M/s. DARCL Logistics Ltd., New Delhi V. DCIT, New Delhi

CO 444/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3697 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.3732/DEL/2015 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE 7(1), VS DARCL LOGISTICS LTD. ROOM NO.403, NEW DELHI. M-2 HIMLAND HOUSE, WARD 6(4), NEW DELHI. KARAMPURA COMMERCIAL COMPLEX, NEW DELHI. (PAN:AAAQCD2086J) C.O. NO.444/DEL OF 2015 (IN I.T.A. NO.3732/DEL/2015) ASSESSMENT YEAR: 2010-11 DARCL LOGISTICS LTD. VS DCIT, CIRCLE 7(1), M-2 HIMLAND HOUSE ROOM NO.403, NEW DELHI. KARAMPURA COMMERCIAL COMPLEX, WARD 6(4), NE W DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K.M. GUPTA. DEPARTMENT BY: SHRI S.R. SENAPATI, SR. DR DATE OF HEARING: 28.03.201 8 DATE OF PRONOUNCEMENT: .04.2018 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER OF THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS)-3, NEW DELHI (FOR SHORT HEREINAFTER CALLE D AS THE LEARNED CIT (A)) IN APPEAL NO.172 OF 2010-11 DATED 10.03.2015, REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING GROUND: WHETHER OIL THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF RS.38,06,250/- MADE BY THE AO UNDER RULE 8D(III) READ WITH SECTION 14A OF THE ACT TO RS.3,44,252/- ONLY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS AND MATERIAL TH ROUGH ROAD TRANSPORT WITH HEAVY VEHICLES HIRED FROM THE MARKET AND WITH ITS OW N FLEET AND BY RAIL. DURING THE SCRUTINY OF RETURN FOR ASSTT. YEAR 2010-11, LEA RNED AO FOUND THAT THE ASSESSEE COMPANY HAS EARNED DIVIDEND INCOME OF RS.68,268/- AN D WHILE FOLLOWING THE FORMULA UNDER RULE 8D OF THE INCOME-TAX RULES ( TH E RULES) WITH SECTION 14A OF THE INCOME-TAX ACT, 1961 (THE ACT) MADE A DISALLO WANCE OF RS.38,06,250/- . 3. IN APPEAL, LEARNED CIT(A) OBSERVED THAT THE EXPE NSES, RELATED TO EARNING OF EXEMPT INCOME, ARE EMBEDDED IN THE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT, AS SUCH, THE ADDITION U/S 14A OF THE ACT R EAD WITH RULE 8D OF THE RULES ON ACCOUNT OF DISALLOWANCE OF THE ADMINISTRATIVE EX PENSES IS RESTRICTED TO RS.3,44,252/-. CHALLENGING THE SAME, REVENUE PREFE RRED THIS APPEAL. CHALLENGING THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE DISA LLOWANCE OF RS.3,44,252/- BY APPLYING THE PROVISIONS OF RULE 8 D(2)(III) OF THE R ULES, ASSESSEE PREFERRED THE CROSS OBJECTION CONTENDING THAT IN VIEW OF THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN JOINT INVESTMENT PVT. LTD. VS CIT (2015) 372 ITR 694 DISALLOWANCE UNDER SECTION 14A SHALL NOT EXCEED THE DIVIDEND INCOME EARNED. 4. AT THE OUTSET, IT IS SUBMITTED BY THE LEARNED AR THAT SIMILAR ADDITION MADE BY THE LEARNED AO IN RESPECT OF ASSTT. YEARS 2009-10 , 2011-12 AND 2012-13 WAS RESTRICTED BY THE LEARNED CIT(A) AND WAS UPHELD BY TH E COORDINATE BENCHES OF THIS TRIBUNAL IN ITA NOS. 5031/DEL/2012, 5651/DEL/2015 A ND 979/DEL/2016. LEARNED AR FURTHER PLACED RELIANCE ON THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JOINT INVESTMENTS P. LTD. VS CIT (20 15) 372 ITR 694 (DEL) FOR THE PRINCIPLE THAT THE DISALLOWANCE U/S 14A OF THE ACT CANNOT EXCEED THE AMOUNT OF TAX EXEMPT INCOME. 5. IN ASSESSEES OWN CASE FOR THE PRECEDING AND FOL LOWING YEARS, THIS TRIBUNAL HAS TAKEN THE VIEW THAT THE DISALLOWANCE CAN ONLY BE RESTRICTED TO THE EXTENT OF EXEMPT INCOME ONLY. FURTHER, THE TRIBUNAL WHILE COM ING TO SUCH CONCLUSION RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN M/S CHEM INVESTMENTS VS CIT (2015) 378 ITR 33 (DEL). NO CHANGE OF CIRCUM STANCES IS BROUGHT TO OUR NOTICE. WE, THEREFORE, FOR THE ABOVE REASONS UPHOL D THE FINDING OF THE LD. CIT(A) THAT ADDITION MADE UNDER RULE 8D(2)(II) OF RULES CA NNOT BE SUSTAINED. FURTHER, THE DISALLOWANCE UNDER RULE 8D(2)(III) OF RULES CAN NOT EXCEED THE EXEMPT INCOME OF RS.68,268/-. 6. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERE D OPINION THAT THE VIEW TAKEN BY THE LEARNED CIT CANNOT BE TERMED EITHER ILL EGAL OR IRREGULAR INSOFAR AS THE DELETION OF ADDITION MADE UNDER RULE 8D(2)(II) OF R ULES. WE, THEREFORE, FIND THE GROUNDS OF THE APPEAL AS DEVOID OF MERITS AND ARE L IABLE TO BE DISMISSED. WHILE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF JOINT INVESTMENTS P. LTD. VS CIT (2015) 372 ITR 694 (DEL), WE ALLOW CROSS OBJECTION OF THE ASSESSEE AND DIRECT THE LD. AO TO RESTRICT THE DISALLOWANCE U/RULE 8D(2)(III) OF THE RULES TO RS.68,268/-. 7. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH APRIL, 2018. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH APRIL, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) BY ORDER 5. DR, ITAT ASSTT. REGISTRA R, ITAT