO noted that assessee had paid interest @ 9% on investment made against share application money. bank statement of assessee revealed that payment of Rs. 80,00,000/- was made by assessee on 13.2.2008 and another payment of Rs. 80,00,000/- was made on same date against share application money of M/s. Career Point Infosystem Ltd. No shares were allotted against investment in share application money. amount of Rs. 1,60,00,000/- was returned back on 28.8.2008. AO, therefore, worked out interest @ 9% on investment made against share application money from 1.4.2008 to 28.8.2008 at Rs. 6,00,000/- and disallowed same under section 14A. It is undisputed fact that assessee has not claimed any disallowance in relation to investment made in share application money under provisions of section 14A. provisions of section 14A(1) states that no deduction shall be made in respect of expenditure incurred by assessee in relation to income which does not form part of total income. Sub-section (2) of section 14A empowers AO to determine amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with such method as may be 5 ITA No. 474/JP/2015 M/s. Ruby Merry Enterprises Pvt. Ltd. vs. JCIT (OSD) Central Circle- 3, Jaipur . prescribed, if AO, having regard to accounts of assessee is not satisfied with correctness of claim of assessee in respect of such expenditure in relation to income which does not form part of total income. Further, sub-section (3) of section 14A empowers AO to apply sub-section (2) in case where assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income. In this case I noted that even though AO has made disallowance by relying on provisions of section 14A but he did not comply with conditions as stipulated in section 14A(2). He has not recorded any satisfaction with regard to incorrectness of claim of assessee having regard to accounts of assessee having no such evidence or material brought to my notice by ld. D/R which may show that AO has given finding on basis of accounts maintained by assessee that he is not satisfied with claim of assessee. Even AO has not recorded satisfaction as regards to claim of assessee. He is bound to compute disallowance in accordance with such method as may be prescribed. In this regard it is rule 8D which has been notified with effect from 24.03.2008. assessment year involved is assessment year 2009-10. I do not find any whisper whatsoever by AO or by ld. D/R that AO has computed disallowance by applying Rule 8d. In view of this fact, I am of view that it is case where no disallowance can be made. I accordingly set aside order of ld. CIT (A). 4. In result, appeal filed by assessee is allowed. Respectfully following decision of ITAT Jaipur SMC Bench in assessee's own case for assessment year 2009-10 (supra), appeal of assessee on issue in question is allowed. 6 ITA No. 474/JP/2015 M/s. Ruby Merry Enterprises Pvt. Ltd. vs. JCIT (OSD) Central Circle- 3, Jaipur . 3.0 In result, appeal of assessee is allowed Sd/- Sd/- (KUL BHARAT) (Bhagchand) Judicial Member Accountant Member Jaipur Dated:- 14 /10/ 2016 Copy of order forwarded to: s 1. Appellant- M/s. Ruby Merry Enterprises (P) Ltd., Kota 2. Respondent- JCIT (OSD) Central Circle- 3, Jaipur 3. CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6. Guard File (ITA No.474/JP/2015) By order, Assistant. Registrar M/s. Ruby Merry Enterprises (P) Ltd. v. JCIT (OSD) Central Circle- 3 Jaipur
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