M/s. Quatrro Global Services Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 312/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3440 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALITA KRISH NAMURTY
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO. 1447/DEL/2015 & C.O NO. 312/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 1447/DEL/201 5 ( A.Y 2010-11) ACIT CIRCLE-20(2) NEW DELHI (APPLICANT) VS QUATRRO GLOBAL SERVICES PVT. LTD. (FORMERLY KNOWN AS QUATRRO BPO SOLUTIONS PVT. LTD.) BASEMENT 24, C-BLOCK, COMMUNITY CENTRE, JANAKPURI, NEW DELHI AAFCA4469B (RESPONDENT) C.O NO. 312/DEL/20 15 ( A.Y 2010-11) QUATRRO GLOBAL SERVICES PVT. LTD. (FORMERLY KNOWN AS QUATRRO BPO SOLUTIONS PVT. LTD.) BASEMENT 24, C-BLOCK, COMMUNITY CENTRE, JANAKPURI NEW DELHI AAFCA4469B (APPELLANT) VS ACIT CIRCLE-20(2) NEW DELHI (RESPONDENT) APPLICANT BY SH. ATIQ AHMAD, SR. DR RESPONDENT BY SMT. LALITA KRISHNAMURTY, CA ORDER PER SUCHITRA KAMBLE THESE APPEAL AND CROSS-OBJECTION ARE FILED BY THE R EVENUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER DATED 30/12 /2014 PASSED BY CIT (A)-VII, NEW DELHI. DATE OF HEARING 04.01.2018 DATE OF PRONOUNCEMENT 31.01.2018 2 ITA NO. 1447/DEL/2015 & C.O NO. 312/DEL/2015 2. THE GROUNDS OF APPEAL ARE AS UNDER: (ITA NO. 1447/DEL/2015) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN DELETING THE DISALLOWANCE U/S 14A R.W.R 8D OF RS .2,60,74,348/- IGNORING THE MANDATORY PRESCRIBED METHOD FOR DETERMINATION T HE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME I N SUB-RULE (2) OF RULE 8D. (C.O NO. 312/DEL/2015) 1. THAT IN THE ABSENCE OF SATISFACTION, IN TERMS O F SECTION 14A(2) OF THE INCOME TAX ACT, BEING RECORDED BY THE ASSESSING OFF ICER , WITH REGARD TO THE AMOUNT OF DISALLOWANCE MADE BY THE ASSESSEE COM PANY, THE APPLICATION OF RULE 8D BY THE ASSESSING OFFICER IS BAD IN LAW. 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 13/10 /2010 SHOWING NIL INCOME. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTI CE U/S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29/08/2011. THE ASSESSING OFFICER MADE DISALLOWANCE U/S 14A READ WITH RULE 8D FOR RS.2,60, 74,348/-. 4. BEING AGGRIEVED BY THE ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DE LETING THE DISALLOWANCE U/S 14A READ WITH RULE 8D IGNORING THE MANDATORY PR ESCRIBED METHOD FOR DETERMINING THE AMOUNT OF EXPENDITURE INCURRED IN R ELATION TO EXEMPT INCOME IN SUB RULE 8D. 6. THE LD. AR POINTED OUT DETAILED CALCULATIONS FOR SELF-DISALLOWANCE OF EXPENDITURE AT PAGE 30 AS RELATED TO THE COMPETENT OF INCOME GIVEN TO THE ASSESSING OFFICER WHICH IS A PAGE 31 OF THE PAPER BOOK. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- 3 ITA NO. 1447/DEL/2015 & C.O NO. 312/DEL/2015 5.3. THUS WHENEVER THE ISSUE OF 14A ARISES THE A.O SHOULD ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPEC T OF EXPENDITURE INCURRED OR NOT INCURRED IN RELATION TO INCOME WHICH DOES NOT F ORM PART OF THE TOTAL INCOME UNDER THE ACT. 5.4 IN CASE THE AO IS SATISFIED WITH THE CLAIM OF THE APPELLANT, THE AO SHOULD ACCEPT THE CLAIM OF THE APPELLANT SO FAR AS THE QUA NTUM OF DISALLOWANCE IS CONCERNED. IN CASE THE AO AFTER GIVING THE APPELLAN T AN OPPORTUNITY OF BEING HEARD, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT, HE SHOULD REJECT THE CLAIM AFTER GIVING REASONS. THE A O IS TO THEN DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 5.5. THE LANGUAGE OF SUB SECTION 14A(1) IS ABUND ANTLY CLEAR THAT RELATION HAS TO BE SEEN BETWEEN THE EXEMPT INCOME AND EXPEND ITURE INCURRED IN RELATION TO IT. THE AO HAD ANALYZED THE FACTS OF TH E CASE AND THEN MADE THE DISALLOWANCE. 5.6. THE AO HAS SIMPLY APPLIED RULE 8D WITHOUT SHOWING ANY RELATION BETWEEN THE EXEMPT INCOME AND EXPENDITURE INCURRED. IN VIEW THEREFORE, I DO NOT FIND ANY BASIS TO SUSTAIN THE ADDITION MADE. TH E ADDITION OF RS.2,60,74,348/'- IS DELETED. THE GROUND OF APPEAL IS RULED IN FAVOUR OF THE APPELLANT. 6. GROUND NO. 3 A 4 ARE GENERAL. 7. AS A RESULT, THE APPEAL IS ALLOWED. FROM THE PERUSAL OF THE RECORDS, IT CAN BE SEEN THA T IN FACT THE CALCULATION AND THE DETAILS OF THE SAID CALCULATION WAS GIVEN T O THE ASSESSING OFFICER DURING 4 ITA NO. 1447/DEL/2015 & C.O NO. 312/DEL/2015 THE ASSESSMENT PROCEEDINGS WHICH WAS NOT AT ALL CON SIDERED BY THE ASSESSING OFFICER. THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT (A). 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D AND CROSS-OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 31/01/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 03/01/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 03/01/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 5 ITA NO. 1447/DEL/2015 & C.O NO. 312/DEL/2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 31.01.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 3 1 .01.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.