M/s Gujral Design Plus Overseas Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1079/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6952 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BENC H, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEM BER ITA NO. 1079/DEL/2017 [ASSESSMENT YEAR: 2012-13] GUJRAL DESIGN PLUS OVERSEAS PVT. LTD VS. THE DY . C.I.T 16, FEROZ GANDHI ROAD CIRCLE 10(2) E 20, LAZPAT NAGAR - III NEW DELHI PAN: AAACG 2661 A [APPELLANT] [RESPONDENT] DATE OF HEARING : 05.02.2020 DATE OF PRONOUNCEMENT : 05.02.2020 ASSESSEE BY : SHRI M.P. RASTOGI, ADV SHRI P.N. SHASTRY, CA REVENUE BY : SHRI S.N. MEENA, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] 35, NEW DELH I DATED 23.11.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 40,23,974/- M ADE U/S 14A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT' FOR SHORT] READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF NBFC NON BA NKING FINANCIAL COMPANY, INVESTMENTS, TRADING IN SECURITIES, ETC. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE APPELLANT HAS MA DE INVESTMENT OF RS. 96.70 CRORES AND HAS RECEIVED EXEMPT INCOME IN THE FORM OF DIVIDEND AMOUNTING TO RS. 5.04 CRORES. THE ASSESSI NG OFFICER WAS OF THE STRONG BELIEF THAT THE PROVISIONS OF SECTION 14 A R.W.R 8D SQUARELY APPLY ON THE FACTS OF THE CASE AND ACCORDINGLY, THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE TO EXPLAIN WHY THE DISALLOWANCE SHOULD NOT BE MADE AS PER RULE 8D OF THE RULES. 5. IN ITS REPLY, THE ASSESSEE STATED THAT IT HAS NO EXPENSES ON ACCOUNT OF INTEREST WHICH IS EVIDENT FROM THE PROFI T AND LOSS ACCOUNT ITSELF AND ONLY 0.5% OF AVERAGE INVESTMENT AS GIVEN IN RULE 8D MAY BE 3 CONSIDERED FOR DISALLOWANCE. IT WAS FURTHER EXPLAI NED THAT THE INVESTMENT AMOUNTING TO RS. 10.76 LAKHS IS NOT TO Y IELD TAX EXEMPT INCOME. THE ASSESSEE PRAYED THAT THE DISALLOWANCE OF RS. 8,11,262/- MAY BE ACCEPTED. 6. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO PROCEEDED BY COMPUTING THE DI SALLOWANCE U/S 14A AS PER RULE 8D AND ADDED A SUM OF RS. 40,23,974 /-. 7. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 18 OF THE PAPER BOOK WHICH IS SCHEDULE OF INVE STMENTS AND POINTED OUT THAT MAJOR INVESTMENTS ARE COMING FROM EARLIER YEARS AND FURTHER FURNISHED A CHART OF DIVIDEND INCOME RECEIV ED DURING THE YEAR AND POINTED OUT DIVIDEND INCOME OF RS. 5 CORES. RS. 4.62 CRORES HAS BEEN RECEIVED FROM DLF LTD, WHICH INVESTMENT IS COM ING FROM EARLIER YEARS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PO INTED OUT THE COMPUTATION OF DISALLOWANCE WHICH IS PLACED AT PAGE S 34 TO 36 OF THE 4 PAPER BOOK AND STATED THAT IF AT ALL DISALLOWANCE H AS TO BE MADE, THE SUM SHOULD BE RS. 5,57,206/-. 9. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THA T DETAILS NOW FURNISHED BY THE LD. COUNSEL FOR THE ASSESSEE APPEAR TO BE NO T EXAMINED BY THE ASSESSING OFFICER. 10. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE BALANCE SHEET AND, IN PARTICULAR, NOTE 11, WHICH IS EXHIBITED AT PAGE 18 OF THE PAPER BOOK SHOWS THAT MAJOR INVESTMENTS ARE COMING FROM EARLIE R YEARS. FURTHER, DIVIDEND INCOME DETAILS ARE AS UNDER: PARTICULARS AMOUNT-RS 1 DLF LTD 46,287,500 2 ONGC LTD 2,670,300 3 COROMANDEL MUTUAL FUND 956 4 ACTION 19,500 5 INDIA INFOLINE LTD 19,027 6 ITC LTD 943,400 7 JINDAL STEEL 10,500 8 KWALITY DAIRY INDIA LTD 577 9 ORBIT CORPORATION 2,000 10 OFFSHORE LTD 1,440 11 PRAKASH INDUSTRIES 1,500 5 12 RATNAKAR BANK LTD 20,000 13 RAYMOND LTD 850 14 RELIANCE INDUSTRIES 700 15 REPRO INDIA LTD 42,000 16 SYMPHONY LTD 3,000 17 TPEICL 500 18 IL&FS 1,400 19 UCO BANK 300 50,025,450 INTEREST FROM HUDCO 450,000 50,475,450 11. A PERUSAL OF THE ABOVE CLEARLY SHOWS THAT MAJOR AMOUNT OF DIVIDEND HAS BEEN RECEIVED FROM DLF LTD. WE HAVE AL SO CAREFULLY PERUSED THE WORKING ALLOCATION OF EXPENSES FOR SECT ION 14A OF THE ACT WHICH IS EXHIBITED AT PAGES 34 TO 36 OF THE PAPER B OOK. IN OUR CONSIDERED OPINION, VERIFICATION OF THE WORKING VIS -A-VIS INVESTMENTS, VIS-A-VIS DIVIDEND INCOME CHART NEEDS TO BE EXAMINE D/VERIFIED BY THE ASSESSING OFFICER. WE, ACCORDINGLY, RESTORE THIS I SSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO FUR NISH WORKING OF ALLOCABLE EXPENSES BEFORE THE ASSESSING OFFICER AND EXPLAIN IN DETAIL THE OLD INVESTMENTS. THE ASSESSING OFFICER IS DIREC TED TO EXAMINE/VERIFY THE DETAILS TO BE FURNISHED BY THE A SSESSEE AND DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 6 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 1079/DEL/2017 IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05.02 .2020. SD/- SD/- [KULDIP SINGH ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05 TH FEBRUARY , 2020. VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR 7 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER