DCIT, DELHI V. R K S DISTRIBUTORS PVT. LTD., DELHI

ITA 2908/DEL/2024

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax, Delhi against R K S Distributors Pvt. Ltd. concerning the assessment year 2018-19. The primary issues in the appeal were the disallowance under section 14A of the Income-tax Act, 1961, related to exempt income, and the disallowance of travelling and conveyance expenses. The CIT(A) had restricted the disallowance under section 14A to the amount of exempt income and had partially allowed the travelling expenses disallowance at 5%. The Tribunal found no merit in the Revenue's arguments and upheld the CIT(A)'s decisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473553 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2018-2019
• Other Referred Cases: Joint Investment Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del), Motilal Laxmichand Sanghavi vs. ACIT [2019] 109 taxmann.com 186
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: AKASH OJHA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No.2908/Del/2024 Assessment Year: 2018-19 DCIT, Delhi Vs. R K S Distributors Pvt. Ltd., K-7B, Ground Floor, Kalkaji, New Delhi PAN: AAACR5920R (Appellant) (Respondent) ORDER PER SATBEER SINGH GODARA, JM This Revenue’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2023-24/1058552935(1), dated 07.12.2023 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. Heard both the parties. Case file perused. Assessee by Sh. Akash Ojha, Adv. Department by Ms. Harpreet Kaur Hansra, Sr. Dr Date of hearing 19.03.2025 Date of pronouncement 19.03.2025 ITA No.2908/Del/2024 2 | P a g e This Revenue’s appeal raises the following substantive grounds: (1) \"Whether on the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law, in restricting the disallowance under section 14A to the extent of exempt income, i.e., Rs. 51,09,431/- without appreciating the facts of the case?\" (ii) \"Whether on the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law, in restricting the disallowance of travelling expenses to the extent of 5% without appreciating that there was no evidence of business expansion in abroad?\" (iii) \"The appellant craves leave to add, alter, amend, append or delete any of the above grounds of appeal.\" 3. We now advert to the Revenue’s first and foremost substantive ground that the CIT(A) has erred in law and on fact in restricting the Assessing Officer’s action making section 14A r.w.s. Rule 8D disallowance to the extent of assessee’s exempt income amount of Rs.51,09,431/- only. 4. Suffice to say, there could be hardly any dispute that the instant issue is no more res-integra in light of Joint Investment Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del), already rejecting the Revenue’s stand thereby holding that the impugned section 14A r.w.s. Rule 8D disallowance could not exceed the amount of exemption income itself. We thus reject the Revenue’s former substantive ground in very terms. ITA No.2908/Del/2024 3 | P a g e 5. Next comes the Revenue’s latter substantive grievance that the CIT(A) has erred in law and in fact in restricting the assessee’s travelling and conveyance expenditure disallowance of Rs. 1,78,65,066/- that @ 5% only as follows: “6.3 Ground No. 7 Vide this ground the appellant has assailed to the disallowance of travelling and conveyance expenses to the tune of Rs. 1,78,65,066/-. It has been recorded by the AO that these expenses are not properly vouched and the appellant has not been able to relate these expenses to have been incurred specifically for the purpose of the business or draw a relation for these expenses to bear business expediency. On the other hand, the appellant has stated that the directors of the appellant company have to travel to London and New York for planning and meeting relevant persons to create a diversified portfolio by investing in US and London Stock Exchange. It gives diversification in terms of geography as well as ability to invest in large companies, which is not listed in NSE/BSE. The appellant has further furnished the statement of the accounts from which expenses have been incurred. 6.3.1 The narration of the bank accounts/credit card statements were perused. There is clear intermingling of the expenses which could have been borne for Page 25 of 27AAACR5920R- R K S DISTRIBUTORS PRIVATE LIMITED A.Y. 2018-19 ITBA/NFAC/S/250/2023-24/1058552935(1) personal reasons and clearly there are expenses which appears to have been incurred in relation to the business. The appellant has relied on the case of Motilal Laxmichand Sanghavi vs. ACIT in [2019] 109 taxmann.com 186, wherein under similar circumstances, where a separate ledger or logbook could not be produced for personal expenses and business expenses, the Hon’ble ITAT had disallowed certain percentage of total expenses. Therefore, it appears to be justified if 5% of total such expense, i.e 5% of Rs. 1,78,65,066/-, which arrives at Rs. 8,93,253/- be disallowed to meet the ends of justice. The amount of disallowances is thus restricted to the said amount. The ground of appeal is thus PARTLY ALLOWED. 6. We have given our thoughtful consideration to the assessee’s and the Revenue’s vehement rival submission and find no case in the latter’s favour. This is for the precise reason that as it has ITA No.2908/Del/2024 4 | P a g e already come on record that the assessee is a company in securities trading business wherein it had filed all the relevant records justifying the impugned travelling and conveyance expenditure, during the assessment. The Revenue could hardly pinpoint any discussion in the assessment order specifically rejecting the same. 7. Faced with this situation and in light of the fact that the CIT(A) has already estimated the impugned disallowance to that extent @ 5%, we are of the considered view that his impugned action warrants no interference at our behest. Ordered accordingly. 8. No other ground or argument has been pressed before us. 9. This Revenue’s appeal is dismissed in above terms. Order pronounced in the open court on 19th March, 2025 Sd/- Sd/- (AMITABH SHUKLA) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19th March, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "