ITO, New Delhi V. M/s. Hero Financial Services Ltd., New Delhi

ITA 1022/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69319 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SATPAL SINGH
• Keywords: Rule of consistency; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C: NEW DELHI) BEFORE SHRI S.V.MEHROTRA,ACCOUNTANT MEMBER VS. SHRI I.C. SUDHIR, JUDICIAL MEMBER ITA NO.1022 /DEL/ 2013 (ASSESSMENT YEAR :2006-07) ITO VS. HERO FINANCIAL SERVICES LTD. WARD-12(3) 601, INTERNATIONAL TRADE TOWER, NEW DELHI NEHRU PLACE NEW DELHI AAACH0593C (APPELLANT) (RESPONDENT) ASSESSEE BY :SHRI SATPAL SINGH, SR. DR REVENUE BY : SHRI RANJAN CHOPRA ORDER PER I. C. SUDHIR, JUDICIAL MEMBER: THE REVENUE HAS QUESTIONED FIRST APPE LLATE ORDER ON THE SOLE GROUND THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.48, 19,116/- ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT. 2. THE RELEVANT FACTS ARE THAT THE ASSESSE E COMPANY ENGAGED IN THE BUSINESS OF HIRE PURCHASE AND BILL DISCOUNTING, HAD DECLARED A LOSS OF RS.1,35,11,599/-. THE RETURN WAS PROCESSED U/S 143(1) AND LATER ON IT WAS PICKED UP FOR SCRUTINY. IN THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT WORKED OUT THE PROPORTIONATE DISALLOWANCE OF RS.48,19,116/-, THE AO MADE DISALLOWANCE OF RS. 32,19,116/- U/S 14A OF THE ACT. ITA NO. 1022.DEL.2013 2 THE AO OBSERVED THAT THE ASSESSEE COMPANY HAS EARNE D DIVIDEND INCOME OF RS.72,731/- DURING THE YEAR. THE AO DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE HAS NOT INCURRED ANY EXP ENDITURE ON EARNING DIVIDEND INCOME. THE AO POINTED OUT THAT THE ASSESSEE COMPA NY HAS BORROWED MONEY TO INVESTIGATE IN EQUITY SHARES, MUTUAL FUNDS, GOVERNM ENT SECURITIES. BEING AGGRIEVED WITH THE ACTION OF THE AO THE ASSESSEE WENT IN FIRS T APPEAL AND ACCEPTING THE SUBMISSION OF THE ASSESSEE AS WELL AS DECISION OF T HE TRIBUNAL ON IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE FOR THE A.YS 2002-03, 2004 -05 & 2005-06, THE LD. CIT (A) HAS DELETED THE DISALLOWANCE. THE REVENUE IS NOW A GGRIEVED WITH THIS ACTION OF THE LD. CIT(A). 3. IN SUPPORT OF THE APPEAL THE LD. DR HAS B ASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. THE LD. AR ON THE OTHER HAND POIN TED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS FULLY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF TRIBUNAL IN THE CASE OF ASSESSEE ITSELF UNDER SIMIL AR FACTS IN THE A.YS 2002-03, 2004- 05 & 2005-06. HE REFERRED PAGE NOS. 1 TO 14 OF THE PAPER BOOK WHEREIN COPIES OF ABOVE CITED ORDERS OF THE TRIBUNAL HAVE BEEN MADE A VAILABLE. THESE ORDERS ARE DATED 6/7/2007 IN ITA NO. 4555/DEL/2005 (A.Y 2002-03); DA TED 11/2/2011 IN ITA NO. 2387/DEL/2008 (A.Y 2004-05) & DATED 18/1/2013 IN IT A NO. 5337/DEL/2007 (A.Y 2005-06). HE ALSO PLACED RELIANCE ON THE DECISIONS CITED BEFORE THE LD. CIT(A) AND REITERATED SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ITA NO. 1022.DEL.2013 3 4. HAVING GONE THROUGH THE ORDERS OF THE TRIBUNAL RELIED UPON BY THE LD. AR, WE FIND THAT UNDER SIMILAR FACTS IN THE CASE OF THE ASSESSEE FOR THE A.YS 2002-03, 2004-05 & 2005-06 THE TRIBUNAL HAS DECIDED AN IDENT ICAL ISSUE IN FAVOUR OF THE ASSESSEE. IN THE A.Y 2002-03 THE DISALLOWANCE HAS B EEN DELETED BY THE TRIBUNAL MAINLY ON THE BASIS THAT THE RBI GUIDELINES ARE BIN DING ON THE ASSESSEE WHICH IS A NON-BANKING FINANCIAL COMPANY AND THOSE GUIDELINES HAVE TO BE FOLLOWED AND SECONDLY IN VIEW OF RULE OF CONSISTENCY THE ADDITIO N SHOULD NOT HAVE BEEN MADE AS ASSESSEES SIMILAR CLAIM HAVING BEEN ACCEPTED BY TH E DEPARTMENT IN THE A.YS 1999- 2000 AND 2004-05. IN THE ASSESSMENT YEAR 2004-05 T HE REVENUE WAS IN APPEAL AGAINST THE RELIEF GIVEN BY THE LD. CIT(A) AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT THE A SSESSEE WAS HAVING CAPITAL RESERVES OF RS.826.24 LAKHS, IT HAD MADE INVESTMENT IN GOVER NMENT SECURITIES AT RS.161.41 LAKHS AND THIS INVESTMENT WAS COMPULSORY INVESTMENT TO MEET THE REQUIREMENT LAID DOWN BY RBI BECAUSE ASSESSEE IS A NON-BANKING FINAN CIAL COMPANY. THE ASSESSEE WAS HAVING AUTHORIZED SHARE CAPITAL OF RS.10 CRORE AND GENERAL RESERVE OF RS.63,66,434/-. AGAIN IN THE A.Y 2005-06 THE TRIBU NAL HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE PRESENT ASSESSEE ON THE BASI S THAT NO PART OF THE INTEREST EXPENDITURE WAS INCURRED FOR EARNING TAX FREE DIVID END INCOME APPROVING THE FINDING OF THE LD. CIT(A) ON FACTS THAT AFTER ANALYZING BAL ANCE-SHEET AND OTHER DOCUMENTS IT WAS FOUND THAT ASSESSING OFFICERS COMPUTATION OF T HE INTEREST COMPONENT AT RS.43.6 ITA NO. 1022.DEL.2013 4 LAKHS AS HAVING BEEN INCURRED ON EARNING OF TAX FRE E DIVIDEND INCOME OF RS.9.41 LAKHS DOES NOT STAND THE TEST OF SCRUTINY. IN THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION THE EXPLANATION OF THE ASSESSEE REMAI NED THAT THE ASSESSEE HAS NOT BORROWED FOR MAKING INVESTMENTS IN EQUITY SHARES, M UTUAL FUNDS AND GOVERNMENT SECURITIES; BORROWINGS HAVE BEEN MADE FOR BUSINESS PURPOSES; INVESTMENT MADE IN GOVERNMENT SECURITIES WAS ON ACCOUNT OF SLR REQUIRE MENTS OF NBFC; AND THE AO HAS ERRONEOUSLY TREATED THAT THE INVESTMENT OF RS.1 32 LAKHS YIELDED EXEMPT INCOME OF RS.72,731/-, WHEREAS THE ASSESSEE HAS EARNED INT EREST INCOME OF 62,42,592/- FROM GOVERNMENT SECURITIES WHICH HAS ALSO BEEN OFFERED F OR TAX. IN ABSENCE OF REBUTTAL OF THESE MATERIAL FACTS BY THE REVENUE BEFORE US, WE D O NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER WHEREIN THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING ORDERS OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF ON IDENTICAL ISSUE UNDER ALMOST SIMILAR FACTS IN THE A.YS 2002-0 3, 2004-05 & 2005-06. THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED . 5. CONSEQUENTLY, APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30/09/2013. SD/- SD/- (S.V.MEHROTRA) (I.C. SUDHIR) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) DATED THE 30 TH DAY OF SEPTEMBER , 2013 R. NAHEED COPY FORWARDED TO 1. APPELLANT ITA NO. 1022.DEL.2013 5 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DE LHI.