Anant Raj Agencies Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1203/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81543 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SANJEEV DEORA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

PAGE NO. 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI N. K. SAINI , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1203 /DEL/ 2013 (ASSESSMENT YEAR: 2009 - 10 ) ANANT RAJ AGENCIES PVT. LTD. H - 65, CANNAUGHT CIRCUS NEW DELHI PAN:AAACA0087E VS. DCIT CIRCLE - 1(1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SANJEEV DEORA, CA RESPONDENT BY : SMT. Y KAKKAR, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 24.12.2012 OF THE CIT(A) - IV, NEW DELHI RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 . 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1. THAT WITHIN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND LAW ON THE POINT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING PART OF THE DISALLOWANCE OF RS. 5,78,113/ - OUT OF DISALLOWANCE OF RS. 26,06,195/ - MADE TO THE RETURNED INCOME OF THE APPELLANT BY THE LEARNED DEPUTY COMMISSION ER OF INCOME TAX UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. 2. THAT WITHIN THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, AND AFTER HAVING ACCEPTED ALL ARGUMENTS OF THE APPELLANT, AND HAVING APPRECIATED THAT THE APPELLANT HAD NOT CLAIMED ANY EXPENDITURE IN ITS COMPUTATION OF INCOME HAD HAD NOT CARRIED FORWARD THE CURRENT YEARS BUSINESS LOSS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN PLACING RELIANCE ON THE PREMISE THAT THE EXPENDITURE OF RS. 5,78,113/ - WAS INCURRED BY THE APPELLANT IN EARNING INCOME FROM AN EXEMPT INCOME. 3. THAT THE GROUNDS OF APPEAL SUBMITTED HEREINABOVE BE READ WITHOUT PREJUDICE TO ONE ANOTHER IN CASES AND CIRCUMSTANCES WHEREVER THE CONTEXT SO REQUIRES. PAGE NO. 2 3. THE SOLE GROUND OF APPEAL. APROPOS DISALL OWANCE OF RS. 5,78,113/ - UNDER SECTION 14A OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND CONSTRUCTION ACTIVITIES. THE APPELLANT COMPANY HAS SHOWN DIVIDEND INCOME OF RS. 15,22,48,863/ - WHICH IS EXEMPT U/S 10(34) OF THE ACT. THE RETURN OF INCOME W AS FILED DECLARING INCOME OF RS. 13,46,401/ - WHICH WAS INTEREST INCOME. THE AO WAS OF THE VIEW THAT THE RULE 8D WAS APPLICABLE. THEREFORE, THE AO APPLIED RULE 8D AND COMPUTED DISALLOWANCE OF RS. 2,75,55,871/ - . HOWEVER, HE RESTRICTED IT TO RS. 26,06,195/ - A S ASSESSEE HAS CLAIMED TOTAL EXPENSES OF THE SAID AMOUNT ONLY. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO WAS PLEASED TO REST RICT THE DISALLOWANCE AT RS. 5,78,113/ - AND HELD AS UNDER: - 6.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF LD AR AND PERUSED THE ORDER PASSED BY THE AO. THE APPELLANT HAS CLAIMED DEDUCTION OF TOTAL EXPENDITURE OF RS. 24,97,203/ - . EVEN THOUGH RULE 8D IS APPLICABLE FOR THE YEAR UNDER CONSIDERATION, YET THE DISALLOWANC E U/S 14A CANNOT EXCEED THE EXPENDITURE CLAIMED BY THE ASSESSEE . IN THE COMPUTATION OF INCOME, OUT OF THESE EXPENSES OF RS. 24,97,203/ - , THE ASSESSEE HAS ITSELF DISALLOWED A SUM OF RS. 5,26,000/ - ON ACCOUNT OF DONATION AND RS. 51,600/ - ON ACCOUNT OF PF. TH US, THE EFFECTIVE AND NET CLAIM OF DEDUCTION ON ACCOUNT OF EXPENSE WAS RS. 19,19,603/ - (RS. 24,97,203/ - RS. 5,77,600/ - ). ON ACCOUNT OF CLAIM OF EXPENSES OF RS. 19,19,603/ - , THE ASSESSEE HAS SHOWN THE LOSS OF RS. 13,41,510/ - UNDER THE HEAD BUSINESS AND PROF ESSION. HOWEVER, THIS LOSS HAS NEITHER BEEN CARRIED FORWARD NOR BEEN SET OFF AGAINST OTHER INCOME FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE EFFECTIVE CLAIM OF EXPENSES BY THE ASSESSEE COMES TO RS. 5,78,113/ - (RS. 19,19,603/ - RS. 13,41,510/ - ). THE AO HIMSELF HAS AGREED THAT DISALLOWANCE U/S 14A IS TO BE RESTRICTED TO THE EXPENSES CLAIMED BY THE ASSESSEE. SINCE IT IS ONLY THE AMOUNT OF RS. 5,78,113/ - WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS EXPENSES, THE DISALLOWANCE U/S 14A IS TO BE RESTRICTED TO RS. 5,78,113/ - . THE GROUND S OF APPEAL ARE PARTLY ALLOWED. 6. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A), THE ASSESSEE/ APPELLANT IS BEFORE US. 7. THE LD AR SUBMITTED THAT THE LD CIT(A) HAS ERRED IN PLACING RELIANCE ON THE PREMISES THAT EXPENDITURE OF RS. 5,78,113/ - WAS INCURRED BY THE ASSESSEE IN PAGE NO. 3 EARNING EXEMPT INCOME INVOKING SECTION 14A READ WITH RULE 8D, WHEREAS, THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE SAID DIVIDEND INCOME. THEREFORE HE PLEADS THAT THE SAID DISALLOWANCE MAY DEBITED AND CITED THE CASE LAW MODERN INFO TECHNOLOGY LTD. (ITA NO. 4294/2012/DELHI). THE LD AR STRESSED THAT THE ASSESSEE HAD INCURRED A LOSS WHICH HAS N OT BEEN CLAIMED AND THEREFORE THE SUSTENANCE OF DISALLOWANCE IS BAD IN LAW. ON THE OTHER HAND, THE LD DR RELIED ON THE ORDERS OF THE LD CIT(A) AND WANTS US NOT TO INTERFERE IN THE IMPUGNED ORDER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS A ND CASE LAWS CITED BEFORE US. WE FIND THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 15,22,48,863/ - WHICH HAS BEEN CLAIMED AND HELD AS EXEMPT INCOME. THIS DIVIDEND INCOME IS IN RESPECT OF INVESTMENTS HELD TO THE TUNE OF RS. 5,52,19,93,684/ - BY THE ASS ESSEE . THE AO HAVING NOTICED THE ABOVE FACTUAL POSITION HELD THAT IT IS INCONCEIVABLE THAT NO EXPENSES HA VE BEEN INCURRED FOR EARNING EXEMPT INCOME. IN HIS OPINION ASSESSEE MUST HAVE TAKEN DECISION TO INVEST IN COMPANIES , MAINTAIN AND HOLD THESE SHARES. AN D AS SUCH ASSESSEE MUST HAVE USED RESOURCES WHICH ENTAIL INCURRING OF EXPENSES FOR EARNING THE EXEMPT INCOME . ACCORDINGLY, HE HELD THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. HE THUS COMPUTED THE DISALLO WANCE UNDER RULE 8D AFTER RECORDING SATISFACTION AS ENVISAGED U/S 14A OF THE ACT TO THE TUNE OF RS. 2,75,55,871/ - . HOWEVER THE AO, FINDING THAT THE ASSESSEE HAS CLAIMED EXPENSES OF ONLY RS. 26,06,195/ - HAS RESTRICTED THE DISALLOWANCE TO RS. 26,06,195/ - . HOWEVER, IN APPEAL, WE TAKE NOTE THAT THE LD CIT(A) HAS FURTHER REDUCED THE AFORESAID DISALLOWANCE TO RS. 5,7 8,113/ - HOLDING THAT IT WAS THE NET EFFECTIVE EXPENSES CLAIMED BY THE ASSESSEE . IN ARRIVING AT THE SAID CONCLUSION, THE LD CIT(A) HAS REDUCED THE DISALLOWANCE BY THE FIGURE OF LOSS DECLARED AND NOT CLAIMED BY THE ASSESSEE . THUS WE TAKE NOTE THAT THERE REMAINS NO FURTHER GRIEVANCE SO FAR AS LOSS INCURRED BY THE ASSESSEE IS CONCERNED. 9 . IN THE COURSE OF HEARING BEFORE US, THE LD AR HAS NOT BEEN ABLE TO DEMONSTRATE THAT EITHER RULE 8D WAS INCORRECTLY INVOKED OR THE COMPUTATION AS COMPUTED BY THE LD CIT(A) WAS SUFFERING FROM ANY INFIRMITY EITHER FACTUALLY OR LEGALLY. NO EVIDENCE TO THE EFFECT THAT NO EXPEN DITURE WAS INCURRED FOR PAGE NO. 4 EARNING HUGE DIVIDEND INCOME OF RS. 15.22 CRORES AND HOLDING INVESTMENT TO RS. 550.13 CRORES . AS SUCH, THE CASE RELIED UPON BY THE ASSESSEE/ APPELLANT DOES NOT SUPPORT THE PROPOSITION CANVASSED BY THE LD AR, ON THE CONTRARY IN THE C ASE OF MODERN INFO TECHNOLOGY (SUPRA) , THE DISALLOWANCE WAS RESTRICTED TO THE ACTUAL EXPENSES CLAIMED BY THE ASSESSEE . THIS EXACTLY WHAT WAS ALSO HELD BY THE LD CIT(A). THEREFORE , WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) AND, THEREFORE, WE ARE INCLINED TO SUSTAIN THE ORDER OF THE LD CIT(A) AND DISMISS THE APPEAL THE ASSESSEE. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 . 08 .2014. - S D / - - S D / - ( N. K. SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 3 / 08 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI