M/S Alternative Food Process Pvt. ... vs Department Of Income Tax

Deputy Commissioner of Income-tax, Circle 11(1), Bangalore. ... Appellant Vs.

M/s.Alternative Food Process Pvt. Ltd. No.49, 15th Cross, I Block, R.T.Nagar, Bangalore-560033. ... Respondent PAN:AADCA4411H AND

ITA No.1428/Bang/2013 (Assessment year: 2010-11)

M/s.Alternative Food Process Pvt. Ltd. No.49, 15th Cross, I Block, R.T.Nagar, Bangalore. ... Appellant Vs.

Asst. Commissioner of Income-tax, Circle 11(1), ... Respondent Bangalore.

Assessee by: Shri E.Balasubramanyam, CA. Revenue by: Shri T.S.N.Murthy, CIT(DR).

Date of hearing : 15/04/2015 Date of pronouncement: 11/06/2015

Per Smt. P.MADHAVI DEVI, JM:

These cross-appeals by the assessee as well as the

revenue are directed against the order of the CIT(A)-I,

Bangalore, dated 31/07/2013 for the assessment year 2010-11.

ITA No.1383 & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd.

Page 2 of 6

2. Brief facts of the case are that the assessee-company

filed its return of income for the assessment year 2010-11 on

1/10/2010 declaring an income of Rs.3,61,59,904/-. During the

assessment proceedings u/s 143(3) of the Income-tax Act, 1961

[hereinafter referred to as 'the Act' for short] the Assessing

Officer (AO) perused the books of account and other details

furnished by the assessee and observed that the assessee had

declared long term capital gain of Rs.4,55,27,758/- on the sale

of immovable property. From the computation, the AO noticed

that the assessee had claimed an amount of Rs.1.00 crore as

deduction u/s 54EC of the Act. He observed that the land was

sold in the month of January 2010 and the assessee had

invested an amount of Rs.50 lakhs in REC bonds on 31/1/2010

and another investment of Rs.50 lakhs in the REC bonds was

made on 31/5/2010, thus making the overall investment in the

long term specified asset i.e. REC bonds to Rs.1.00 crore.

Observing that the claimed deduction is restricted only to Rs.50

lakhs, the assessee was asked to explain the eligibility of the

excess claim of Rs.50 lakhs made by the assessee. Vide his

submissions dated 14/9/2012 the assessee explained that the

assessee has sold property in January 2010 and accordingly the

assessee has to invest the eligible amount within six months

there-from i.e. July 2010 to be eligible for deduction u/s 54EC of

the Act. He submitted that the proviso thereto specified that the

amount of investment made after 1/4/2007 in any financial year ITA No.1383 & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd.

Page 3 of 6 cannot exceed Rs.50 lakhs but it does not restrict the deduction

of capital gains only to Rs.50 lakhs. But since deposit during the

financial year 2010-11 is Rs.50 lakhs and Rs.50 lakhs in the

subsequent financial year, the condition is satisfied. The

assessee also referred to CBDT circular No.3 of 2008 dated

12/3/2008 in support of his contention. The AO was, however

not convinced with the contention of the assessee and held that

the deduction claimed by the assessee is to be limited to Rs.50

lakhs for the relevant financial year. Thereafter, referring to the

decision of the ITAT, Jaipur in the case of ACIT vs. Shri Raj

Kumar Jain & Sons (HUF) and also American Hotel & Lodging

Association Educational Institute vs. CBDT (289 ITR 46) he

brought the excess claim of Rs.50 lakhs deduction made u/s

54EC to tax.

3. The AO further observed that the assessee had earned

dividend income of Rs.1,94,060/- and since the same was

claimed as exempt u/s 10(34) of the Act, he was of the opinion

that the disallowance u/s 14A read with rule 8D is to be made.

The assessee's explanation was called for wherein it was stated

that the investment to yield tax-free income was made only in

the month of January 2010 and till that point of time the

company had not made any investment. The AO was, however,

not convinced with the contention of the assessee and therefore,

applying the provisions of rule 8D, he made the disallowance of

Rs.28,535/-.

ITA No.1383 & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd.

Page 4 of 6

4. Aggrieved by the above, the assessee preferred an

appeal before the CIT(A) and in addition to the above

disallowances, the assessee also challenged the non-allowance of

the claim of expenditure of Rs.55 lakhs against long term capital

asset. It was contended that the assessee had incurred an

expenditure of Rs.55 lakhs towards the transfer of long term

capital gains, the details of which were given in its letter dated

8/8/2012 and that the said amount was disallowed while

computing income from business even though the assessee

failed to claim the deduction while computing the long term

capital gains. The CIT(A) granted relief to the assessee by

deleting the disallowance of Rs.50 lakhs u/s 54EC of the Act as

well as the disallowance u/s 14A read with rule 8D of the IT

Rules. However, as regards the claim of the expenditure of

Rs.55 lakhs towards the transfer of long term capital gain, the

CIT(A) rejected such claim. Against the relief given by the

CIT(A), the revenue is in appeal before us whereas the assessee

is in appeal against relief denied by the CIT(A).

5. Coming to the assessee's appeal, the learned counsel

for the assessee submitted that the assessee has not made the

claim before the AO but has made the claim for the first time

before the CIT(A) and now before us, has filed additional

evidence in support of its claim. He has filed the paper book

containing the additional evidence and has prayed that the

matter may be remitted to the file of the AO for verification.

ITA No.1383 & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd.

Page 5 of 6 The learned Departmental Representative opposed the

admission of the additional evidence.

6. Upon hearing both the parties and after considering the

rival contentions and the material on record, we find that the

additional evidence goes to the root of the matter and therefore,

in the interests of justice, the same is admitted and remanded to

the file of the AO for de novo consideration of the issue in

accordance with law in the light of the additional evidence filed

by the assessee. Therefore, the assessee's appeal is treated as

allowed for statistical purposes.

7. Coming to the revenue's appeal, we find that the proviso

to sec.54EC(3) only restricts the investments in a financial year

made in the long term specified assets by an assessee after 1st

day of April 2007 to Rs.50 lakhs. The learned Departmental

Representative has placed reliance upon the decision of the

Jaipur Bench of the Tribunal in the case of ACIT vs. Shri Raj

Kumar Jain & Sons (HUF) (cited supra) in support of his

contention. We find that the CIT(A) has followed the decision of

ITAT at Bangalore in the case of Vivek Jairazbhay vs. DCIT in ITA

No.236/Bang/2012 in allowing relief to the assessee. The

revenue is challenging the order of the CIT(A) by relying upon

the order of ITAT in the case of Raj Kumar Jain (cited supra) and

on the ground that the ITAT's decision in the case of Vivek

Jairazbhay has not attained finality as it has been appealed ITA No.1383 & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd.

Page 6 of 6 against us 260A of the Act. On going through the decision of

this Tribunal in the case of Vivek Jairazbhay, we find that the

Tribunal had considered the decision in the case of D.Raj

Kumar. Since Vivek Jairazbhay has not been suspended by the

Hon'ble High Court, it does not lose its precedential value. In

view of the same, we do not see any reason to interfere with the

order of the CIT(A) on this issue.

8. As regards the disallowance u/s 14A of the Act r.w.8D of

the IT Rules, the learned counsel for the assessee has conceded

the disallowance, at the time of hearing. Therefore, the ground

No.4 of the revenue is allowed.

9. In the result, the assessee's appeal is treated as allowed

for statistical purposes while the revenue's appeal is partly

allowed.

Pronounced in the open court on 11th June, 2015.

sd/- sd/- (Pramod Kumar) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu

Copy to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore